BATTLE OF THE BANS
Natural gas is fast becoming a flashpoint in the ongoing conundrum that is U.S. energy policy and infrastructure as legislators weigh its stigma as a fossil fuel against its established versatility and reliability. Indeed, Tom Di-Christopher, reporting for S&P Global Market Intelligence last month, notes that, whereas six states have passed or plan to pass bans on the use of natural gas in buildings, 22 other states have passed or plan to pass legislation actually banning bans on gas use in buildings. The six states on the “ban” side account for roughly 25% of U.S. heating demand; the 22 states on the “no ban” side ac-count for roughly 45%. Moreover, although most of the current bans focus on new buildings, some governments are planning to require electrification retrofits for existing buildings.
New York and California top the list for residential and commercial gas demand, and their desire for (in the case of the former state) and adoption of (in the case of the latter) gas bans could turn out to be a case of “Be careful what you wish for!” In the last few years, California has endured some very high and volatile power prices as a result of its emphasis on building a more renewable but intermittent power grid. New York has not yet experienced such a price spike, but the freezing weather in Texas in February is a reminder of just how wild power prices can become with a large enough share of renewables on the grid.
As states continue to increase the share of renewables in their generation mixes and leave natural gas behind, the added burden of electrification driven by some form of gas ban may amplify the unpredictable impact of the absence of the fuel on power prices, particularly under stressed market conditions. Meanwhile, states that prohibit banning gas use in buildings may enjoy relatively greater grid and price stability by simply giving them-selves more options. Clearly, this nationwide controversy has broad implications for the future not only of the natural gas sector but also the broader electricity market.