More Capacity ≠ More Gas Burn
A Reminder for the Gas Value Chain
𝗔 𝗿𝗲𝗺𝗶𝗻𝗱𝗲𝗿 𝗳𝗼𝗿 𝗴𝗮𝘀 𝗽𝗿𝗼𝗱𝘂𝗰𝗲𝗿𝘀 𝗮𝗻𝗱 𝗺𝗶𝗱𝘀𝘁𝗿𝗲𝗮𝗺𝗲𝗿𝘀: 𝗰𝗮𝗽𝗮𝗰𝗶𝘁𝘆 𝗶𝘀 𝗡𝗢𝗧 𝗴𝗲𝗻𝗲𝗿𝗮𝘁𝗶𝗼𝗻...
With all the excitement about gas fired generation capacity coming on, mostly connected with data center buildouts, its 𝗲𝗮𝘀𝘆 𝗮𝘀𝘀𝘂𝗺𝗲 𝘁𝗵𝗮𝘁 𝗺𝗲𝗮𝗻𝘀 𝗮 𝗹𝗼𝘁 𝗺𝗼𝗿𝗲 𝗴𝗮𝘀 𝗯𝘂𝗿𝗻.
𝗧𝗵𝗮𝘁'𝘀 𝗮 𝗿𝗶𝘀𝗸𝘆 𝗮𝘀𝘀𝘂𝗺𝗽𝘁𝗶𝗼𝗻.
As the base of low marginal cost assets like solar, wind and BESS grows, they will deliver the energy we need more in hours of more days. That eats away at demand for gas (demand growth offset on the other side).
In a growing number of cases 𝗶𝘁 𝗶𝘀 𝗿𝗲𝗹𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝘆, 𝗺𝗼𝗿𝗲 𝘁𝗵𝗮𝗻 𝗲𝗻𝗲𝗿𝗴𝘆, 𝘁𝗵𝗮𝘁 𝗻𝗲𝘄 𝗴𝗮𝘀 𝗳𝗶𝗿𝗲𝗱 𝗰𝗮𝗽𝗮𝗰𝗶𝘁𝘆 𝗶𝘀 𝗽𝗿𝗼𝘃𝗶𝗱𝗶𝗻𝗴.
Yes, gas fired generation will get paid richly in the hours it serves (part of the compensation for reliability), but there may be fewer of them. And that means if your business model relies on the flow of energy, there may be fewer hours in which your product is in demand.
𝗧𝗵𝗶𝗻𝗸 𝗺𝗼𝗿𝗲 𝘃𝗮𝗹𝘂𝗲, 𝗹𝗲𝘀𝘀 𝗳𝗹𝗼𝘄.
𝗦𝗼 𝗵𝗼𝘄 𝗱𝗼 𝘆𝗼𝘂 𝘁𝗮𝗸𝗲 𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲? That is something our team has been discussing a lot over the last several months (happy to discuss with you if you have interest).
Whether it's Exxon, CVX, ET or Williams (and others) it seems to mean 𝗴𝗲𝘁𝘁𝗶𝗻𝗴 𝗰𝗹𝗼𝘀𝗲𝗿 𝘁𝗼 𝗱𝗲𝗺𝗮𝗻𝗱 𝗮𝗻𝗱 𝗴𝗲𝘁𝘁𝗶𝗻𝗴 𝗿𝗲𝘄𝗮𝗿𝗱𝗲𝗱 𝗳𝗼𝗿 𝗻𝗼𝗻-𝗲𝗻𝗲𝗿𝗴𝘆 𝗮𝘁𝘁𝗿𝗶𝗯𝘂𝘁𝗲𝘀 (reliability and environmental).