5/3/2015

Gasandrenewables:partnersoradversaries|PetroleumEconomist

Gasandrenewables:partnersoradversaries
26February2015
INTERNATIONALoilcompaniesclaimgasandrenewablesareidealbedfellows,whilemany
environmentalistsbelievetheriseofgas,particularlyshalegas,willdelaytheworld'sshiftaway
fromfossilfuels.
TherehasbeenalotoftalkacrosstheEUabouttheneedforgastoprovidebackupgeneration
forintermittentrenewableenergysources,particularlywindandsolar.
But"asGermany'sexperienceclearlydemonstrates,thisfactorhasbeenexaggeratedby
opponentsofrenewableenergy",JonathonPorritt,aprominentUKenvironmentalistandfounder
ofnonprofitsustainabilityconsultancyForumForTheFuture,toldPetroleumEconomist.
Still,clearly,untileagerlyanticipatedbreakthroughsinstoragetechnologiesoccur,thereisno
reasonwhyforashortperiodoftimerenewablesandgasshouldnotcoexist,Porrittadded.
SteveSawyer,secretarygeneraloftheglobalwindenergycouncil,"doesnotthinktheyare
inherentlyeitherpartnersoradversaries",asallgenerationtechnologiessimultaneouslycompete,
coexistandcooperate.
However,hetoldPetroleumEconomist,thattheyareoftenadversarieswhenlobbying
governmentsregardingenergypolicyforavarietyofreasonsindifferentmarkets.
Highlightingthisaspectofthedebate,arecentstoryinUKnewspaperTheGuardianclaimed
majorfossilfuelcompaniesandenergyutilitieshaveusedtheirfinancialpowertotakecontrolof
keyrenewableenergylobbygroupsinEuropeinanefforttoslowthecontinent'stransitionto
cleanenergy.
Butputtingasidethepolitics,it'sclearthatgas,whetherfromconventionalorunconventional
sources,willbeacriticalbridgetoalowcarboneconomy,asitisthecleanestburningfossilfuel.
Gasemitsupto60%lesscarbondioxidewhenburnedforpowergenerationcomparedwithcoal.

Adecadeaway
Crucially,amarketneedstobedesignedthatwillleadtozeroemissionpowersystems.Once
thatisanagreedgoal,gaswillplayanecessaryroleinsomemarkets,insomecasesformany
decades."Butuntilwehavethatagreement,thenwe'llallbefightingformarketshare,"added
Sawyer.
Withcosteffectiveutilityscaleelectricitystoragesolutionsforrenewablesatleastadecadeor
moreaway,fossilfuelswillcontinuetoplayasignificantroleinprovidingreliableelectricity.Even
thereafter,storagedeploymentcouldtakedecades.
Duringthetransitiontoanentirelyrenewableenergyfuture,whichcouldtake30to50years,gas
willbethemostreliableandversatilepartnertorenewables,PaddyPadmanathan,wholeads
SaudiArabiabasedpowerdeveloperAcwa,said.
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Gasandrenewables:partnersoradversaries|PetroleumEconomist

Andperhapstheconflictbetweengasandrenewablesisoverstated.Acwa'slatestdealfora
utilityscalephotovoltaicsolarpowerplantinDubaiwasnaileddownatbelow$0.06perkilowatt
hour(kWh)$0.03cheaperthangas.
"WehavecometotheconclusionthatrenewableenergyischeaperthangasinDubai.Thatis
today'srealityintheMiddleEast,aregionawashingasandoil,"DolfGielen,directorofthe
innovationandtechnologycentreattheInternationalRenewableEnergyAgency(Irena),told
PetroleumEconomist.
Giventhefallingcostsofsolarpower,renewableenergywillmarchonregardless,whilegaswill
getusedmorewhereitcancompetewithalternativessuchascoal,addedPadmanathan.Evenin
theUS,wheresurgingshalegasproductionhasweighedheavilyondomesticgasprices,inmany
placesutilityscalewindandsolarisstillamoreattractiveeconomicproposition,accordingtoa
studybytheinvestmentbankLazard.
Withoutsubsidies,thebank'sanalysisshows,solarcostsabout$0.072/kWhatthelowend,with
windat$0.037/kWh.Thiscompareswithnaturalgasat$0.061/kWhatthelowendandcoalat
$0.066/kWh.
ChrisNelder,anindependentUSbasedenergyanalyst,saidthatnearlyeverystudyhehasseen
onhowrenewablescanobtainalargeshareofthepowergenerationmarketassumesthatgas
willbeusedfordispatchablesupplybalancing.IntheUS,Nelderguessesthattheriseofshale
gasmayhavedampened,ratherthandelayed,theprogressofrenewablesonthegrid,butnot
elsewhereintheworld.
Themaineffectofincreasingshalegasproductionhasbeenthereplacementofcoalfiredpower
withgasintheUS.
"Idon'tthinkwe'vereallyseenthepointyetwherewe'relockingingasdependencytothe
exclusionofrenewableenergy,"saysNelder.
Gasplantsareeasilyturnedoffandon,sowhererenewableenergygenerationishigh,it'soften
thegasplantsthatpowerdownfirst.
Generally,gasmoreoftendisplacescoalandnuclearthandefersinvestmentinrenewable
energy.
Andgiventherapidpaceoftechnologicalinnovation,whichishelpingdrivedowncosts,manyof
themajorbanksexpectthatwithinthenextfiveyearsrenewableenergywillgenerallybethe
cheapestwaytoaddamegawattofnewcapacityinmostoftheworld.
Atthatpoint,renewableenergywilllikelydisplaceanynewinvestmentincoal,ifstrongercarbon
policiesareintroduced,andnuclear,becauseofitshighercost.But,Neldersays,renewableswill
notdisplacegas,asitisaflexiblefuel.
"It'sreallymoreofazerosumgamenownotrenewableenergyfightingwithgastoprovidenew
generationcapacity,butratherbothcompetingwithandpushingoutexistingconventional
capacity,"headded.
Ultimately,though,iftheworldistosolvetheissueofclimatechange,fossilfuelsneedtobe
replaced.Thebulkofthetransitiontorenewableenergyistakingplacewithinthepowersector,
whichonlymakesuponequarteroffinalglobalenergydemand.Otherendusersectors,suchas
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Gasandrenewables:partnersoradversaries|PetroleumEconomist

heating(forbuildings),industryandtransport,needmoreattention,Irena'sGielensays.
Gascanplayanimportantroleintheenergytransitioninthesesectors,howeverenergy
efficiencyandrenewableenergymustplayakeyroleandshouldfeatureprominentlyinthe
climatetalkslaterthisyear,headded.
Porrittsaysthatgiventheincreasinglyurgentneedforswiftdecarbonisationofoureconomies,we
needtoseeatleasttwiceasmuchinvestmentgoingintorenewableseveryyearsotherecould
bearealproblemifcapitalexpenditurecontinuestoflowintounconventionalgasandoil.
Butthatlooksunlikely.WithSaudiArabiaintentonsqueezingtheUSunconventionaloilindustry,
allthesignalspointtoconsolidationandvaluedestructionratherthanbignewinvestmentsinto
theindustryasawhole.
"Andwhereunconventionalgascanbeseentobehelpingkilloffthermalcoalforpower
generation,thatisatleastasmallstepalongtheroadtothekindofdeepdecarbonisationwe
need,"Porrittadded.DE

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