As investment in solar, wind and gas generation continues to evolve, dynamics are changing rapidly and differ by region-based utility mandates, state policy, proximity to low cost gas production and solar and wind resources. Especially as we consider a post-Covid world, the expectation is a focus on ESG investment and zero carbon plans will continue to put pressure on further solar and wind development and further declines in coal burn. Is there opportunity for increased need for gas generation to back continued renewables intermittency, especially since a long duration battery solution is not immediately on the horizon? This Energy Market Commentary will look at how solar, wind and gas development is evolving and how gas burn is changing through time at a state and plant level.
Aging thermal fleets continues to provide opportunities for solar, wind and gas development. As shown above, the chart shows combined total gas and coal capacity by state compared to the percentage of the fleet that is 15 years or older. Texas, Florida and California large populations place them at the top of the list combined with relatively more modernized generation fleets. Highlighted are four states that have greater than 20 GW fleets and have over 80% of the fleet that was built prior to 2005 which includes Illinois, Indiana, Arizona and Oklahoma.
As it turns out, states with most solar and wind development also tend to be the states with the most natural gas plant development. Shown above are the states with the most combined solar and wind development, compared to gas development. Texas, California and New York are in the top spots but if we look at the four previously selected states we can see Illinois and Indiana have active development of solar, wind and gas. This data is from BTU Analytics’ Power View which has a project vetting methodology called the ‘BTU Grade’ so the projects shown are only projects actively moving through the development process. Considering Indiana and Illinois still have substantial coal fleets, active development of solar, wind and gas is planned. Meanwhile in Oklahoma wind development leads while in Arizona solar represents the most development.
Looking at how gas burn has responded to date we can see emerging trends by state. Illinois and Indiana have already seen steep decreases in coal capacity. In Illinois, coal capacity has gone from 17 GW in 2010 to 11 GW in 2020 and Indiana from 21 GW in 2010 to 17 GW in 2020 with commensurate significant drops in coal generation. As shown above, natural gas burn on an average hourly basis for June 2016, 2018 and 2020 show increases year-over-year in these two states. Meanwhile in Arizona, solar development reaching 2 GW in 2020 combined with coal capacity and generation declines have resulted in a gas burn that is starting to look like the ‘duck curve’ in California ISO. Arizona peak gas burn is moving later into the day and ramping more steeply, presumably to back-fill for falling levels of solar at the end of the day. In Oklahoma where coal generation has gone to almost zero while wind has grown from 1 GW in 2010 to 8 GW in 2020, gas burn has declined year over year. Considering considerable wind development on the books in Oklahoma, this trend is likely to continue.
Finally, if we look at anecdotal evidence at an individual plant level using BTU Analytics’ Power View hourly thermal plant data, we can see evidence supporting these trends. In Indiana, the St Joseph Energy Center located in northern Indiana has 1,400 MW of capacity and went into service in 2018. As shown above, this plant has been providing consistent baseload generation running at near capacity except for a few hours between 2 AM and 6 AM. Plants like this one, and others result in the previously shown increase power burns in Indiana year-over-year. Meanwhile, if we look at the Sundance peaker gas plant in southern Arizona, we can see strong dispatch in the later afternoon and evening hours which backs the trend of gas backing solar generation at the end of the day. As more coal retires and more solar and wind get developed, absent a long duration battery, natural gas will be called upon to back renewable intermittency. To find more power development opportunities, dig deeper with BTU Analytics’ Power View – request more information here.