Thread by @SeanCasten

And now, I bring you a public service announcement to pre-but the arguments that seem to be gaining traction suggesting (falsely) that current gas price volatility is caused by renewables. Buckle up... Thread:

1/ First, the case being made by the fossil shills: Intermittent renewables (read: wind and solar) need balancing capacity on the grid. Only quick ramping, inefficient gas plants can provide that so as Rs are deployed, gas demand goes up and increases price.

2/ That is a real thing and not without it's merits. If that were driving demand, it would be pretty easy to spot in the data, because we'd see rising gas demand. Trouble is, we don't. eia.gov/dnav/ng/hist/n…

3/ For the 7 months that ended July 2021, total US gas use was 17,862 billion cubic feet. Same 7 months of 2020 total us gas use was 17,696 BCF. e.g., Demand in 2021 is 114 BCF lower than it was at this time last year. There goes that argument.

4/ So if it's not a demand side pressure, what about supply? In the 7 months ending July 2021 the US has produced 20,297 BCF of gas. Same period in 2020 total production was 23,792 BCF. e.g., US natural gas producers produced more than 3,000 FEWER BCF this year than last.

5/ Since both are down, there's a much stronger case to be made that declining production is driving market tightness rather than declining demand. Only the former is consistent with the laws of supply and demand after all.

6/ It makes sense BTW that demand would be down. Remember all those gas companies that were writing down losses over the last couple years? That tends to dry up capital for new field development. And there has been a decline in operating wells. eia.gov/dnav/ng/hist/n…

7/ As an aside, my dad used to have a paper-weight of an oil barrel on his desk. On one side it said "relax, the price will go down". On the other it said "relax, the price will go up." Such is the nature of capital investment cycles in the O&G sector... But I digress.

8/ But that's not the whole story. Gas storage in the US exists to absorb swings between demand and supply. Changes in storage levels also have to factor in. Turns out that's also down, year-on-year:

9/ As of July 2021, we had 7,188 BCF in storage. That's down 6% (495 BCF) from July 2020. Maybe not totally surprising. Supply has fallen faster than demand (which has also fallen) so the buffer in the system is tighter. That would lead to upward price pressure too.

10/ Now to be sure, there is actually a big renewable driven upward pressure on gas supply going on, in spite of the falling overall demand. Hydro-electric capacity is WAY down. Thanks to climate change, it should be noted. Less snowpack = lower reservoirs = less hydro.

11/ Through July 2020, hydro-electric dams had produced a little over 184,000 billion watt-hours. That's down over 13% to just under 160,000. On the margin, you'd expect that to lead to more natural gas generation. eia.gov/electricity/mo…

12/ My rough back of the envelope is that if all that lost hydro was replaced by 13,000 Btu/kWh gas engines that would account for an additional ~323 BCF of natural gas use this year. Probably not quite that high, but in any event total demand is down.

13/ Worth watching that trend though, because burning more natural gas = more reduction in hydro capacity = more demand for gas peakers. We should try to get out of that doom loop. Just sayin'.

14/ But now here's the real kicker: look at what's happened to LNG demand. This is gas that we produce in the US, then export to other countries. eia.gov/dnav/ng/hist/n…

15/ We've exported over 2,000 BCF through July 2021 vs. 1,318 through July 2020. And it's increasingly rapidly. That increase is almost 2x the decline in storage. If we weren't exporting that NG, we'd see surging storage volumes (or less production.)

16/ Moreover, as producers gain more and more access to foreign gas markets, US consumers get more and more exposure to foreign gas market volatility.

17/ So there you have it. Gas producers have successfully found markets to sell US resources to higher priced foreign markets, causing prices to US consumers to rise. Also, they aren't producing as much as they used to. And climate change is making it worse.

18/ The solution to that is to invest in zero-carbon generation technology that doesn't have exposure to volatile fossil markets and stops the planet from warming.

19/ And as for those folks telling you that those investments are in fact the problem? Well, they would. After all, they've got a rooting interest in making your gas more expensive. You don't though. Pay them no mind.

20/ You may now return to your regularly scheduled programming. And because I forgot to say this earlier: #energytwitter rocks! /fin