U.S. power utilities spending billions on natural gas pipelines to make up for falling electricity demand had better watch their backs, Bloomberg News warned in a recent post on Renewable Energy World. Their investments “could be upended if the shift toward renewables and batteries accelerates.”
Companies like Duke Energy, Dominion Resources, and Eversource Energy are looking at natural gas as a “hot deal at a time when coal-fired power plants are getting shuttered, nuclear stations aren’t being built, and gas-fired generators are picking up most of the slack,” the news agency notes. But “their bets may prove riskier than they think if improvements in battery storage and ever-cheaper wind and solar power edge out gas-fired generation in electricity markets.”
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Bloomberg cites a telephone interview with San Francisco attorney Jon B. Wellinghoff, who chaired the U.S. Federal Energy Regulatory Commission from 2009 to 2013. “These utilities are taking a risk that these will be stranded assets that ultimately their shareholders will have to pay off,” he said. “We will see regulators being more critical of these asset decisions as prices of renewables continue to go down.”
The article reviews the combination of booming shale production, low gas prices, and regulated financial returns from natural gas pipelines that makes the industry an attractive investment for power utilities facing uncertain customer demand. “The threat from batteries, however, is that they can remove the problem of ‘intermittency’ from renewable sources— allowing for solar and wind power to keep the lights on even when it’s cloudy and calm out,” Bloomberg notes.
“If battery costs fall far enough compared with gas, then wind and solar could become the preferred source of ‘peaking’ power that’s needed when electricity demand is at its highest.” That transition may already be under way in parts of the United States served by PJM Interconnection, the country’s largest power grid, and Southern California Edison.
