The new decade has greeted the fossil gas industry with a painful wallop. Even before the coronavirus devastated the stock market, fossil gas stocks were already in sharp decline as a glut in supply collided with falling demand and mounting competition from cleaner, cheaper renewable sources . The resulting financial pain is being felt by frackers, pipeline builders and gas utilities alike. It’s tied to an overall swoon for fossil fuels and market experts warn there’s no end in sight.
Bloomberg News reports: “In the past few days, electric utility valuations blew past those for gas, a sign that investor confidence in the future of fossil fuels has reached a tipping point. With climate advocates pushing to eliminate natural gas from homes and businesses and lawmakers from New York to California taking a stand against greenhouse gas emissions, pipeline developers are facing an uncertain future.”
Nasdaq cautions “the odds are stacked against a natural gas rebound,” concluding “the near-to-medium term outlook for gas producers looks bleak.”
Bank of England governor Mark Carney foresees a potential collapse for the fossil fuel industry in which governmental and corporate net-zero pledges and clean-source competition shatter the value of existing fossil assets. He suggests, “Action is needed to help consumers navigate the market. Labels to clearly signal the sustainability of a product to consumers may be a good start.”
CNBC market analyst Jim Cramer continues to paint a dire picture for the future of the industry, writing: “When stocks get pulverized I smell opportunity. But sometimes the smell is a stink literally almost at every price.”
Markets often seem rock-solid until the moment they shift, but once they do, they move swiftly and decisively away from industries that don’t fit into the future. The good news is that grassroots efforts to fight climate change are making a difference by accelerating the move away from fossil fuels.
Whether it be opposition to pipeline proposals in Ashland, Westborough or Longmeadow, or continued efforts to stop the compressor project in Weymouth, community-based action has already put the larger industry on its heels. The public is calling out the unjustifiable economics and climate malfeasance associated with new gas infrastructure expansion. Nobody’s buying what they’re selling.
But don’t expect the industry to go without a massive battle. Gas utilities will continue to push for the development of additional pipelines, compressor stations and tank farms. They want to make as much money on gas as they can before the door closes forever. And, unfortunately, the current regulatory structure is set up to let them do that, while passing on the lon-term costs to ratepayers,
Yet, even as the fight continues, there is one more bright spot to celebrate: Fossil gas is headed toward obsolescence because the renewables market is gaining steam across the Northeast. The CEO of regional electric grid operator ISO-New England recently noted a “dramatic shift” in the projects being built to meet our future energy needs.
About 95% of the nearly 21 GW of energy resources currently proposed for the New England region are grid-scale wind, solar and battery projects.
In a press call on Friday, ISO-NE CEO Gordon van Welie noted that five years ago, the majority of projects sought by developers were natural gas resources, accounting for 63% of the queue.
The makeup of the proposed 21 GW includes 68% wind, 15% solar and 11% battery storage. Natural gas makes up only 5% or 1,037 MW. Developers are asking ISO-NE to study proposals for many more potential projects as well.
And it’s not just happening in New England. The same article quotes Gregory Wetstone, CEO and president of the American Council on Renewable Energy, who says, "The growing share of renewables in the ISO-NE interconnection queue is a trend seen across all RTOs and reflects renewables' increasing cost-competitiveness in every region of the country."
The future has arrived, and the smart money is betting on renewable energy. The 2020s are shaping up to be a decade of rapid decline for the gas industry.