Natural gas is now the leading fuel for electric generation in the United States as it surpassed coal in 2015, and in 2017, it was used to generate 32% of electricity, while coal was used to generate about 30%. While natural gas is forecasted to remain the primary source of electric generation for at least the next two years, its role is being challenged in some parts of the country. The resistance is being led by state policy makers, renewable energy advocates, and environmental groups who argue that some existing and proposed natural gas plants are not needed or should be replaced by renewable energy.

Key Details

• California is aiming to generate 50% of its power from renewables by 2030, so the California Public Utilities Commission (CPUC) has expressed preference for batteries, wind farms, and solar panels
  • CPUC directed Pacific Gas & Electric to solicit bids for renewable energy and storage projects to replace three gas plants
  • Earlier, the Los Angeles Department of Water and Power put on hold a $2.2 billion plan to rebuild up to seven natural gas power plants in favor of studies for clean energy alternatives
• Arizona is proposing a clean energy mandate of 80% by 2050 and 3,000 MW of energy storage by On March 13, its regulators placed a temporary moratorium on new natural gas infrastructure through the end of 2018, pending Commission review and approval on a case-by-case basis
  • APS has 510 MW of natural gas (gas turbine) capacity already under construction as part of the Ocotillo Gas Project
  • Tucson Electric Power has 200 MW of natural gas (internal combustion) capacity, planned as part of the Sundt Generation Modernization Project, that was approved by the Arizona Corporation Commission on March 13 (the same day the temporary moratorium was placed)
• Other states have (or are putting in place) similar clean energy goals/mandates and may be leaning toward similar actions (e.g., Alaska (50% by 2025), Kentucky (12.5% by 2028), Maryland (50% by 2030), Massachusetts (40% by 2030), Michigan (15% by 2021), Minnesota (50% by 2030), New Jersey (100% by 2050), and Pennsylvania (100% by 2050))

Implication

Approval of natural gas projects may become more challenging, given the legislatively mandated renewable targets in some states.

More Information

Wall Street Journal: Natural Gas under Assault in Some States after Brief Reign at the Top

Los Angeles Times: California regulators weigh whether the state needs more power plants

Greentech Media: Arizona Regulators Freeze New Gas Plants, Demand More Clean Energy Planning from Utilities

The U.S. Energy Information Administration (EIA): Natural gas to remain primary energy source for electricity generation

S&P Global Market Intelligence – Regulatory Focus (March 21, 2018): Overview of 2018 state-level energy legislative activity *Subscription required

S&P Global Market Intelligence: Arizona OKs 10-unit fast-ramping gas-fired project for Tucson Electric Power *Subscription required

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