Victims of natural gas: Today, merchant power. Tomorrow, renewables?
By Jesse Berst
A new report from Fitch Ratings explains how steep declines in natural gas prices over the past four years have "dramatically altered the merchant generation sector." Power projects are likely to be under financial strain if they were structured assuming gas prices from $6 to $13/MMbtu. And it's not just merchant power that may feel the pain, Fitch says. Hydro facilities are also challenged.
The Fitch report does not address renewables, but here at Smart Grid News we think certain states may be headed for trouble. They have stringent renewable portfolio standards (RPS) that require their utilities to get more power from renewables each year. Those renewables are likely to come in at prices far higher than the cost of building a natural gas plant.
It's unclear how ratepayers and policymakers will react when they realize they are paying more for power than other states because of their RPS.