Natural gas fired power plants have been the go-to source of firm capacity across the US power system. Firm capacity is generation that can be relied on to run when it is needed – unlike renewable sources such as wind and solar which only generate electricity when the weather is favorable.
However, Bloomberg analysis of the latest EIA data on US power plants (the EIA860) shows that the growing queue of battery installations has now overtaken the declining queue of natural gas fired plants that are planned or under construction in the US.
This is a seismic shift for the industry. Batteries cannot produce electricity for themselves but they can be paired with other sources of generation to move production from times of day when demand is lower – to times when it is higher. This will relieve downward price pressure on the markets from solar generation in the middle of the day at the expense of high prices for gas generators in the early evening when summer demand is at its highest. Similarly, it will allow excess wind generation overnight to be stored until it is needed later in the day, or potentially later in the week.
The side-by-side charts below show the queue of planned, permitted and under construction power plants for the US over time for both Natural Gas and Batteries. It clearly shows that battery power is taking over from natural gas in the queue for flexible capacity – and that 2022 is the first year ever when the queue of batteries is larger than that for gas-fired plants.
Batteries provide a different kind of reliability to gas generators as they are not able to create electricity for themselves. For this reason they are generally paired with, and enable additional deployment of, renewable generation. The chart below shows the queue for wind and solar generation and how it dwarfs the rapidly declining gas generator queue. The chart shows the sum of under-construction capacity plus 50% of permitted capacity as this reflects a good estimate of what will actually reach operational service. Whilst wind and solar cannot achieve 100% of capacity over the course of a year, US build for renewables is now around 5 times that of natural gas. This means that renewables are now being built fast enough to exceed both the capacity and generation of new natural gas plants.
Gas generators need not be afraid that batteries will push them out of the system any time soon – total generation from fossil fuels in the US has risen in each of the last 3 years as demand has recovered strongly post-covid and outstripped the build of low carbon generation. However, we are now seeing the stage being set for an absolute decline in natural gas generation over the next decade.
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