Competition is growing between renewable-fuelled and liquefied natural gas (LNG)-fired power generation due to the falling costs of renewable technologies, new analysis has found.
In a report released this week, consultancy The Brattle Group said the increase in competition is set to have “significant ramifications” for power project developers who have signed long-term contracts for LNG exported from North America.
Proposed projects not yet under construction face an uncertain future, the report said, due to the global collapse in oil and LNG prices and a projected oversupply of LNG in the next few years.
While the group noted that many hope the oversupply will be temporary and that market conditions will improve after 2020, it said the falling costs of renewable power and its growing penetration in the world’s energy mix point to a need for caution, as renewables will increasingly compete with LNG as a favoured fuel in global markets.
“The increasing competition between renewable power and gas-fired generation using LNG should be considered carefully by participants in the global LNG markets,” the report said. “This competition increases the uncertainty in global gas demand and the future LNG requirements in markets now being targeted by North American LNG export developers.
“Both investors in LNG infrastructure and buyers of LNG under long-term contracts will want to consider these risks before making large and long-term commitments to buy or sell LNG,” the consultancy concluded.