Low prices for U.S. gas truly are a great thing. Gas is now second to sister fuel oil and supplies 33% of our energy – and 40% of our electricity, double the share of second-place coal. Low and stable natural gas prices have benefitted families and helped businesses reduce costs, saving a family of four, for instance, $2,500 per year since 2007.
This is most important for lower-income and communities of color because electricity is the most indispensable form of energy. Low-cost energy might be our most vital weapon in the pursuit of racial justice: as a percentage of income, poorer Americans spend three to five times more on energy than wealthier ones do. Even before Covid-19, nearly a third of Americans struggled to pay their energy bills. And low-cost energy is the key to growing our economy. It frees up more money for the consumer spending that constitutes almost 75% of U.S. gross domestic product.
Moreover, our climate-driven goal to use more electricity in transportation, in buildings, and in industry hinges on affordability. President Biden has promised more low-cost, abundant natural gas to give unions a competitive advantage for a massive infrastructure and manufacturing build-out.
Every time the Department of Energy’s National Modeling System peers into the future, it sees lower and lower priced natural gas (see Figure). Such low prices over the long-term will make market penetration more difficult for politically favored but naturally intermittent wind and solar power. Electrification can only increase the need for gas because it could increase our power demand 65% or more. Since the shale revolution took off in 2008, the U.S. has added about 130,000 MW of gas capacity, a 33% increase for state-of-the-art generating units built to stand for generations. As seen for other technologies, cost reductions for renewables are bound to flatten out as they evolve.
It typically goes unmentioned, for instance, that “high grading” means that many of our windiest and sunniest locations have already been taken. But more wind and solar development actually depends on low-cost gas: gas is dispatchable and the backup for their natural intermittency. More gas gives wind and solar a commercial chance. For example, the U.S. now has some 530,000 MW of gas generation capacity, versus less than 2,000 MW of battery storage, with most of that able to run for only a few hours before needing a recharge. From an environmental perspective, low-cost gas is crucial because fuel switching in most markets still pivots on gas versus coal – that is, higher-cost gas will simply mean turning to higher-emission coal.