The economics guiding United States investments in electricity generation have reached a historic tipping point: combinations of solar, wind, storage, efficiency and demand response are now less expensive than most proposed gas power plant projects.
According to a new report by Rocky Mountain Institute (RMI), portfolios of these clean energy resources can provide the same energy and reliability services as traditional gas power plants — but cost less.
This new economic reality has profound implications for electricity consumers and industry investors. Currently, there is an estimated $90 billion of planned investment in new gas-fired power plants and over $30 billion of planned investment in proposed gas pipelines. If clean energy replaces the proposed gas plants, consumers could save $29 billion, according to the report, The Growing Market for Clean Energy Portfolios.
For investors, the report highlights the significant risk that proceeding with announced projects will result in stranded costs. By the mid 2030s, as clean energy prices continue to fall, building a new portfolio of clean energy resources will become less costly than continuing to pay the operating costs of a combined-cycle gas plant, and such a portfolio will provide the same level of energy, capacity and reliability services.
These cost trends could lead to the economic retirement of plants representing over 90 percent of the currently proposed new combined-cycle gas capacity by 2035, resulting in a significant risk of investment capital becoming stranded. Just as coal plants have retired due to competition from low-priced natural gas in the past 10 years, the ongoing cost declines in wind, solar and battery technologies threaten to do the same to natural gas plants by the mid-2030s, according to the report.
The report notes examples from Colorado, Michigan, Indiana, California and other states across the country where this trend is already on display and causing industry leaders to prioritize investment in clean energy instead of new gas infrastructure.
Read the full report here.