Utilities Shift from Coal to Natural Gas and Renewables

Utilities shifted from coal to natural gas because gas plants are cheaper, more efficient, easier to maintain, and avoid costly coal transport and waste disposal. Renewables are now starting to outperform gas economically, with wind and solar-plus-storage showing lower long-term electricity costs than fossil fuel generation.

Today's massive gas plant buildout could eventually create stranded assets as renewables continue gaining market share and becoming the lowest-cost power source. If we think of electricity purely as a commodity, then we should apply to it the one financial rule that dominates all commodity markets everywhere: the lowest cost producer always wins.

The logic behind this is simple. Why would anyone pay more for an identical product, scarcity concerns notwithstanding?

If a pound (or kilo) of say sugar was $5 at store A and $10 at store B, it's no mystery whose inventory will sell out first. The same logic applies to the production of electricity. And, to us, that's why industry leaders have been so focused on a transition to gas from coal as a boiler fuel.