This article is originally from The Energy Mix, and was published on November 21, 2021.
Investors and state governments in the United States are pulling back from new natural gas projects, showing how climate policy and technological advancements are shifting their choices in favour of renewable energy.
“The future for planned gas-fired power plants appears bleak as the investment market leaves them behind and turns to cleaner, lower-cost renewable options,” writes energy analyst Dennis Wamsted for the Institute for Energy Economics and Financial Analysis (IEEFA).
New fossil gas projects are facing a novel degree of resistance in several states. A recent decision to cancel a combined-cycle gas plant in Pennsylvania is “the latest warning for investors funding new gas-fired power plants” in the region, Wamsted says. It’s one of three gas-fired power plant projects that were cancelled in 2021, with another 14 potentially on the chopping block.
“Significant uncertainty about future capacity prices,” ever-lower renewable energy costs, flat demand growth, projected increases in renewable storage and generation capabilities, financial concerns about climate change, and the need for fossil fuel plant closures by 2050 are all adding to investors’ concerns about the projects.
“The economics have changed,” says IEEFA.
Government policy and regulations are changing, too. The New York State Department of Environmental Conservation (DEC) recently denied two permits for new facilities in Queens and Newburgh, citing inconsistencies with state legislation. Greenhouse gas emissions from the facilities were not in compliance with the state’s Climate Leadership and Community Protection Act, which calls for a 100% zero-emission electricity grid by 2040, IEEFA reports.
Although the applicants said they would eventually shift the facilities to renewable energy production, “the department found the discussions of potential future use of green hydrogen or renewable natural gas at the proposed facilities were essentially ‘aspirational’,” IEEFA says. Furthermore, higher levels of nitrogen oxide emissions in the proponents’ plans indicated that, even if the transition took place, the facilities would still produce substantial emissions.
DEC also concluded that the regions to be developed already had sufficient energy capacity, making the new plants unnecessary.
IEEFA says the DEC decisions “provide a useful example of how agencies should scrutinize key issues when reviewing permit applications for new natural gas infrastructure projects today. Other states should take note.”
Climate policy and rising natural gas prices are having broad, systemic impacts on energy investing. In a 2020 report, Moody’s Investors Services notes the risks associated with new fossil fuel projects and states that it will “reserve its long-term credit rating judgment based on actual completion and operation of the projects.”
Read the original article here: https://www.theenergymix.com/2021/11/21/u-s-investors-states-shifting-from-gas-plants-to-renewables/