Natural Gas and Renewables are Complements, Not Competitors

on June 28, 2013 at 1:00 PM

Electricity Prices To Rise Due To Renewable Energy Investments

The following is an excerpt from an Energy Solutions Forum Industry Brief.

Many renewable energy supporters tout the claim that cheap natural gas prices will delay deployment of renewable energy technologies. However, this is contrary to reality, and investors and policymakers have clear market-based incentives to invest simultaneously in both natural gas generation and renewables. In fact, natural gas can serve as a complement to renewable energy, and investment in natural gas could actually help make renewables more economically feasible in the long run.

The combined investment in both renewable energy and natural gas-fired generation offers portfolio diversification benefits from two sources with different but complementary risk profiles. Natural gas-fired generation can rapidly ramp up and offset renewable energy’s variability, while renewables offer fuel price stability (contributing as a fixed cost portfolio component) and low emissions to hedge against regulatory risk. Investing in both renewable energy and natural gas-fired generation can help optimize investment portfolios and the nation’s energy mix.

The key takeaway is that the cheapest option is not always the best option. The best investment opportunities minimize risk and provide certainty, reducing the variance of expected future costs and portfolio risk.

Key Takeaways:

  • Natural gas and renewable energy are complements, not competitors.
  • The best energy investment opportunities seek to reduce the variance of expected future costs and portfolio risk.

You can read the rest of the brief here.

Today marks the close of New York Energy Week, organized by Energy Solutions Forum 

Energy Solutions Forum is an energy policy research and data company based in New York City. Follow @EnergySolForum for policy research and stay plugged in with ESF Calendar, the industry’s go-to resource for energy business events in and around NYC.