Economists Analyze the Increasing Challenge Posed to LNG Projects by Renewables

On January 15, 2016, the Brattle Group, an economic consultancy firm, released a report entitled “LNG and Renewable Power: Risk and Opportunity in a Changing World.” The report provides a cost analysis between renewable energy and LNG supply and regasification plant projects over the next few years.

The report suggests that the expansion of LNG export facilities and pipeline projects in North America have profited from the falling worldwide oil prices, but also that they are currently suffering from a decline in demand for natural gas, especially from Asia. According to the authors, “market participants should be very cautious in thinking that the LNG supply glut is necessarily a temporary problem, because another important dynamic in world energy markets is the declining cost of renewable power and the prospect of increased penetration of renewables in the global power generation mix and thus competing with LNG as a ‘fuel source” for power generation.”

The authors contend that renewable energy projects might rapidly become an important challenge for North America’s LNG projects and that “both investors in LNG infrastructure and buyers of LNG under long-term contracts will want to consider these risks before making large and long-term commitments to buying or selling LNG.”

Writing by Chloe Marie - Research Fellow

02/03/2016