Gas-fired Generation is UNDERPAID
The reliability attribute is undervalued and likely the draw for financial buyers
๐๐ฎ๐-๐ณ๐ถ๐ฟ๐ฒ๐ฑ ๐ด๐ฒ๐ป๐ฒ๐ฟ๐ฎ๐๐ถ๐ผ๐ป ๐ถ๐ ๐จ๐ก๐๐๐ฅ๐ฃ๐๐๐ ๐ณ๐ผ๐ฟ ๐ฟ๐ฒ๐น๐ถ๐ฎ๐ฏ๐ถ๐น๐ถ๐๐. Financial buyers like these assets, even as US power supplied by gas is set to DECLINE 3.7% and 0.8% in 2025 and 2026, while total generation grows 2.1% and 1.0% (from the latest STEO from the EIA).
๐๐๐ฎ ๐๐ฉ ๐ข๐๐ฉ๐ฉ๐๐ง๐จ? Natural gas markets have experienced a nice tailwind for the three years with gas-fired generation growing 7.2%, 7.4% and 3.9% from 2022-2024.
That trend is set to reverse as solar PV capacity grows an estimated 24% in 2025 and takes a growing share of the energy portion of the power market. Meanwhile the EIA is calling for gas-generation to decline 3.7% in 2025 resulting in ~1.2Bcf/d LESS power burn that in 2024.
But gas provides two "products" to the market: energy and reliability. LOCE and other metrics focus on energy, and indeed, solar can be cheaper on that basis alone (hence the growth).
Of course, we also care about getting our energy when we want and need it. The cost of that reliability is embedded in gas-fired generation, but not in non-dispatchable resources.
Getting this โproductโ more fully priced into the market is one of the great opportunities of the moment, especially as inflexible and relatively price insensitive loads (think data centers) drive growth.
No wonder the likes of Blackstone, Quantum and Trafigura are accumulating gas-fired power assets. Consider these examples: