Role of gas as a bridge fuel in U.S. ‘just got shorter and narrower’—S&P

The natural gas revolution that has led to a power plant building boom and kept electricity prices low may be nearing its end, as the coronavirus pandemic has reduced demand for the fuel and competition from renewable sources of energy intensifies, said Dan Klein, head of scenario planning at S&P Global Platts.

This spring, as the coronavirus shut down the economy, analysts projected that the renewable energy industry would emerge from the crisis in a stronger position as falling electricity demand hit fossil-fuel plants particularly hard. Adding to the pain for the natural gas industry, the health and economic crisis came at a time when the financial outlook for some plant owners was already deteriorating.

“Gas was viewed as a bridge fuel between coal and renewables, and that bridge just got shorter and narrower,” Klein said Oct. 6 on a webinar hosted by S&P Global Inc. “[We] still expect gas to grow strongly over the long term. … But COVID took a good chunk out of that growth.”

Meanwhile, the country’s wind and solar markets are expected to grow significantly this year, there is increasing momentum behind a push for net-zero emissions in corporate America and Europe’s oil and gas majors are turning more of their attention — and capital spending — toward renewables.

“Some companies are signaling that an increasing proportion of their investment budget will be going into renewables rather than oil and gas, even if, of course, the majority of the capex will actually continue going to oil and gas for the time being,” Simon Redmond, a senior director at S&P Global Ratings, said on the Oct. 6 webinar. “We do expect increased investment across renewables businesses from the European majors, in particular.

7 October 2020

IEEFA