Giant Batteries Drain Economics of Gas Power Plants

Batteries used to store power produced by renewables are becoming cheap enough to make developers abandon scores of projects for gas-fired generation worldwide. Reuters reports: The long-term economics of gas-fired plants, used in Europe and some parts of the United States primarily to compensate for the intermittent nature of wind and solar power, are changing quickly, according to Reuters' interviews with more than a dozen power plant developers, project finance bankers, analysts and consultants. They said some battery operators are already supplying back-up power to grids at a price competitive with gas power plants, meaning gas will be used less. The shift challenges assumptions about long-term gas demand and could mean natural gas has a smaller role in the energy transition than posited by the biggest, listed energy majors. In the first half of the year, 68 gas power plant projects were put on hold or cancelled globally, according to data provided exclusively to Reuters by U.S.-based non-profit Global Energy Monitor. [...] "In the early 1990s, we were running gas plants baseload, now they are shifting to probably 40% of the time and that's going to drop off to 11%-15% in the next eight to 10 years," Keith Clarke, chief executive at Carlton Power, told Reuters. Developers can no longer use financial modelling that assumes gas power plants are used constantly throughout their 20-year-plus lifetime, analysts said. Instead, modellers need to predict how much gas generation is needed during times of peak demand and to compensate for the intermittency of renewable sources that are hard to anticipate. The cost of lithium-ion batteries has more than halved from 2016 to 2022 to $151 per kilowatt hour of battery storage, according to BloombergNEF. At the same time, renewable generation has reached record levels. Wind and solar powered 22% of the EU's electricity last year, almost doubling their share from 2016, and surpassing the share of gas generation for the first time, according to think tank Ember's European Electricity Review. "In the early years, capacity markets were dominated by fossil fuel power stations providing the flexible electricity supply," said Simon Virley, head of energy at KPMG. Now batteries, interconnectors and consumers shifting their electricity use are also providing that flexibility, Virley added.

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