Wholesale natural gas prices have been on a steady downward slope, hovering at around $2.50 per million BTU. The latest official supply figures show the US has three trillion of cubic feet of stored gas, up 25% from this time last year. All this talk of cheap and plentiful natural gas has me wondering: What does this mean for cleantech?

Cheap and Abundant Natural Gas

The obvious answer is: This is bad news. Solar, wind, energy storage, demand response, energy efficiency – anything that competes with natural gas peaker plants – will suffer as natural gas becomes an increasingly attractive option for energy companies. As I travel the US, I’m finding increasing evidence from utility and energy company executives to support the thesis that natural gas will put increasing pressure on renewables. The EIA’s prediction for our future energy mix also supports the belief that natural gas will grow its share more quickly than other options including renewables.

Biogas companies will also feel some heat. Efforts to capture, clean and utilize biogas (e.g. from landfills or wastewater treatment plants) make much more sense when natural gas sells for $10 per million BTU or more. At $2.50, it’s harder to justify the fully loaded costs for biogas, and businesses will continue to flare gas instead of investing to re-process it.

However, I’m thinking there must be a flip side. Cheap and abundant natural gas should create an opportunity for creative cleantech startups. While out of favor, isn’t there a strong business case for natural gas as a transportation fuel? I know of American Gas & Technology and a couple other companies focused in this area, but it’s not been a focal point for venture capitalists or government policy. Lack of distribution (fueling stations) is often cited as a big barrier, but can’t natural gas work for fleets where routes are highly predictable? Or forklifts that are always within close proximity of a filling station?

The exploration and production of natural gas using “fracking” requires enormous amounts of water. This water is often trucked many miles to treatment and/or injection facilities. There is a massive opportunity for startups to help energy companies treat, manage and reuse the “produced water” that’s used for oil and gas exploration. Companies like Aquatech and HTI Water are riding this trend.

Conversion of natural gas to electricity represents another opportunity. Bloom and other fuel cell companies seem well-positioned to take advantage of cheap natural gas prices as well as attractive subsidies in California to displace diesel backup generators. However, do the economics allow them to expand beyond backup power?

Taking advantage of global price differences seems like another potential pot of gold. While natural gas costs $2.50 per million BTU in the US, it’s much more expensive in Asia (e.g. recently $16 per million BTU in Japan). A number of big companies seek to arbitrage this price difference by converting natural gas to LNG (liquefied natural gas), shipping it to Asia and then using it in various ways there. This is expensive, and I’m not sure how a startup can participate in these markets (and I don’t think this is cleantech).

Finally, I’m starting to hear about companies that are taking advantage of the natural gas and heat that is leaked or wasted during the industrial process to find, transport, compress, and distribute to end customers. I was impressed with SFN Biosystems’ idea to use waste heat and exhaust at compression stations to grow algae biomass which can then be used for numerous useful and profitable markets. Their execution seems strong as well – they have partnered with EnCana, Canada’s largest natural gas company.

I’m thinking there’s plenty of opportunity for creative cleantech entrepreneurs to take advantage of abundant natural gas, and I’m sure we’re missing a few exciting startups. For example, I’m guessing a number of companies are working on conversion technologies to create drop-in chemicals from natural gas, but I have yet to run in to any of these companies. Do you know any?