While net-zero remains a dream for many, the electricity market is providing a wake-up call for anyone believing that natural gas will be replaced in the near future as the plurality winner in the electricity-generation business. As this article by Oil Price notes, natural gas is providing 46 percent of the nation’s power generation so far this year, up 5 percent from last year.

The primacy of natural gas is not likely to change soon, as new gas plants, mostly efficient combined-cycle generators, are proposed across the country. According to Sierra Club data cited by this Bloomberg article, the first half of 2024 has already seen as much gas-fired capacity proposed as in all of 2020.

One of the reasons natural gas is booming is that it remains inexpensive. As a result, demand is at record-high levels. While this would ordinarily drive prices higher, there is currently an over-supply available as a result of years of drilling and warmer winters. As this article from Pipeline & Gas Journal notes, gas drillers are planning to cut production (even in the face of the record level demand), hoping for higher prices later.

In the past, when gas prices rise, we often see other types of fuel rising in prominence. In light of the current state of the market, however, even if natural gas prices rise, it likely won’t be enough to stop coal’s slide as a power source, now down to just 16 percent of U.S. power generation according to West Virginia Public Broadcasting. While China continues to build coal plants, for itself and others, the environmental and institutional forces arrayed against coal make the likelihood of its return as the power king unlikely.

Nuclear power offers the best hope of reliable, baseload, emission-free power, but it remains expensive, and it is still viewed with suspicion and fear by many. Environmentalists in particular have had difficulty embracing a generation source that otherwise would seem to be a perfect fit for a low-carbon future.

The preferred electricity sources for many are solar and wind, but they have a huge disadvantage. They operate only intermittently and, in the case of wind, unpredictably. Onshore wind has a capacity factor (actual energy generated during a period of time divided by the theoretical maximum generation) of about 37 percent, and for solar the capacity factor is around 25 percent. Given that they only produce roughly one-third or less of their nameplate rate, some reliable source has to exist in the background, ready to step in when the wind stops blowing and the sun sets.  

Which brings us back to gas, the necessary bridge to a reduced-carbon future. Gas plants can provide power when renewables can’t, filling in the gaps in power generation that allow the lights and heating to stay on during cold, windless winter nights. The ability to cycle up and down allows gas plants to match the need for power on the electrical grid.

The ability of combined cycle gas plants to adjust their power output isn’t unlimited, and the unpredictable variability in renewable generation means that often the gas turbine will be spinning in the background even when it is not needed. Someone has to pay for this potential power, even if it isn’t being used. In essence, ratepayers pay for duplicate sources of electricity generation.

And it’s not just operational expenses, such as the cost of natural gas, that have to be considered. The capital cost of building a gas plant has to be recovered, during whatever hours it is allowed to operate. Limiting the hours of operation of a gas plant, because renewables are allowed to feed into the grid first, makes each hour of operation more expensive as the cost of the building and equipment have to be recovered during the reduced hours of operation. If a $400,000,000 gas plant is allowed to operate only 1,000 hours a year, each megawatt-hour is going to be more expensive than if that cost was spread out over 8,000 hours a year.

Renewables, with their lack of fuel costs, are relatively inexpensive. When one considers the backup that renewables require by their very nature, though, they become much more expensive. In some cases, they become more expensive than simply generating power from natural gas. 

Nothing remains the same forever. Just as coal’s heyday has passed, for now, natural gas may fade as a power workhouse in favor of something else. Maybe that is wind power, backed up by Form Energy's long-term battery storage. Possibly small modular nuclear reactors could be the solution. But looking into the mists of the future, it’s hard to see gas surrendering its dominant role anytime soon.