A new study concludes that “the proliferation of natural gas infrastructure contributes to distinct risks that threaten shareholder value, including investor portfolio risk, company-level physical risk, regulatory and technological transition risk, and reputational risk.”

Natural Gas: A Bridge to Climate Breakdown, published by As You Sow, a shareholder advocacy group, and Energy Innovation, an energy consulting firm, is an investor brief on overcoming the power sector’s natural gas dependence.  The study notes that “investors have a unique role to play in the clean energy transition. They are well positioned to encourage power utilities to reduce the investment risks associated with an overreliance on natural gas.”

Here are some further excerpts from the study:

  • Natural gas is a fossil fuel comprised primarily of methane, a potent greenhouse gas with roughly 84 times the global warming potential of CO2 over a 20-year period.
  • 2018 research in Science suggests U.S. methane supply chain emissions are likely close to 60% higher than estimated by the Environmental Protection Agency (EPA) – a leakage rate of approximately 2.3%.6 This leakage rate implies gas-fired plants emit closer to 75% of coal-fired plant emissions per-unit of energy.
  • Utilities must begin planning now to align their operations with the Paris Agreement’s 1.5°C goal. Given the long lifetime of gas-based infrastructure, increasing investment in this fuel source is shortsighted and harms shareholders by contributing to exacerbating the impacts of climate change across the global economy.
  • Despite the risks, most power utilities in the U.S. are continuing to invest in new natural gas power plants and pipelines, with operating lifetimes stretching far beyond what is permitted in climate stabilization models, raising the question of stranded assets and self-inflicted harm.
  • The U.S. is on track to spend roughly $1 trillion on new gas-fired power plants and fuel by 2030. these gas infrastructure assets will either become stranded or need to be retrofitted with expensive and relatively unproven carbon capture and storage (CCS) technology to remain viable.
  • According to Edison Electric Institute (EEI) research, 70% of utility customers support the statement that “in the near future, we should produce 100 percent of our electricity from renewable energy sources such as solar and wind.” Due in part to utility unresponsiveness to large customer demands for clean energy, once-captive customers are seeking ways to directly purchase clean energy, circumventing utilities and eroding their ratepayer base. As a result, customers large and small are challenging the traditional monopoly model to access clean energy.
  • In almost all jurisdictions, utility scale wind and solar now offer the cheapest source of new electricity, without subsidies.
  • In an investor’s worst-case scenario, as new plants lose market share to cheaper renewables before the end of their productive life, regulators may face enough pressure to consider prohibiting or reducing utility cost recovery from customers for relatively new but underutilized natural gas plants. The costs from this accelerated retirement will likely fall on consumers, akin to discussions today about who pays and how much for uneconomic regulated coal-fired power plants.
  • Utilities cite a host of reasons to delay movement away from fossil fuels, particularly natural gas. Many maintain that natural gas generation is needed either instead of, or in addition to, renewables, for reliability. Evidence increasingly demonstrates that such assertions are unfounded.

For another point of view that complements the findings of this new study, see the guest column by Thomas Hadwin that appeared in the April 20 issue of the Virginia Mercury, linked below in In the News.

Natural Gas Is A Bridge to Nowhere for Investors, According to New Study
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