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SRP’s baffling, costly natural gas expansion

Arizona residents who get their electricity from Salt River Project should be outraged at the utility’s proposal to expand its Coolidge Generating Station by adding — in utter defiance of the current energy market — 16 new natural gas generation units.

The U.S. power generation market has changed dramatically over the past five years. Natural gas has been bleeding market share to cheaper sources of electricity, which include solar, wind, and even nuclear.

David Jenkins

At roughly $5 per MMbtu, the price of natural gas today is more than double what it was just two years ago. Even at half of that price, natural gas has been unable to compete with solar in the Southwest.

New solar generated electricity paired with storage is selling electricity for between $15 and $25 per megawatt hour (MWh), while electricity generated from natural gas plants has been selling anywhere between $45 and $73 per MWh.

This price difference is only going to widen as Russia’s ongoing invasion of Ukraine has sent natural gas price forecasts sharply upward.

Adding new gas generation now makes zero sense for SRP ratepayers, as it will saddle them with higher electric bills going forward — due to both the ever-rising price of gas, and the likelihood that these new units will become so uneconomical that they will have to be retired early, thus becoming costly stranded assets.

Before recent events in Europe, the Energy Information Agency projected that natural gas prices would more than double by 2030. They blew past that in just two years.

Now, the urgent need for European countries to be free of their longstanding dependence on Russian gas has further altered the market. Because much of that Russian supply is being replaced with liquefied natural gas from this country, global demand for U.S. gas is increasing, which will drive domestic natural gas prices higher for the foreseeable future.

Despite all this, SRP is plowing ahead with its plan to double down on natural gas generation. The only thing standing in the way of this costly and boneheaded expansion is an upcoming vote by the Arizona Corporation Commission.

If the ACC cares a wit about Arizona ratepayers, it will reject SRP’s plan to add 16 new gas generation units at Coolidge.

A simple review of energy news from around the country shows what happens when utilities are too heavily dependent on natural gas. One good example of this comes via a recent story from a Fox News outlet in Florida. It reports that the big three electric utilities in that state are all dumping their added natural gas costs onto the backs of customers.

The same is true across the country. For example, when a Pennsylvania man’s utility bill jumped $200 in January the utility attributed it to higher natural gas prices.

This trend continuing is both certain and obvious. You will not find an independent energy market analyst who projects natural gas generated electricity as ever being price competitive with solar generated electricity going forward.

Anyone who somehow still argues that natural gas generation will positively affect ratepayer utility bills is ignoring literally every signal the market has been sending for the past five years.

It is truly hard to understand SRP’s rationale for this market-defying — and logic-defying — proposal, but it is telling that this monopoly utility chose not to issue a competitive all-source bid for this project. In other words, SRP rigged its decision in favor of gas by not allowing cheaper options to compete.

According to FAQs about the project on its SRP’s website, the company points to lack of experience with battery technology and cloudiness as concerns that steered it away from solar and storage.

Cloudiness? Arizona is the sunniest state in America with roughly 300 sunny days per year.

It seems obvious that SRP shaped its Coolidge expansion decisions to meet internal biases and motives that have nothing to do with providing its customers with the cheapest electricity.

Approving this expansion will saddle ratepayers with huge utility bills for decades, while denying them the clear cost savings and price stability of Arizona solar.

The ACC should just say no.

David Jenkins is president of Conservatives for Responsible Stewardship, a national organization with more than 800 members in Arizona.

 

 

 

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