Cheap Natural Gas Leads to Falling Consumer Electricity Rates

Plunging oil prices may have hit some energy companies hard and have some oil-producing nations worried about their budget deficits, but it has been a boon to the average American consumer as electricity rates have dropped 1% nationwide to an average of 12.4 cents per kilowatt hour, the first nationwide decline in energy prices in decades.

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As developed nations move away from burning dirty coal for energy as a result of the efforts to meet international greenhouse emission caps, cleaner burning natural gas plants and alternative energy sources (wind, sun, geothermal, etc) are filling in the gaps. Natural gas is now the major source of fuel for energy producing plants, and a 28% drop in the price of natural gas for energy producers over the first half of the year has translated into big gains for consumers nationwide.

However, the replacement of coal burning plants with plants that use natural gas and a plunging price in hydrocarbons is not the entire story. Solar and wind energy in particular continue to become more efficient with advancing technologies, and are taking an increasing share of national, and international, energy production. This year the United Kingdom produced more energy from solar panels than from burning coal, and marked the first day since 1882 that no energy was produced from the burning of coal across the entire nation.

The state of Texas has enjoyed an even greater drop in consumer electricity prices, down 6% to 11 cents per kilowatt hour, thanks to easy access to plentiful supplies of cheap natural gas and a deregulated market. The deregulated market has allowed producers to adjust their prices sooner to reflect the lower cost of natural gas, and then pass these savings on to the consumer.

New England, which has a similar share to Texas of energy produced by natural gas, saw a similar decline in electricity rates over the year. However, the biggest decline of 12% was observed in the state of Hawaii, which uses oil for the vast majority of its energy production. The steep decline in the price of oil helped to bring electricity rates down substantially, albeit from a position that was far above the national average as a result of the state’s remote location and the difficulties that its geography causes for the installation of energy infrastructure.

 

Electricity Sales Continue Multiyear Decline

Numbers released recently by the Energy Information Administration show that electricity sales in the U.S. continue to slow.  For the 5th time since the 2008 recession retail electricity sales have actually declined.  The biggest declines were seen in the industrial sector. While the residential and commercial building sectors were more or less flat.

Electricity Usage

There is no one simple explanation for the decline in growth of electricity usage in the U.S.  Rather, it’s a result of a number of factors.  In the residential sector, the number of households has increased. Yet energy efficiency regulations and improvements the energy efficiency of newly constructed homes have offset the effect of having more households.  The EIA report also credits more aggressive federal energy efficiency standards for appliances with the slowdown in household electricity usage. For the commercial and industrial sectors the numbers reflect a continued sluggish economy and a shift of the type of manufacturing performed in the US.

While the government numbers provided no regional breakdown, a separate report by ERCOT, the agency responsible for maintaining the Texas electricity grid showed an increase in electricity usage in Texas for 2015.    Since the 2008 recession the U.S. has seen a general population shift to the South and West.  Population growth in Texas has likely offset the effect of more energy efficient building and federal energy efficiently standards and appliances.

Texas has also seen cheap electricity rates for a number of years which takes some of the pressure off of consumers to conserve energy and spend on energy efficiently efforts.  A website operated by the Texas PUC seeks to help Texas homes and businesses conserve energy with energy saving tips such as “save up to 16% by turning you’re A/C 1-2 degrees warmer”.

Wind Energy Provides Cheap Electricity In Texas

The U.S. Energy Information Administration, a government run agency responsible for collecting, analyzing and reporting on energy related matters, is predicting that Texas will continue to break records for electricity provided by wind power.

Peak Texas Wind Electricty

This is not a bold prediction considering that the state has recently put together a string of new all-time highs for wind energy output based on peak supplies of electricity being fed to the state’s grid.  Recent record wind days include the following:

  • October 22, 2015 – 12,238 megawatts
  • October 21, 2015 – 11,950 megawatts
  • September 13, 2015 – 11,467 megawatts
  • February, 2015 – 11,154 megawatts

There are a number of factors at play that are contributing to the recent all-time highs.  This autumn in Texas has been unseasonably warm and windy allowing for the perfect conditions to make use of the state’s large and growing portfolio of wind turbines.

Already the largest producer of wind electricity in the U.S., Texas continues to see more capacity brought online month after month.  This is thanks in large part to generous subsidies paid by the federal government to encourage investment in wind turbines.

One could make the case that the continued growth in wind power is due entirely to government subsidies when you consider that during a period in 2013 and 2014 when the subsidies were allowed to lapse, installation of new wind capacity in Texas and the rest of the country virtually ceased.  The eventual renewal of the subsidies in 2014 saw an immediate resumption of investment in new wind energy capacity in Texas.

Texas Wind Capacity

Unlike fossil fuel sources such as coal and natural gas, the production cost of electricity from wind is almost entirely front loaded in the cost of putting up the turbines.  After they are up, the incremental cost of each additional watt of electricity is negligible.   This, coupled with the bonus money paid by the government for each kilowatt of electricity produced from wind can lead to some very cheap energy for Texas consumers.  In many cases, it leads to free electricity.

To compare electricity providers who offer cheap and sometimes free electricity plans visit vaultelectricity.com

Solar Power Generating Capacity Up, Reports EIA

Solar power in Texas electricityThe Energy Information Administration (EIA), an agency of the federal government that collects, analyzes, and reports information about the energy sector to help create effective energy policy and to educate the public, has released a report about solar electricity generation in the United States. The news is impressive: Capacity for generation of electric power from solar has risen dramatically over the past four years, from 2,326 megawatts in 2010 to 12,057 MW in 2014, going from .22% of the power generation capacity of the United States to almost 1.13%, an amazing 418% growth rate.

If one percent or so sounds miniscule, consider that it means more than one in 100 people in the country can get their power from a clean, renewable source. That’s over 3.2 million people, at present, and if solar were to maintain its meteoric growth rate of over 100% per year, that capacity would more than double every year, providing two-thirds of the country’s capacity in six short years. While it’s unlikely that capacity will burgeon that dramatically, prospects for continued robust growth look good, owing mainly to the sharp decrease in prices for solar power generation systems in recent years, coupled with increased government incentives.

The EIA report analyzes data from three different sources of solar power generation: Residential and commercial photo-voltaic (PV) systems that are connected to the grid via net metering; “utility-level” (defined as producing more than one megawatt) PV systems; and utility-level solar thermal systems. Net metered systems have increased annually by over 1,000 MW since 2010, and there are many incentives at the state level to encourage further growth. Net metering, which allows individual customers to sell the excess energy produced by their systems back to the power companies, is about equally divided between residential and commercial applications (there are also some self-sufficient systems that are “off the grid”–not net metered–but these were not counted among the data).

In the two utility-level categories, solar PV applications at the utility level finally surpassed the net metered PV capacity in 2013, currently accounting for more than 5,500 MW. Not surprisingly, sunny California and Arizona are the leading states in this sector, but somewhat-sunny North Carolina comes in third, due to statewide incentives. Solar in Texas is still struggling to take hold due largely to a lack of incentives and low electricity rates from traditional sources of power such as natural gas.  Solar thermal systems, which employ the sun’s heat where PV systems use its light, currently lag behind PV, with a generating capacity of about 1,050 MW, but the forecast for growth in this sector is also strong. Because of its storage capacity, solar thermal can supplement PV on cloudy days or at night. Several new solar thermal plants were brought online recently, more than doubling the prior capacity, and plans are in the works for further development, both in solar thermal and PV, as well. It is anticipated that net-metered solar will expand accordingly, making solar a robust sector for growth.

See Also:  New Transmission Lines To Bring West Texas Wind To Dallas And Austin

 

 

New Homes Larger But More Energy Efficient

According to data released by the Energy Information Administration (EIA), newer homes built in the U.S. are significantly more energy efficient than those build before 2000.  This is according to data from the EIA’s Residential Energy Consumption Survey.  Those newer homes, built after 2000, consumed about the same energy despite the fact that they are on average 30% larger.

The newer houses consumed 21% less energy for space heating even though they are significantly larger than older homes on average.  The improvement was largely attributed to better heating systems technology and more efficient building construction as a result of more stringent energy codes.  Space heating is the only category of household energy consumption that saw a net drop from older to newer homes.

The relatively smaller energy demand for heating can also be attributed to the fact that a disproportionate number of newer homes have been built in the south in places like Texas.   This geographic trend towards Texas and the southern states resulted in increased energy usage for air conditioning.

Even with better air conditioning technology and improved housing construction energy efficiency standards, average household energy consumption for air conditioning is 56% higher in newer homes.  Adding to the increase in energy for air conditioning was the fact that newer homes tended to be larger, newer homes are more likely to have central air than older homes, and the fact that newer homes are more likely to be in hotter parts of the country.

While natural gas is often then fuel of choice for heating, especially in northern states, electricity powers air conditioning.  Even with more energy efficient air conditioning units, the increase in electricity demand has put a strain on the U.S. electricity infrastructure.

See Also: Texas Tops States in Grid Modernization

 

Texas Tops States in Grid Modernization

Texas ranks at the top of 41 states for the modernization of its electricity grid.  This is according to a report released by a group called Gridwise Alliance in conjunction with the Smart Grid Policy Center.  The report assigned a Grid Modernization Index score (GMI) to 41 states and the District of Columbia.   The GMI value for Texas was 83, putting it alongside California at the top of the 41 states included in the report.  Nine states were not included in the analysis.

The Grid Modernization Index consists of three components.

  • Policy – State policies and regulatory mechanisms that facilitate grid investment
  • Customer Engagement – Investments throughout the state in customer enabling technologies and capabilities
  • Grid Operations – Investments throughout the state in grid enhancement technologies and capabilities.

In addition to a top overall score, Texas obtained top scores in the Policy and Customer Engagement categories.   The Policy score includes components such as the presence of a grid modernization strategy and the presence of Renewable Portfolio standards.

Texas obtained a top score for Customer Engagement which is a metric that includes such things as the availability of dynamic pricing plans or rates that leverage smart grid technology.  In recent years, Texas has seen a proliferation of innovate products made available because of smart grid technology.  These products include Free Nights plans, Free Weekend plans, and prepaid electric plans that rely on smart meter technology.

The Texas electricity marketplace is substantially different from other states in a number of ways.   The Texas grid is independent from the other major electric grids that serve North America.   Texas is also by far the largest deregulated electricity marketplace in the U.S.  The authors of the report point to a positive correlation between a state’s GMI score and the availability of retail choice within the state.

Challenges Remain

Despite Texas’ strong showing in this report, significant challenges remain for the state’s electricity grid.  Capacity has been a concern for a number of years and continues to be so.  Each summer there is concern that the state’s electricity producers will not be able to supply enough power to meet demand; especially in the event of an unusually hot heat wave.  Such concerns have led to, as yet, unsuccessful attempts to convert the state to a Capacity Market for electricity.  Under such a scheme, producers are paid simply to build additional capacity and have it available if needed to meet peak demand.  Such a move would inevitably lead to higher electricity rates.

According to numbers published by the Energy Information Administration, the average Texan pays 11.59 cents per kilowatt hour for electricity.  This average, however, is not indicative of what a motivated consumer who is willing to shop and compare rates should expect to pay.  For example; as of this writing, 4ChangeEnergy is currently offering a rate of 9.0 cents for a 12 month electricity plan in the Houston area.  Month-to-month rates are even lower.  Reliant energy, for example, is currently offing a rate of 7.9 cents in the Dallas area.

See Also: Texas State Senator Pressures ERCOT to Leave Reserve Margins Unchanged