The role of fossil gas plants in the power system is frequently debated. The significant increase in deployment of renewables is changing the balance of technologies in electricity production, requiring greater flexibility. While coal and nuclear power plants provide very low flexibility, gas power is portrayed by its proponents as necessary to support the integration of renewables and ensure grid flexibility. The gas industry is using the argument of gas power “flexibility” to justify the development of new plants and the promotion of fossil gas as a “bridge fuel” for the energy transition.
This paper examines the potential of gas plants to support a renewables-based power system and the consequences of such a strategy in terms of durability and cost.
Key findings
- Most new fossil gas plants are not suitable for providing the flexibility within a day, week, and between weeks that is required in modern power systems.
- The most developed type of gas plants run combined cycle gas turbines (CCGTs) and are designed for baseload purposes.
- Using CCGTs for peakload purposes reduces lifespan, risks profitability, and increases CO2 emissions and atmospheric pollution.
- Open cycle gas turbines (OCGTs) are designed for peakload but have high emissions and low efficiency.
- The economic viability of gas plants is ensured through costly financial mechanisms supported by consumers and taxpayers that increase the risk of fossil fuel lock-in and slow decarbonization of the power sector.
- Current gas turbine shortages threaten the development of new gas plants and will severely delay expansion projects.
- Sustainable and cheaper solutions already provide efficient flexibility to renewables-based power systems (storage systems, demand side management, improved interconnections, and grid-enhancing technologies).
Supporting the development of storage capacities, power grids, and sustainable power (solar, wind) instead of fossil gas plants is key to limiting global warming and air pollution
What it means for financial institutions
Based on the various issues and risks posed by fossil gas plants, and the availability of reliable and sustainable alternative solutions for power system flexibility, banks should adopt robust gas power policies to immediately:
- End all dedicated financial support for new gas plant projects.
- Adopt time-bound restrictions for companies involved in gas power expansion, conditioning further financial services against:
- the immediate end of gas power development;
- a public commitment by January 2027 to phase-out gas power at a pace compatible with the objectives to decarbonize the power sector by 2035 in OECD and European countries, and by 2045 in the rest of the world (1);
- a detailed asset-by-asset closure timetable (without selling or converting to alternative fuel) by January 2028 that is compatible with the objective to decarbonize the power sector by 2035 in OECD and European countries, and by 2045 in the rest of the world (1).
Simultaneously, banks should significantly increase financial support to sustainable solutions such as batteries, interconnections, and power grid enhancements, along with financial support for solar and wind power generation.
