Shale gas 'no competitor' outside US

Large-scale wind and solar will be competitive before shale gas is developed at scale in every global region except the US, predicts Jason Channell, head of equity research for the global alternative-energy and clean-technology sectors at Citigroup.

The notion that shale gas represents an existential threat to renewables has become a common theme of high-level energy discussions in recent years.

However, in most places the break-even point for shale gas exploitation will be on a par with – or higher than – the cost of utility-scale renewables by the time shale gas development takes off in any commercially significant way, claims Channell, a former oil and gas analyst.

Thanks to its domestic shale gas boom, US natural gas prices currently trade at $3.29 per million British thermal units (BTU) – a price which renewables “can’t get near”, Channell acknowledges.

But at those prices most producers are losing money, making them unsustainable.

A break-even price for US shale gas is “probably more like” $4-$6 per mmBTU, and Channell notes that future regulations, such as a mandate to trap fugitive methane emissions, would add another $1-$2 per mmBTU. 

At that price – and even in the face of a flood of natural gas – utility-scale solar would be competitive across much of the US by the end of the decade.

Moreover, the lag time facing shale gas development in other parts of the world, including Europe and Asia, means that renewables will already be fully cost-competitive by the time significant production comes on stream.

“There’s this perception that shale gas is this impossibly abundant, incredibly cheap source of energy that’s going to sweep everything before it and … [ultimately represent] the death of renewables,” said Channell, speaking at a Scottish Renewables conference in Edinburgh.

“But what we’re finding is that renewables actually get there first, everywhere outside the US.”

Well-sited onshore wind farms can already compete with gas at $8-$9 per mmBTU – half the current gas price in Japan, Channell claims, adding that “wind causes much fewer problems in terms of grid stability than solar”.

But in spite of the dramatic decline already seen in PV prices in recent years, solar holds by far the greatest potential for continued cost reductions. “Solar still holds the chance for new eureka moments and game-changing shifts in manufacturing and technology,” Channell says.