Here comes the death of LNG

For years now, the oil and gas industry has touted natural gas as a so-called “bridge” to a low-carbon future. Not surprisingly, it was one they intended to help build and use to transition their businesses away from fossil fuels at a leisurely pace. But if a flurry of recent announcements is any indication, that bridge may be about to collapse.

On Wednesday, the Quebec government rejected a proposed $14-billion liquefied natural gas (LNG) project to export western Canadian gas, citing its environmental impacts and ability to interfere with the transition to cleaner energy. And while industry advocates and conservative politicians were predictably outraged by the decision, it’s hardly the only LNG project to die on the vine lately. In April, Pembina Pipelines announced it was pausing its Jordan Cove project in Oregon due to “the impact of recent regulatory decisions,” while the Annova LNG project in Texas was scrapped in March due to “changes in the global LNG market.”

Those changes are about to pick up speed. As we approach this November’s United Nations Climate Change Conference in Glasgow, Scotland, the pressure being applied on countries to reduce their emissions will only increase. That pressure is increasingly coming from the global financial community, where people like former Bank of England and Bank of Canada governor Mark Carney are building trillion-dollar alliances that seem ready to fight harder than ever on this front.

That pressure is already being felt, it seems. In Japan, a draft policy from the Ministry of Economy, Trade and Industry would see the country — one of the biggest importers of LNG in the world — nearly double its renewable energy target for electricity generation, from 22 per cent to 24 per cent by 2030 to 36 per cent to 38 per cent. As a result, the share of electricity generated from burning LNG would drop from 56 per cent to 41 per cent.

But that might not even be the worst news this week for Canada’s LNG enthusiasts. The Wall Street Journal ran an exclusive story about a potential breakthrough in battery storage technology, one that could transform wind and solar energy into more stable and predictable sources. The company, Form Energy, is backed by Breakthrough Energy Ventures, a climate investment fund that counts Bill Gates and Jeff Bezos as investors, and it’s led by a CEO, Mateo Jaramillo, who developed Tesla’s Powerwall and worked on some of its earliest drivetrains.

According to Jaramillo, his company has developed “the kind of battery that you need to fully retire thermal assets like coal and natural gas (power plants).” That battery doesn’t depend on so-called “rare-earth” minerals and other exotic commodities that are in perpetually short supply. Instead, it uses iron, one of the most abundantly available commodities on the planet, and one that can be produced with very few emissions under the right circumstances.

Best of all, it checks in at $20 per kilowatt-hour in energy capacity costs — exactly the figure that academics have said is needed to make the dream of a totally renewable grid into reality. As Vox’s David Roberts wrote just two years ago, “that’s around a 90 per cent drop from today’s costs. While that is entirely within the realm of the possible, there is wide disagreement over when it might happen; few expect it by 2030.”

If it has, in fact, actually happened, this is very bad news for anyone hoping to develop a new LNG export facility in Canada. After all, it was hard enough to navigate the regulatory and political challenges, never mind attracting the billions of dollars needed to actually build it. But if the companies and communities proposing these projects can’t predict the long-term demand for LNG with any certainty, that much-ballyhooed natural gas bridge might have just become a bridge too far.

There is still a lot of road left to pave between where we are today and where we need to get by 2030. Form Energy’s battery technology needs to be commercialized and scaled up, along with the sources of renewable electricity that would be stored by it. This will take time and money, and it should allow a project like LNG Canada, which has some of the lowest associated emissions of any LNG project in the world, to proceed with construction.

But if it goes ahead, it will be the last of its kind here in Canada. Form Energy isn’t the only company chasing the holy grail of battery storage technology, and one of its many competitors could easily come along with an even better and cheaper battery technology. The future is electric, and that future is coming faster than many people thought possible. Those who still insist on betting against it are about to learn a very expensive lesson.