Show Me the Money - Renewable Energy in the U.S.

Dollars and 'Common' Sense

There seems to be a common refrain from some on the fossil fuel side of the climate change and renewable energy debate that suggest natural gas is the power panacea and that renewable energy isn't needed.

To put this thesis to a test, we calculate natural gas fuel cost savings from U.S. wind and solar power generation.  Under this theoretical scenario, all wind & solar power generation is replaced by natural gas generation at the prevailing U.S. natural gas heat rate and utilizing monthly natural gas prices.

U.S. natural gas generation and natural gas consumption for power generation suggests the implied average heat rate is approximately 7.6 MMBtu/MWhr.

Although fuel cost savings weren't nearly as substantial with low natural gas prices, the recent increase in wind and solar generation combined with the increase in natural gas prices has re-rated fuel cost savings materially.

Fuel cost savings since 2014 have totaled nearly $80 billion.

Looking at it a different way, the $80 billion represents replacing a required 10-15% increase in U.S. natural gas production.  

Where would natural gas prices be in that scenario?

What this analysis doesn't and cannot highlight is that the $80 billion in 'savings' since 2014 do not all end up in consumers pockets.  The structure of U.S. power markets in different regions of the country and marginal power pricing ensure that a large chunk of these fuel cost savings end up in the pockets of developers and investors.  We expect these dynamics to receive heightened attention in coming months and years.