Graph of the Day: Myth of cheap shale gas and cheap energy

This graph above highlights the issue. Electricity prices are more seasonal in the US – hence the ups and downs – and are an average over the country.

The graph was published by Deutsche Bank in response to speculation that the plunging oil price – and with it the falling price of natural gas – could undermine the transition to renewables in the electricity grid.

But like its conclusions about oil – that it cannot compete with solar even at $50 a barrel and its fall with will have a minimal impact on solar, Deutsche Bank notes that the fall in the price of shale gas will also have a minimum impact.

That’s because transmission and distribution make up nearly half of the average electricity bill in the US, and investment in the grid has risen four fold in recent years, and those costs past on to consumers.

And this means that rooftop solar, whose costs are falling, becomes more interesting. Solar is benefitting from low interest rates, improving financing environment, and rising retail rates. Commercial solar PPAs (power purchase agreements) are  being signed in the 8-9c/kWh range and Deutsche Bank analysts say they do not expect low nat gas prices to have any adverse impact on this segment.