Just as natural gas has beaten coal in less than five years, solar power is already beating gas, so betting on LNG exports or even fracked methane for domestic power is a bad investment. These are some implications of a new Citi GPS report.
The switch from gas to solar is already happening in Germany and in the U.S., according to Citi GPS in Energy Darwinism: The Evolution of the Energy Industry, October 2013, page 9:
…moreover, solar steals the most valuable part of electricity generation at the peak of the day when prices are highest. This effect has already caused the German utilities to release profit warnings, with some gas power plants in Germany running for less than 10 days in 2012, all of which makes some utilities reluctant to build new gas plants given fears over long term utilisation rates and hence returns.
And not just in Germany; see page 84:
This is not a ‘tomorrow’ story, as we are already seeing utilities altering investment plans, even in the shale-driven U.S., with examples of utilities switching plans for peak-shaving gas plants, and installing solar farms in their stead.
Wind is also beating coal; page 9 again:
Wind is already overshadowing coal in the second quartile. While wind’s intermittency is an issue, with more widespread national adoption it begins to exhibit more baseload characteristics (i.e. it runs more continuously on an aggregated basis). Hence it becomes a viable option, without the risk of low utilisation rates in developed markets, commodity price risk or associated cost of carbon risks.
By no “commodity price risk” they allude to wind requiring no fuel. And that’s also true of solar, as they spell out on page 90: Continue reading Solar learns faster than any other energy source –Citi GPS