More than a fifth of European gas-fired power plants and nearly a third of US units are lossmaking, and surging fuel prices risk sending many more into the red. Overall, the economics for new gas in Europe and the US are very weak. Those committing to the long-term funding of such assets are already risking the loss of billions of dollars, while the risks of continued investment will only grow further.
This report calls into question the case for long-term investment in gas-fired power plants globally. It argues that unabated gas plants’ future role in the power system should be predominantly limited to backup reserve to allow for flexible low-carbon forms of supply to fully emerge. New onshore wind and solar investment options are already cheaper than the costs associated with the continued operation of existing gas plants in the US, and it is projected the costs for both renewable technologies will fall to levels less than half the long-run marginal cost for gas by 2030.
Although some existing gas-fired capacity may be required to sit idle in reserve to ensure system reliability for the long-term, this should be limited and not relied upon for day-to-day supplies.