New-build natural gas/renewable facilities unlikely to take off – LS Power CFO

Though natural gas-fired generation is perceived as renewable energy’s battery – the back-up charge that steps up to fill in the gaps in the flow of variable wind or solar power – natural gas and renewable generation are natural competitors, LS Power CFO Joseph Esteves said.

“They have to be so because they provide for the commodity of electricity, and any time you look to fill demand, I believe you should look at a bunch of technologies and come up with the one that is appropriate for that particular circumstance,” Esteves said at the Renewable Energy Finance Forum in New York City on June 25.

The two forms of generation are still complementary, he said.

However, it is unlikely that there will be a rise in greenfield dual-plant development that sites a natural gas simple- or combined-cycle plant together with a solar or wind facility. This is especially true for independent developers, he added.

“Theoretically there are scenarios where a dual-plant package would be more economical, such as when gas prices are very high and fossil-fueled peaking plants are very low,” he said. “Unfortunately none of those conditions exists today, and it’s hard to see when that’s going to materially change. You probably would not today choose to build two plants when you could build one.”

Acquiring an existing gas-fired peaking plant for a “reasonable price” and locating a wind or solar farm adjacent to it could be an option for dual-plant packages, he said. But dual-plant new-builds are not likely.

“I think we’d need a lot of market design changes to stimulate that,” Esteves said. “First of all, we need to refine our capacity pricing markets as is, and some areas still actually need to create them. You need that for any new generation in general. If you notice, not a lot of generation is getting built today and certainly not by independents.”

It is more likely that integrated utilities would be able to execute dual-plant new-build construction.

“Integrated utilities may have an easier time with all of this because they generally have larger portfolios,” he said. “They don’t have to rely on pure market prices to make things work.”

Esteves also said that, in that complementary way, natural gas plants are likely to benefit from renewables “continuing to make it difficult for coal plants, possibly forcing them to shut down.”

Though LS Power has been largely involved in natural gas-fired generation, it has financed $2bn of solar facilities and $1bn of transmission lines over the last two years, Esteves said.


About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.