Tom Benning reports:

Is the rapid growth of wind power in Texas actually making electricity cheaper?

 

At home on the range

Yes, says Bernstein Research in a recent report, “Will Wind Power Blow Texas Generators Away?,” a follow-up to their own prior effort. The idea is that wind power is steadily replacing more expensive forms of power generation, essentially natural gas.

The more wind power there is—and Texas is the sixth-biggest wind power country in the world–the less need there is to turn to gas-fired turbines to cover the last bit of demand. Bernstein figures this trend will only accelerate in the next few years:

[A]t hours of relatively low power demand, it will no longer be necessary to dispatch high cost gas fired generators to meet the prevailing load; rather, the system’s wind, nuclear and coal fired power plants will be sufficient to meet demand. As power prices are set by the variable cost of operation of the last unit dispatched, wind can have a material impact on the price of power.

Granted, that’s at times of low power demand. Wind power works best when it’s not much needed—at night. During the day, when electricity demand is highest, wind power is much less productive. That’s doubly true in the summer months, when wind power’s output is the lowest.

What’s that mean for power production in Texas? For starters, consumption of natural gas will probably fall further, Bernstein says: “The growth of wind power in ERCOT over the next three years will markedly lower the consumption of gas and coal by conventional generators.” With a natural-gas supply glut already looming, that would probably push natural-gas prices down even further.

And wind power’s growth will hurt certain utilities, Bernstein estimates: Energy Future Holdings (formerly TXU), NRG Energy and PNM Resources are “most at risk” of falling margins in their traditional generation business.

http://blogs.wsj.com/environmentalcapital/2009/08/10/blown-away-wind-power-makes-electricity-cheaper-in-texas/

Tue Jun 30, 2009 11:29am EDT

  By Marc Gunther - Marc Gunther

In the energy and climate change debate, environmentalists are for the most part united in their feelings about coal (very bad), gasoline (avoid “gas guzzlers”), nuclear energy (scary), hydropower (small is better than big), wind (good unless you worry about birds), solar thermal (nifty) and rooftop solar PV (even niftier). But what about natural gas, which is the source of more of our energy than coal, nuclear or all the renewable sources combined?

“We’re the Rodney Dangerfield of fuels,” says Roger Cooper, executive vice president of policy and planning at the American Gas Association. Meaning that gas gets no respect, nor all that much attention. (The DOE logo includes an oil derrick, wind turbine, hydro and the nuclear symbol, but nothing about gas.) [Editor's note: The DOE logo, pictured here, includes a windmill, rather than a wind turbine.]

I went to see Cooper and Christopher McGill of the AGA last week because of the news that the domestic supply of natural gas is increasing. A group called the Potential Gas Committee, which is based at the Colorado School of Mines, has just reported that the U.S. has about a 100 year supply of natural gas, assuming we continued to consume it at today’s rates.

“That’s the largest future supply ever reported,” McGill said.

Just a decade ago, the same group project that the U.S. had a 60- to 65-year supply. The increase is, essentially, a result of new (and controversial) drilling technologies that make it easier to recover the gas from saturated shale rocks that, it turns out, exist all over the country -- the Applachachians, Texas, Arkansas and Oklahoma and in the Rocky Mountains. “You’re talking about a huge volume of saturated rock that has the potential to be exploited,” McGill said. This New York Times story explains the significance of the new estimates.

My question for the gas association was a simple one: What does the discovery of vast new reserves of natural gas, which is, after all, a fossil fuel, mean when it comes to climate change? A simple question, but the answer is anything but.

Naturally (no pun intended), Cooper and McGill argued that natural gas can help solve the climate change problem -- particularly if it is used instead of electricity in people’s homes for space heating, hot-water heating and cooking. It could also serve a role as a bridging fuel that electric utilities would burn instead of coal, while awaiting the development of cost-competitive renewable sources of energy.

“Gas is now. Gas is here,” McGill said. “We have a lower carbon footprint than any other fossil fuels.”

He’ll get no argument about that -- burning natural gas produces 43 percent less CO2 than coal and 28 percent less than fuel oil. What’s more, nearly all of the natural gas burned in the U.S. is produced in this country or in Canada.

The gas guys made another persuasive argument on behalf of natural gas-fueled homes. We are using natural gas today more efficiently than ever because of the increased efficiency of appliances (thanks to programs like Energy Star) and, to a lesser degree, of homes. According to the AGA,

"It takes less natural gas to serve 65 million homes today than it took to serve about half that number in 1970."

Homes using natural gas, it turns out, also generate on average fewer greenhouse gas emissions that homes using electricity. Again, according to the AGA, “a typical all-electric home on average produces 10.8 tons of CO2 per year while an all-natural gas home produces 7.2 tons of CO2 per year.” That’s largely because about half of our electricity today is generated by burning coal.
To see a larger version of the chart, click here.
So just as it makes sense to replace your incandescent light bulbs with CFL bulbs, it makes sense to choose natural gas over electrical appliances when replacing broken ones or buying a new home. So in that regard, AGA, which represents natural gas utilities that sell to homes and business, can fairly say that natural gas is part of the climate change solution.

What’s not as clear to me is whether we should applaud the idea that we now have more natural gas available to burn to make electricity. (This question isn’t AGA’s focus, so we didn’t get into it in detail during our conversation.) If we build new natural gas plants instead of coal plants, clearly we are better off when it comes to climate change. But if abundant supplies of relatively low-cost natural gas get in the way of wind or solar or geothermal power, we’re probably worse off.

Further complicating the debate over natural gas is the method used to extract it from shale, known as hydraulic fracturing. It requires drilling deep into the ground and injecting water and chemicals into rock to crack it and allow natural gas to escape; critics say it endangers water supplies. This is way out of my area of expertise but my former FORTUNE colleague, Abrahm Lustgarten, has written extensively about the drilling debate for the nonprofit journalism website, Pro Publica. Here’s one of his stories.

Meanwhile, I learned from reading Andrew Refkin of The Times on his Dot Earth blog that Africa has vast deposits of natural gas which could be used as a substitute for charcoal in home cooking. Charcoal production destroys forests and burning it creates indoor air pollution. Refkin asks:

"Why isn’t development of this African gas resource, for both local and global markets, a priority for rich countries that claim they are committed to helping Africa break the bonds of persistent poverty?"

One more question about natural gas that should be asked: Can we make it cleaner? Cooper and McGill say we can, and they point to a startup company called Atlantic Hydrogen that says it is developing a “patented plasma technology that removes some of the carbon from natural gas pre-combustion.”

Natural gas may be the Rodney Dangerfield of fuels for now, but it will likely demand more of our attention going forward.

Image by dreamjay.

 http://www.reuters.com/article/gwmCarbonEmissions/idUS220171301920090630

As every year, Texans will do some heavy-duty sweating this summer, whether from roofing a house or chasing a deep fly ball in a weekend softball game.

But one thing they won’t have to sweat is whether there will be enough electricity to keep home and office air conditioners humming even on 105-degree days.

The Electric Reliability Council of Texas said in an assessment Friday that the state should have sufficient electric power to meet the summer’s peak use.

ERCOT is forecasting a peak demand of 63,491 megawatts. That’s 1,731 megawatts less than an assessment made in December, with the reduction reflecting weaker demand due to the faltering economy.

The estimate is about 2 percent higher than last summer’s actual peak demand of 62,174 megawatts, when weather was cooler than normal. ERCOT’s all-time record use of electricity, 62,339 megawatts, occurred in August 2006.

Strong population growth has increased electricity demand in Texas in recent years and is expected to do so in the future, but energy efficiency and conservation measures have helped offset that.

"We have lowered the peak-demand forecast because of the current economic downturn," ERCOT CEO Bob Kahn said. "However, our forecasts anticipate a recovery in the economy over the next five years as reflected in an increase in the average annual growth rate from 1 percent in the near term to as high as 3 percent around 2012 and 2013."

As for the future, it appears that the state will have "healthy reserve margins through 2014, as well as a number of generation projects committed and proposed for further down the road," Kahn said.

Obama makes Earth Day push for new energy

In Iowa, he stumps for wind projects

NEWTON, Iowa - Pitching his energy plan on Earth Day, President Obama yesterday called for a "new era of energy exploration in America" and argued that his proposal would help the economy and the environment at once.

"The choice we face is not between saving our environment and saving our economy - it's a choice between prosperity and decline," Obama said in his first postelection trip to Iowa, the state that launched him toward the White House. "The nation that leads the world in creating new sources of clean energy will be the nation that leads the 21st century global economy."

But Obama's promise of preserving natural resources and jump-starting the economy ran smack into the reality of this economically struggling town of about 16,000 about 30 miles east of Des Moines.

The wind energy plant where he spoke, and received a tour beforehand, is a shadow of what it replaced - a Maytag Corp. appliances plant that built washers, dryers, and refrigerators and employed about 4,000 in jobs that paid about $30,000 to $40,000 a year.

Trinity Structural Towers has roughly 90 people working at the old Maytag site, a number that is expected to grow to about 140. Mark Stiles, a senior vice president at Trinity, which builds the towers that support wind turbines, said workers at his factory make a comparable salary, about $17 an hour plus benefits. "This is a piece of the recovery, but we think it's a nice piece," Stiles said.

The president announced his administration is creating the nation's first program to authorize offshore projects to generate electricity from wind turbines, ocean currents, and waves. Afterward, the Interior Department issued long-awaited regulations governing offshore renewable energy projects that establish how leases will be issued and sets in place revenue sharing with nearby coastal states, which would receive 27.5 percent of the royalties generated from electricity production.

Interior Secretary Ken Salazar said applications are expected for dozens of proposed offshore wind projects, many off the north and central Atlantic Coast in the coming months, and that he expects the first electricity production from some of the offshore projects in two or three years.

"This will open the gates for them to move forward. . . . It sets the rules of the road," Salazar said.

Obama said that wind could generate as much as 20 percent of US electricity demand by 2030 if its full potential is pursued on land and offshore. It would also create as many as 250,000 jobs, he said. "As with so many clean-energy investments, it's win-win: good for environment and great for our economy," the president said.

But wind-produced electricity totals just under 2 percent of all electricity generated, according to the American Wind Energy Association, a trade group.

Obama was in Iowa, which ranks second only to Texas in installed wind capacity, as his energy plan slowed on Capitol Hill. His blueprint is designed to reduce greenhouse gases by 20 percent from 2005 levels by the year 2020, and by 83 percent by mid-century. It calls for measures aimed at reducing the use of fossil fuels, such as requiring utilities to produce a quarter of their electricity from renewable sources.

But skeptical Republicans and some Democrats from coal-producing states complain that it will increase costs for consumers, send jobs overseas, and hurt businesses.

Yesterday, in the second of four days of hearings on House Democrats' version of climate change legislation, top Obama advisers called it a "jobs bill" and an investment in clean energy technology, broadly endorsing the draft but cautioning that the White House will work to fine tune the legislation in coming weeks.

"Three important players in this issue that represent the president believe the principles that are laid out in this bill are very strong principles - and principles that the president and his team can work with as the bill is worked through Congress," said Transportation Secretary Ray LaHood, who was joined by EPA Administrator Lisa Jackson and Energy Secretary Steven Chu at the House hearing.

GOP lawmakers, however, called the draft bill a massive energy tax because it would put a price on carbon dioxide emissions from burning fossil fuels.

"The proposal for cap and tax will raise the energy rates for producing everything in the United States of America," said Representative Mike Rogers, a Michigan Republican. "If we dramatically raise the rates of electricity we will not be competitive when it comes to building anything."

Representative George Radanovich, a California Republican, added that when the public finds out the true cost it will be "a smackdown the World Wrestling Federation would be proud of."

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