Exhibit 2 Gas generation is less expensive than hydrogen turbines or other long-duration energy storage solutions to address multiday power supply variability. 2030 electricity costs,¹ $/megawatt-hour energy storage solutions to address multiday power supply variability.
Gas levelized cost of electricity (LCOE)
Carbon capture, utilization, and storage (CCUS) Long-duration energy storage (LDES)
Implied cost of CO₂ emissions
Combined cycle gas turbine with CCUS
76
35
38
Hydrogen
Direct air capture (DAC)
2
New gas peaker with carbon tax
156
131
25
New gas peaker with DAC offset
131
125
256
LDES
175–300
New H₂ peaker (H₂ delivered at $2–$3/kg)
254–330
Note: Metric tons: 1 metric ton = 2,205 pounds. 1 Key assumptions: Gas CCGT w/CCUS—LCOE $35/MWh; CCUS costs of $85/ton; emissions 0.45 tCO₂e/MWh; 90% CO₂ capture; 85% utilization; new gas peaker—LCOE $131/MWh; gas price $3/mmbtu, utilization 10% pa, emissions 0.5 tCO₂e/MWh; social cost of carbon $51/ton, as per current US federal guid ance; DAC cost $250/ton; 100% of emissions offset; LDES approximate costs across multiple technologies including: iron air/flow, Li-ion, modular CAES and gravity assuming 24-hour discharge; 90 cycles per year; new H₂ peaker, utilization 10% pa; hydrogen costs delivered to peaker. - Source: EIA
McKinsey & Company
The natural gas system needs to be built out to deliver on peak-demand days when renewables cannot generate at full capacity To ensure that dispatchable gas-fired power generation can be used to complement renewables, the supply of natural gas to power plants must be robust enough to meet demand on peak days— occurring when solar and wind generation are low for multiple consecutive days. In deeper decarbonization scenarios, this will lead to a lower average annual gas demand volume, with higher peak-day gas demand. The need for dispatchable power will likely vary by region—with some regions relying much more on gas-fired power generation than others depending on the availability of attractive renewable generation, such as solar and wind (Exhibit 3) (See sidebar, “The need for natural gas in a transition to renewables: A case study”).
New market mechanisms and gas infrastructure investments will be needed to bridge the gap The natural gas infrastructure in North America— pipelines and storage facilities—has grown over decades to transport gas based primarily on long- term, take-or-pay contracts between pipeline operators and customers (typically gas marketers or large buyers, like utilities or industrial companies) that pay a reservation charge (or tariff) for capacity. In the coming decades, the capacity of the natural gas system will have to be increased to allow it to deliver on peak-demand days when renewables cannot generate at full capacity, even in areas currently not impacted by insufficient pipeline capacity. However, expanding this gas infrastructure capacity and maintaining the existing gas infrastructure will require new investments, though the capacity will be utilized at a much lower
Accelerating the journey to net zero
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