The energy transition story across the Midwestern US has remained largely consistent over the last few years. Utilities that were once dominated by coal are now using increasing amounts of natural gas to produce their fuel mix, as waves of natural gas plants are being proposed and built on the remains of old retired coal plants. It was not that long ago that fracking and natural gas were being touted as the 21st century solutions to the world’s energy needs, providing cleaner cheaper energy than traditional fossil fuel sources. Embodying this trend is Indianapolis Power & Light Co.’s new $600 million Eagle Valley natural gas plant in southwest Indianapolis, enabling them to produce a majority of their fuel mix through natural gas.
However, an E&E article by Jeffrey Tomich last week provides evidence that investors, and even some regulators, may be pushing the pause button on building new natural gas plants and are considering renewable, and potentially cheaper, energy alternatives.
The cost of renewable energy technologies has dropped so drastically that proposals to build natural gas plants, viewed as sound economic and investment decisions four or five years ago, are now becoming increasingly difficult to justify.
Mark Dyson, of the Rocky Mountain Institute, recently co-authored a study that looked at whether renewables and distributed energy are more cost-effective options than natural gas generation in replacing retiring fossil and nuclear plants. In examining four case studies of proposed gas plants, Dyson found:
“…clean energy portfolios to be cost-competitive with proposed gas-fired generation” and in three of the four cases found that the clean energy portfolios cost “8-60 percent less than the proposed gas plant, based on industry costs forecasts and without subsidies.”
Moving beyond simple price comparisons, the energy grid desperately needs to be updated to improve its security and flexibility in responding to changes in electricity demand, and renewables are able to adequately provide these attributes. Although no utility in the Midwest has been denied permission to build a natural gas plant, an administrative law judge in Minnesota recently ruled that the state’s second largest investor-owned utility, Minnesota power, failed to prove the need for a new $700 million gas plant because they did not adequately consider all the alternatives. This ruling, along with the overwhelming and diversity of benefits renewable energy can provide, should be taken notice by utilities if they plan on maximizing returns on their investment. No company wants to invest $1 billion only to find out that 4 years down the road a cheaper, efficient, and more popular product is on the market.