Why U.S. Electricity Is Becoming Even More Natural Gas Dominant

Most forget now but back to 2011 the Paris-based International Energy Agency confirmed for us the coming “Golden Age” of natural gas.

And IEA was right, global natural gas demand since then is up 33% to 410 Bcf/d.

This was a very widely accepted vision at the time because the U.S. shale gas revolution was just taking off – “the most critical energy development in many decades.”

Over the past 15 years or so, U.S. gas production has ballooned nearly 80% and closing in on 100 Bcf/d.

Gas now supplies 33% of U.S. energy and 40% of U.S. electricity.

At ~50% when President Obama first took office, main competitor coal has entered structural decline and now accounts for just 20% of U.S. electricity.

The U.S. Department of Energy reports that ~25% of the current 200,000 MW of coal capacity will retire by 2029.

Nuclear has more or less remained at 20% of our power, and its upside has far more questions than answers (e.g., baby boomer retirements, lack of new experts, equipment bottlenecks, incessant regulations, public fear, etc.).

For many decades, colossal cost overruns for nuclear have blocked the “nuclear renaissance” that we keep hearing is imminent.

The nuclear reactors coming at Plant Vogtle in Georgia? Already six years late and a staggering $16 billion over the original budget.

Small Modular Reactors are emerging but they lose the critical economies of scale, and utilities are expecting little until the 2030s.

Reality check: the U.S. Department of Energy models that our nuclear generation will actually DECLINE by over 15% in the coming decades.

Just like renewables and electric cars, Americans seem to have no concept of scale.

There is an enormously gigantic difference between a “growing market” and “taking over a market,” just like there is for “alternative” and “supplemental.”

For renewables like wind and solar, intermittency can only, naturally, remain a massive problem, but the “renewables mean lower costs” argument – the one advocates lean on most to gain wider public acceptance – has been faltering as well.

Passing wind as the go-to renewable, solar has been been overwhelmed by U.S. tariffs on Chinese manufacturers because of their use of slave labor.

What I call the “Great Green Panacea” of electric cars and renewables is a far more mineral, metal, and material intensive endeavor than the conventional energy complex that sustains us today.

It is also going global, so soaring demand for things like rare earths, copper, lithium, polysilicon, aluminum, freight, and a plethora of others is soaring prices – a really big problem since we are barely into the first inning of “The Energy Transition” game.

• “Inflation’s next victim: U.S. offshore wind projects,” E&E News, Nov. 15, 2022
• “Once Cheap, Wind and Solar Prices Are Up 34%,” Inside Climate News, Oct. 20, 2022
• “Solar industry: We’re in ‘most serious crisis’ in history,” E&E News, April 6, 2022

Land expansive wind and solar projects are getting stronger public pushback, and generators are being forced to renegotiate their Power Purchasing Agreements because their costs are flying past what they promised.

Again, “growing in importance but nowhere near taking over the market.”

Wind and solar supplying 20% of U.S. energy and 40% of power in 2050 would be a Herculean achievement from where they are now.

The fact is that new projects and good performance are becoming more difficult to come by because of “high grading,” where the windiest and sunniest spots get picked first – the low-hanging fruit for wind and solar is already starting to disappear.

These renewables-friendly locations are obviously finite from a geographical sense, which is why cloudy Germany’s obsession with solar power was always so bizarre.

So please, can we stop citing sunny California as the example for solar and windy Texas as the example for wind?

And in a warming world, where our weather is becoming increasingly less predictable, why is it that we are just assuming weather-dependent resources like wind and solar will perform so much above their low historical averages?

After decades of tens of billions of dollars of subsidies and forced mandates to incorporate as much renewable power as possible, gas still generated 60% of California’s electricity in the September heat wave.

In other words, we have already seen the “invest tens of billions in renewables and force them onto the grid with policy” movie already play out: it, undeniably, means more natural gas.

No U.S. state, ever, will do as much to “go green” as California has over the past 20 years, and the state is still gas-dominated.

For global warming, hotter temperatures actually mean less wind and less efficient solar panels (Ever been to Texas when it is 100 degrees? There is no wind).

It is becoming a natural gas-based world, whether some like/see that or not.

Natural gas can only rise even more as deep electrification (e.g., electric cars) comes onto the grid to fight climate change.

U.S. demand for natural gas in the electricity sector is becoming less elastic, as its real competitors coal and nuclear continue to decline.

My career is based on statistical analysis and examining what is actually happening on the battlefield of the marketplace. Ignore the empty energy-climate rhetoric and promises of what will be in 20 years, the marketplace is all that matters.

And for gas, “the higher prices do not mean less demand” evidence is becoming even more impossible to ignore – demonstrating that substitutable options are dwindling.

Just a year apart, prices in summer 2022 were frequently triple what they were in summer 2021, yet our gas used for electricity (”power burn”) was also much higher (+4 Bcf/d, or +11%).

Integrated Resource Plans might continue to say “loads of more wind and solar capacity” (politics continue to trump common sense) but Europe and California have shown that such plans ultimately make gas more important, not less, especially when demand spikes and conditions worsen for the availability of weather-dependent wind and solar.

“More capacity” is the easy part: the renewable and green businesses way too often cite capacity additions, not the far more important “generation” or “power fleet penetration.”

My first project after graduate school?

Going back to the reporting of the energy shocks of the 1970s, and I saw many of the same headlines that we are seeing today: “Our Energy Solution Is Blowin’ in the Wind;” “Can Solar Save Us?”

Shout-out Bob Dylan, but go and check for yourself, I swear the young journalists and advocates (not energy experts) writing about energy-climate today really did just do a giant cut and paste.

None of the insanely rosy predictions for renewables ever happened because the problem is unchangeable: physics, not a lack of investment and/or subsidies.

So while more wind and solar is surely coming, and they can help in certain areas, we must be climate and energy pragmatists.

The Europeans were clearly not and Putin happily pounced.

Our mandate is more domestic gas development and related infrastructure.

Not just new gas production but we need new gas storage to help balance the intermittency of wind and solar since its gas that fills in.

President Biden keeps promising more U.S. LNG for Europe but he never talks about the other side of that equation: more exports from here demand more pipelines and more production here.

Europe is disastrously showing that high gas consuming countries that inexplicably block domestic gas development have a very predictably poor end result.

Higher prices, more imports, less reliability, more coal, eroded energy security, and a whole bunch of other bad things.

Natural gas support must be the foundational pillar of U.S. energy policy and energy security.

The price of gas obviously determines the price of electricity, so I would argue that the price of natural gas is more crucial than the price of gasoline. Gasoline is a somewhat arbitrary fuel in that Americans can often choose not to drive. Electricity has to be used: every second, every minute, every hour, every day.

Since they increase home power usage by 50% or more, electric cars will not sell if the cost of electricity is too high and the reliability of the grid is too low.

Gas-based California estimates that its climate goals via electrification could boom the state’s electricity consumption by 70% over the next 20 years.

It has come at a horrific price but, thankfully, even some of our most blind are seeing the silver lining in Putin’s illegal war.

ESG pioneer Blackrock is now promoting big investment in natural gas.

Europe has declared natural gas investment as “environmentally sustainable” for what has been proven as an irreplaceable fuel.

Putin’s OPEC-like “Gas Exporting Countries Forum” continues to expand and extend, so we ignore all of this at our peril.

As for those anti-natural gas unrealists that we never should have been listening to in the first place (yes, the fossil fuel industry has long been afraid to defend itself)?

It surely is: Game. Set. Match.

You lost.