You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App
Join our mailing list to receive top business news every weekday morning.

Solar and wind power can’t compete with gas this cheap

The renewable energy sources are certainly winning in many markets on price alone.
Gas is being viewed less as a bridge fossil fuel, driving the world away from dirtier coal toward a clean-energy future, and more as a hurdle that could slow the trip down. Image: Bloomberg

This will almost certainly be a record-breaking year for the advance of solar and wind power across the US. The additions that are in progress or planned are significant enough to boost hopes for emissions-free electrical grids within a generation—if natural gas doesn’t get in the way.

It just may. Gas is such a bargain that it’s being viewed less as a bridge fossil fuel, driving the world away from dirtier coal toward a clean-energy future, and more as a hurdle that could slow the trip down. Some forecasters say prices will stay low for years, making it tough for states, cities and utilities to achieve their goals of being zero-carbon in power production by 2050 or earlier.

“The fact that there’s an abundance of it makes the move to complete decarbonisaton much harder,” says Ravina Advani, head of energy, natural resources and renewables at BNP Paribas SA. Gas is a tough competitor. “It’s reliable and it’s cheap.”

The flood of inexpensive gas does have a big environmental upside because it’s putting increased pressure on struggling coal plants that contribute significantly to global warming. But it’s also squeezing margins for nuclear reactors, which are the US’s biggest source of carbon-free power. And it’s driving utilities to lay down infrastructure that could ensure gas remains central to the power mix for decades.

Solar and wind are certainly winning in many markets on price alone. Without cheap gas, though, the renewables build-out would be faster, says Cody Moore, head of gas and power trading at Mercuria Energy America LLC. “Absolutely, 100%.”

Just look at the largest grid in the US, which stretches from Washington to Chicago and serves more than 65 million people: It has been boosting the amount of power generated with gas and drawing in renewables at a slower rate.

That grid happens to crisscross a section of the US that’s home to some of the world’s most abundant natural gas reserves. A drilling boom there and in the Permian Basin in Texas and New Mexico is a reason why the US benchmark price for gas is less than $2 per million British thermal units.

That’s the least for this time of year since the late 1990s. In Asia, prices fell to a record low of less than $3 this month amid a global supply glut and as the coronavirus began slowing demand from China. In Europe, the benchmark Dutch price hit a decade low. 
“That’s not good for the new-energy market,” says Jonathan Bell, a business development manager at the risk assessment and quality assurance company DNV GL. “It puts a lot of pressure on renewable energy.”

Rising exports of liquefied natural gas from the U.S. Gulf Coast to Siberia will probably keep prices down and expand developing economies’ reliance on the fuel. The International Energy Agency expects global gas consumption to climb through 2040.

“We’re using solar and wind more than ever, but until we’re very purposeful about trying to subtract some fuels that we’re using, history shows us that market forces alone won’t successfully push fossil fuels out of the energy mix,” says Noah Kaufman, a research scholar at Columbia University’s Center on Global Energy Policy.

None of this is to say that renewable investments in the U.S. haven’t been on a tear. They went up 28% last year to a record $55.8 billion, according to BloombergNEF. Between now and 2050, renewable power will be the fastest-growing source of electricity, accounting for 38% of generation, according to the U.S. Energy Information Administration.

That, of course, isn’t the percentage envisioned by the likes of the state of California, the city of Pittsburgh and the Minneapolis-based utility Xcel Energy Inc., which are among the governments and power providers that have target dates between 2030 and 2050 for cleaning carbon emissions out of their grids.

Whatever the price, natural gas will have to continue to fill the gap for some time because renewable generators need the strength of wind or sun to do their jobs. The battery power-storage technologies that could cut every grids’ ties to fossil fuels are only slowly being added to systems.

Without them, “we cannot go 100% renewable,” says Tom Rumsey, a senior vice president at Competitive Power Ventures, which builds both gas-fired and renewable plants. “There are these moonshot goals, which drive policy behaviour. But the reality is, how do you maintain grid reliability without a breakthrough in storage? You are going to need fossil fuels.”

There’s widespread agreement among forecasters, policymakers and increasingly business leaders that solar and wind will win out in the end. Ultimately, “gas plants will meet the same reality as coal,” says Jules Kortenhorst, chief executive officer of the Rocky Mountain Institute, a nonprofit focused on delivering a low-carbon future. “It’s just a question of when.” Gas prices may define the answer.

(Michael R. Bloomberg, the founder and majority stakeholder of Bloomberg LP, the parent company of Bloomberg News, has committed $500 million to launch Beyond Carbon, a campaign aimed at closing the remaining coal-powered plants in the US by 2030 and slowing the construction of new gas plants.)

© 2020 Bloomberg L.P.


Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.


And if the gas price is so low it will become uneconomic to drill for it and the price will go up.

This article really should take a different slant – seems to me its fossil fuel propaganda

Sorry Gina that this does not paly into your romantic solar panel novel.

Methane resources are nearly unlimited, and more production capacity will come online if you like it or not.

In the USA NREL in its forecasts for the renewable fuels and chemicals boldly included methane and derivatives.

Ignore methane at your peril.

Casi: where do you find the facts that you put out about energy? As they are not random but consistently wrong against renewables and for fossil energy, I could conclude you have an agenda or watch only Fox news or work for Sasol.

The only way to have sustainable methane is to make it. That is actually possible:
1. Microbes in a biodigester.
2. Electrolysis using water, carbon dioxide and a clean energy source.

Neither have anything to do with natural gas which is the topic. Comparing methane and natural gas is like saying electrons can be sustainable therefore electrons from coal electricity are blessed.

Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily of methane, but commonly including varying amounts of other higher alkanes, and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium. Wikipedia

Casi: I am not an academic. I have my own business and as a hobby I help people with energy strategies to cope with the landscape of a baseload coal system that is not off ¼ of capacity, while at the same time trying to reduce energy cost and reducing carbon footprint and keeping their factories running & employing people. I do not supply systems, I figure what is feasible.

The article is about natural gas which contains methane. Natural gas is no more renewable than the electrons from Medupi are renewable. NG energy is million year old material. To be renewable an energy source has to be current (converted in the era it is made). Solar is current, wind is current, most biomass is current, your braai wood is current, hydro is current. Taking sequestered fossil gas and releasing it by way of combustion is NOT current. Taking water and carbon dioxide and adding a renewable electrical energy to manufacture methane (a form of stored energy no different from a battery) is good and current. That does NOT make natural gas extraction sustainable at all.

Oh dear,

you are consumed by ideology with a dogmatic frame work of thought.. you seemed to have missed the latest upgrade, it included the “Sustainability” patch!

I worked at SASOL when Vilanculos pipe was connected and confronted management with plans for retail methane supply.

That does not imply I can not have an opinion on science and reality of renewable business cases.

I run a business in renewable field that is focusing on local technology development. We currently involved in projects with three local research institutions and in partnership with local businesses. Government is also involved because of the potential high impact of the work.

So let me tell you again, methane is the future in energy, Just because it does not fit your belief of how electrons must smell and spin won’t change the facts.

So in other words, you’re a tenderpreneur

tenderpreneur like Elon you mean?.. blowing taxpayers money in Tesla, Solar city and Space X..

but Elon has more skin in the game than most, with hardlyanything.

Nonsensical drivel…

Next you’ll probably tell us that you and Musk were separated at birth

hardlyanything between the ears? FckOf

I enjoy exposing bullsh1tters, you make it so easy for me.

“The renewable energy sources are certainly winning in many markets on price alone”.

Unfortunately these vile MSM propagandists lie by omission. Price alone means nothing. If I wanted a certain type of product that would be available only next month in Upington (at a discount rate) this would probably not suit me.

The undeniable fact is that renewable power cannot produce the right amount of electricity at the right time at the right price.

Japan is busy building up to 22 new coal fired power stations. Maybe someone should whisper in their ears that solar panels, imported from neighbouring China produce much cheaper power. Or maybe the Japanese are not as stupid as the NY Slimes would have us think:

And offshore Mozambique is a huge gas field. Not far from the Reef industrial zone. What is Dear Cyril doing to access that instead of throwing good money after bad in coal-fired Medupi and Kuslile?


Broad methane use needs to overcome established oil industry and the greenfever.

A similar pipeline to that of SAsol’s from Vilankulos needs to be financed by the state..

As Gina pointed out, their is very little private business interest in a resource of such low cost, large capital investments required needs cheap government investment,

The two countries in the world with millions of cars running on methane:
Argentina and Iran..

Beachcomber : courtesy of Sasol Gas, south africa has the most expensive natural gas in the world per a 2018 study. They determine their price relative to import parity pricing but do not use the cheap $2/btu US prices. So buy it in switzerland, ship it to south africa = their price in SA to South Africans. Isn’t it nice when companies created by taxpayers bend the country over a barrel??

The way supply and distribution of a natural resource like offshore gas is utilised doesn’t mean that we should not be changing our energy source but rather that we should be changing our politicians.

….an age of carbon free existence is decades away if not a century for the globe

Storage and especially mobile is the conundrum

Yes trains are electric but the energy is from coal and gas
Airbuses and boeings with solar panels?
Steel smelters with battery banks the size of cities?

And then the maintenance of wind turbines? Acres in the Northern European, redundant from high costs to maintain and eco warriors disrupting elec production because bird life is at stake to general Jane and Joe complaining of noise and visual pollution. You need thousands for a fair sized town let alone a mega city like London

Politicians and alarmists (Feta Thunberg) want to end air travel to make a point, a part of me wants to agree but not if it puts back civilization 2 centuries of progress in living standards

Never milked a cow and don’t want to learn to make cheese either

As much as renewable energy sources may be attractive and As much as we don’t want any pollution, be it methane, sulphur, carbon oxides or the dangerous nitrogen oxides or just fly ash, all fossil fuel sources will be with us for a long time. A long, long time. Longer that our lifetimes, or those of our children or their children.

Because renewable energy sources have some significant disadvantages that have not been overcome. There are also very debatable cost values involved, which both sides are fiddling.

These factors are realities. We must live with them, as much as would like to deny them.

Maybe we should have stayed in the stone age.primitive

End of comments.





Follow us:

Search Articles:Advanced Search
Click a Company: