A Bad Investment… for SEPTA and Its Riders
We believe that the proposed gas plant would be a risky investment from a financial perspective. Though SEPTA officials have argued that this project would save money fore the agency, we think that renewable energy will likely be a more cost effective choice for powering our transit system in the coming years.
Natural gas prices are projected to rise during the time that the plant would operate, while the cost of renewable energy is projected to drop. But as far as we know, SEPTA has not yet compared cost projections for natural gas and renewable energy.
Natural Gas Prices
- If SEPTA goes forward with the gas project, it will sign a 20-year contract with Noresco, an energy service company that will build and operate the plant. SEPTA will be locked into using natural gas for two decades, until at least 2037, no matter how high the cost rises.
- While the price of natural gas is now at an historic low, many experts believe that the cost will rise significantly in years to come. For example, respected consulting firm Deloitte MarketPoint predicts that gas prices will more than double by 2025, and then continue increasing.
- Under the Noresco contract, SEPTA would be contractually required to bear the rising costs of gas. (SEPTA’s official request for proposals states that SEPTA would “accept…energy market risk to the cost of electricity and hot water heating during year 6 to 20” of the contract.)
- Though SEPTA officials have not shared their cost projections for gas, we are concerned that the numbers they are using may be overly optimistic. Energy researchers at the Postcarbon Institute believe that the gas industry and the federal Energy Information Agency have greatly underestimated future prices.
What’s the Alternative?
- Renewable Energy! Costs for wind and solar projects have been dropping, and experts expect them to continue falling in years to come. Solar energy prices have declined by 70% over the past 7 years.
- Wind and solar energy are already cheaper than natural gas in some places. As the renewable energy industry advances, and as the cheapest gas reserves are depleted, experts believe that more and more renewable energy projects will soon beat natural gas on cost.
- In addition, there is a growing push for new government policies to limit global warming and protect people’s health. New policies could raise the cost of gas and lower the cost of renewable energy even further.
- Unlike gas prices, prices for wind and and solar energy can be truly guaranteed. When agencies like SEPTA sign long-term agreements to purchase wind or solar energy, the price can be locked in for 20 to 30 years. There is no risk of unexpected increases.
- Many transit agencies are already saving money by investing in renewable energy. (See our Clean Energy Alternatives page for more details). We believe SEPTA could begin saving money by investing in renewables now, and that the agency would benefit financially from transitioning to 100% renewable energy in the coming years.
The Bottom Line?
Going forward with this project could mean wasting millions of dollars, leaving riders and tax-payers to foot the bill.
SEPTA officials predict that the plant would be a savings boon for the agency. They are awaiting the results of an “investment grade audit” by the contractor that would build and operate the plant. They expect the audit to confirm that the plant would be a good investment. But we do not know what issues the audit will consider, and we are concerned that SEPTA may be ignoring critical factors. We urge SEPTA to look carefully at the long-term prospects for renewable energy and at the risks of natural gas investment.
With its many energy efficiency projects and a recent decision to start buying electric buses, SEPTA has started on the right track towards sustainability.
Let’s keep SEPTA on the right track, and urge them to cancel plans for the Nicetown natural gas plant and to plan for a transition to renewable energy.