Utilities Are Cooking the Books to Justify More Gas Plants

Oil and gas companies and many (but not all) utilities, invested in short-term corporate profit margins, are using this growing demand for electricity as an excuse to keep polluting power plants online, and even to build more fossil gas plants on their customer’s dime. While gas plants are more expensive than clean energy, utilities are able to pass the entire cost onto their customers—plus a guaranteed profit margin on top. The more utilities invest, the more they profit, which makes pricey gas plants attractive to utilities even though clean energy provides cheaper and more reliable power. 

Many utilities that are proposing new gas plants are overstating load growth and ignoring the potential of clean energy, storage, and demand-side measures to meet that demand. By cooking the books, utilities make it seem that new gas plants are the only option available to meet an oncoming grid crisis. All this is so they can charge American consumers for the costs of building unnecessary new power plants. That’s misleading and wrong. 

The scale of this potential problem is hard to overstate. Some southeastern utilities such as Duke Energy, Georgia Power, TVA, and Dominion are rushing to build at least 14 gigawatts of ill-considered gas plants. If you take into consideration the proposed utility buildout plans for other southeastern utilities, this number rises to at least 33 gigawatts of proposed gas capacity. Nationwide, 79 gigawatts of gas capacity are actively seeking connection to the grid as of December 2023. If these new plants behaved like the average gas plant today, they would increase U.S. climate pollution by 191 million tons per year.

Duke Energy

One of the most egregious offenders is Duke Energy, based in the Carolinas. Duke’s integrated resource plan artificially caps energy storage and solar additions at a low level in its modeling. Limiting the contributions of third-party solar and storage creates an artificial shortfall in generation that Duke uses to justify the need for new gas plants for its own profit. When you’re a hammer, everything looks like a nail. Duke’s plans include several baseload gas plants that cannot ramp up and down in response to changing grid conditions. These plants are especially unhelpful in maintaining a reliable grid. But they are especially profitable for Duke Energy and its shareholders.

Tennessee Valley Authority

The Tennessee Valley Authority (TVA), a federally-owned utility, is also cooking the books to justify new gas. TVA’s plans to rely on gas have been criticized by the EPA for failing to consider clean energy alternatives. By failing to consider cheaper technologies, TVA is unnecessarily increasing power bills for its customers who already face a high energy burden.

Georgia Power

Georgia Power, a subsidiary of Southern Company, is also unjustifiably discounting clean energy. Microsoft, a major energy buyer with data center power demand and climate goals of its own, has said that Georgia Power’s integrated resource plan, which relies on new gas, undervalues renewable energy’s contributions to resource adequacy. Even the U.S. Department of Defense, a major electricity customer, has announced it “strongly opposes” Georgia Power’s plans, which do not include even a single carbon-free source of electricity.

Utilities also have a perverse incentive to inflate load growth projections so that even more fossil-fuel investments, billed to customers with a guaranteed rate of return, appear necessary. Regulators should review eye-popping demand projections by utilities with skepticism.

Clean Energy Is Cheaper Than Gas

The rush to gas ignores the possibility of meeting growing demand with lower-cost clean energy and storage. Renewable energy is cheaper than new gas, even without considering the game-changing tax credits and bonus credits for wind, solar, and storage in the IRA that reduce the cost of these technologies by 30 to 88 percent. Renewables that take full advantage of the tax credits in the IRA are cheaper than 99 percent of proposed gas plants. 

And this is exactly what customers are demanding: Increasingly, customers want more energy cost regulation, more affordable power, and utilities investing in clean energy options. 

New gas plants, however, are the most expensive option, will increase pollution and costs for customers, and are “disproportionately vulnerable to failure”. Utility investment decisions must be approved by state regulators, who are tasked with protecting customers from unjust utility bills and unnecessary cost increases. Those regulators must take a hard look at utility proposals and assumptions, many of which fail to take into account the full potential of lower-cost clean energy technologies.

Furthermore, locking in the pollution of these new gas plants for 40 or more years will make it impossible to hit U.S. climate targets. The U.S. has pledged to achieve 100 percent clean power by 2035, as part of its international climate commitments. Many states have their own binding laws and clean energy targets, and utilities have their own climate commitments. Proposed gas plants are out of step with all of these pledges. 

The only parties that benefit from this pricier choice are utilities and gas companies, who stand to make extra profit if they can convince regulators to give them the go-ahead. 

These gas plants also face new regulatory requirements. In April 2024, the Environmental Protection Agency (EPA) finalized carbon pollution standards for new gas plants that require plants to reduce their carbon pollution by 90 percent by 2032, if they operate at least 40 percent of the year. Those requirements make baseload gas plants, which are increasingly unhelpful in matching demand in an era of abundant renewable energy, especially unattractive. Peaker plants that operate less often are covered by less stringent pollution standards that would still impact plant economics. These regulations make it less likely that proposed gas plants would be the most economical choice without utilities putting their thumbs on the scale—and they make clean alternatives even more attractive.

We Have 21st Century Solutions for a 21st Century Grid

Instead of living in the past and building more gas, utilities should invest in solar, wind, and storage. Currently, about 2,600 gigawatts of clean energy and storage are stuck in the interconnection queue, waiting years for utilities and grid operators to let them connect to the grid. If utilities really foresaw a grid crisis, they would speed up the queue. The truth is, they don’t see a real crisis—just an opportunity to profit.

To enable more clean energy to come online and meet rising demand, utilities should plan more transmission and consider the short-term transmission capacity that reconductoring and grid-enhancing technologies can provide—at least a 50 percent increase and a 10-30 percent increase in transmission capacity, respectively, in only a few years. These technologies are commercially ready today. The Department of Energy (DOE) estimates these technologies could collectively meet 100 gigawatts in incremental peak demand—more than the entire expected load increase over the next decade.

Similarly, distributed resources, virtual power plants, and energy efficiency can reduce peak load and defer the need for new power plants entirely. If done right, increased load from electrification can be a boon to the grid, with new storage technologies and flexible loads at chargers and homes helping to smooth out peaks in supply and demand and make the grid more reliable. Virtual power plants and grid flexibility enable load to shift to off-peak hours, deferring the need for expensive investments in new generation of any kind.

We have modern technologies that can meet power requirements at a lower cost than dirty and dated gas plants. We should use them.

Take Action

Just because utilities want to build and profit from new gas plants does not mean that we should let them. We have the technologies, and thanks to the IRA, the Bipartisan Infrastructure Law, and state leadership, we have the new investments and policy tools to get there. We just need utilities, and the federal, regional, and state regulators and grid operators who oversee them, to make the right decisions.

Ultimately, these are public utilities that answer to us—and the utility regulators elected or appointed in our states. Thankfully, these plans can be defeated. As state governments determine how they will comply with EPA’s new power plant carbon standards and consider whether to approve utility resource plans and gas plant proposals, each of us can weigh in. 

The vast majority of new power connecting to the grid is clean energy. The paradigm shift is here. Now utilities need to get with the program.