October 5, 2020 (IEEFA) — The landscape for developers of natural gas-fired power plants in the nation’s largest regional power system has shifted dramatically over the last decade, according to a joint study by the Applied Economics Clinic and the Institute for Energy Economics and Financial Analysis.
The Pennsylvania-New Jersey-Maryland (PJM) system coordinates the flow of power to more than 65 million electric customers in 13 states and the District of Columbia. While the PJM electric system is indispensable to the region’s economy, its reliance on gas poses substantial risks for customers and investors, underscored by problems at 11 proposed gas-fired combined cycle power plants.
“This is clearly a case of buyer (or financer) beware: The headwinds facing new PJM gas plants are growing stronger and stronger,” said Bryndis Woods, a report co-author and researcher at the Applied Economics Clinic.
The future of these 11 projects (in New Jersey, Ohio, Pennsylvania and West Virginia) plus any new proposals in PJM will be determined by a number of factors, including:
“Individually, each of these risks could perhaps be factored into a project’s financing,” said Dennis Wamsted, an IEEFA analyst and report co-author. “Taken together, they pose virtually insurmountable hurdles for new gas-fired projects in the region.”
Liz Stanton, a report co-author and director/senior economist at the Applied Economics Clinic agreed: “Investments made today in U.S. natural gas-fired power plants are at risk due to rapidly changing market conditions that increase the likelihood of these assets becoming stranded before the end of their useful life.”
Full report: Risks Outweigh Rewards for Investors Considering PJM Natural Gas Projects
Dennis Wamsted ([email protected]) is an IEEFA energy analyst.
Bryndis Woods, PhD ([email protected]) is a researcher at the Applied Economics Clinic.
Elizabeth A. Stanton, PhD ([email protected]) is director and senior economist at the Applied Economics Clinic.
Vivienne Heston ([email protected]), +1 (914) 439-8921
The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
The Applied Economics Clinic provides expert testimony, analysis, modeling, policy briefs, and reports for public interest groups on the topics of energy, environment, consumer protection, and equity, while providing on-the-job training to a new generation of technical experts. https://aeclinic.org/