The Coming LNG Trainwreck

Above, interview with Kingsmill Bond, a strategist with the highly respected energy-focused think tank Ember.

Within the first few minutes of the interview above, Bond explains there is an emerging glut in both solar manufacturing and LNG (liquified Natural Gas) supply, coming in later in this decade and early next.
“There’s a lot more LNG export capacity being put in place than demand that is likely to materialize, so the world is set up in the second half of this decade, and the 2030s, for a massive fight between overcapacity for solar and overcapacity for LNG, and I can tell you with absolute certainty that solar is going to win this battle hands down, LNG doesn’t have a chance.”

Bond explains that Solar is much quicker to deploy, continues to get cheaper, is local, and cannot be cut off for political considerations.
This resonates, because currently the Trump administration is encouraging a massive build up of LNG export capacity, which the industry hopes European customers will choose over booming renewable energy sources. But to Bond’s point, the biggest driver behind Europe’s rush to renewables was the shock to supplies in the wake of Russia’s invasion of Ukraine, and subsequent curtailment of Russian gas supplies.

What is the incentive then, for Europeans to make themselves dependent on another supplier who has in recent months, threatened to annex Danish territory and territory of Canadian allies, and repeatedly demonstrated an affinity and admiration for Vladimir Putin and his fellow dictators around the world?

At the same time, China has halted LNG imports from the US in response to Trump tariffs, and has over recent years been building up its own domestic production, so that it now produces more gas than Qatar.
I’ve posted here several times about unexpectedly rapid uptake of solar in the developing world, for example Pakistan and now Africa, which may portend a much more anemic gas demand going forward than what industry shills like Energy Secretary Chris Wright would like to think.
The US decision to empower China in its domination of clean energy and emerging markets in the developing world will undercut demand for LNG in exactly those markets Wright and other gas bulls think they’re going to make their money.

Institute for Energy Economics and Financial Analysis:

The International Energy Agency (IEA)’s World Energy Outlook 2024 points to a challenging decade for the liquefied natural gas (LNG) industry. Surging supply is set to outstrip demand, creating an LNG supply glut that is likely to persist well into the 2030s. 

In addition to pushing down prices, the glut will create financial risks for the LNG industry and inhibit the business case for new LNG supply. Absorbing this new supply, and avoiding a prolonged supply glut, would effectively require significant new LNG demand and displacement of renewable energy and energy efficiency, which will have the effect of slowing the energy transition.
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On the supply side, a rush of new LNG projects reached final investment decision, in part supported by the high price environment and expectations of continued strong gas and LNG demand. These new projects mean that LNG markets are facing an unprecedented wave of new LNG supply, primarily from Qatar and the US, but also from new LNG-producing countries. In its recent World Energy Outlook, the IEA forecast that global LNG liquefaction capacity will increase by almost 50%, from 580 billion cubic metres (bcm) now to 850 bcm in 2030. 

At the same time, LNG buyers in price-sensitive emerging markets have reduced their LNG consumption, with several state-owned utilities also incurring significant financial hits. High and volatile LNG prices also led to LNG gaining a reputation as an expensive, unreliable fuel source, which prompted some buyers to reverse plans centred on greater LNG consumption. For example, Pakistan reversed plans to roll out new LNG-to-power projects, instead looking to new coal generation and renewables, with the country importing 13GW of solar PV capacity in the first half of 2024 alone.

Yale 360:

Chinese solar and wind manufacturers are not only driving a massive buildout of renewable energy in China but also propelling a rapid shift away from fossil fuels in much of the developing world, according to a new analysis. 

China manufactures 60 percent of the wind turbines and 80 percent of the solar panels installed globally. As Chinese wind and solar factories scale up production, they are driving down prices for everyone.

When accounting for the cost of fuel, 91 percent of new solar and wind plants are cheaper than the cheapest available form of fossil fuel power, according to the new analysis, from energy think tank Ember. The result is that many emerging markets are now outpacing the U.S. in the shift to renewable energy, including Brazil, Chile, El Salvador, Morocco, Kenya, and Namibia. Some 63 percent of emerging markets in Africa, Asia, and Latin America are drawing a greater share of their power from solar than the U.S. is.