natural gas: A Bridge to climate breakdown

This report serves to inform investors about the evolving risks associated with the use of natural gas within the power sector. At a time when investors are paying increasing attention to power utilities' exposure and contribution to climate change impacts, natural gas infrastructure build-out is expanding rapidly in the United States. As coal's inevitable decline within the energy system continues, natural gas, which is largely replacing it, is a growing source of climate concern. In isolation, risks to future cash flow for individual projects may seem minimal, but examination in aggregate reveals a different picture - that investment in new natural gas infrastructure is incompatible with long-term shareholder and societal well-being.

Initially, natural gas was considered a 'bridge' fossil fuel to a clean energy future, given findings that it has approximately half the climate impact of coal. Supporters pointed to natural gas-based technologies as a means to ensure reliable electricity service as the world adopted more variable clean energy technologies such as wind and solar. However, natural gas is still a fossil fuel whose use generates large climate warming emissions. To achieve a safe level of climate stabilization and protect investor portfolio exposure to global climate change, the bridge for natural gas and its associated emissions must have a clear end.

And yet, billions of dollars are poised for investment to build natural gas infrastructure throughout the United States. This investment drive, which includes power plants and pipelines with multi-decadal lifespans, is incompatible with maintaining a safe climate and avoiding disastrous and costly economy-wide impacts.

UTILITIES ARE SHOWING SIGNS OF MOVEMENT, BUT NOT FAST ENOUGH

As greater awareness of the climate crisis has grown, and clean technology has proliferated, there has been a notable shift throughout the power utility sector. Heavy greenhouse gas (GHG) emitters are now setting ambitious, long-term decarbonization targets. Xcel Energy, PSEG, Duke Energy, Dominion Energy, DTE, Arizona Public Service, and NRG have all set noteworthy net-zero by 2050 emissions goals (See Table 1 below). Yet, many of these same utilities’ continued investment in new natural gas infrastructure is at odds with their emission reduction commitments. For example, Duke, Dominion, Southern, and AEP’s business plans actually indicate a slowdown of their decarbonization plans between 2017 and 2030—a slowdown tied to significant gas investment plans.