thanks for your comments. i think you may have misunderstood what i meant by stupid policymaking. i wasn't talking about the malinvestment aspect of the capacity adds; i was talking more in a global sense of America's energy policy, and in that context, the significance of additional demand pressure on scarce North American natural gas. (i know i didn't spell that out originally, but i didn't expect an exegesis of a response based on my throwaway comment from an electric utility economist.)
as you mention, the infrastructure does not go away, even if much of the $143 billion in original outlays will be liquidated. at liquidation, the assets will be repriced for profitability in the new pricing environment (soft pricing environment, and high input gas price, combine for low asset price requirement). this discounting brings more capacity online and ironically increases natural gas demand, forcing demand destruction in other areas (manufacturing, fertilizer, etc.).
it is no secret that a lot of the capacity adds are peaking capacity. but it so happens that this peaking capacity makes it more difficult to build gas inventories in the filling season. without these builds, the country is at the mercy of the weather in the heating season. (in fact, winter heating is at the mercy of the weather even in the summer, since very hot weather increases peaking demand.)
so it seems to me there was some very bad policymaking (or rather, a complete absence of same, or lack of coordination between practicality and the environmental preferences) which allowed this bloating of structural demand through malinvestment. the inevitable liquidation will only accelerate the natural gas crisis imo. |
