2016 Another Strong Year for Renewable Energy and Natural Gas

2016 Renewable EnergyContinuing a 3 year trend, 2016 saw renewable energy account for the majority of new electricity generation capacity in the United States.  The lion’s share of these additions came in the form of wind and solar power.

As is often the case, renewable energy generation peaked in the spring on a nationwide basis.  The spring typically sees a peak in hydroelectric power in the western part of the U.S. as rain and snowmelt drives hydro power. The Western United States also contributed the majority of the country’s solar power with 77% of total U.S. solar generation.  In Texas, the state’s massive installed wind base continued to churn out electricity for the Texas electricity grid which is separate from the other major U.S. electricity grids.

While 2016 also saw a large increase in solar power, most new solar capacity comes from small scale solar photovoltaic rather than large scale utility generation.  As of October of 2016 the U.S had a total of 12.6 GW of small-scale solar power installed.

Wholesale Electricity Rates Continue to Fall

Despite the fact that new capacity generation is coming largely from renewable energy sources, it is cheap natural gas that continues to put downward pressure on electricity rates.  Monthly wholesale prices for 2016 were lower than 2015; driven largely by lower natural gas prices.  The cost of natural gas delivered to power generators was 17% lower for the first 10 months of 2016.

Low rates for natural gas also contributed to an increased reliance on natural gas for electricity generation.  2016 saw, first the first time, natural gas surpass coal for electricity nationwide.  Although, in Texas this has been the case for a number of years.

 

GM Continues Transition To Renewable Energy With Wind-Powered Arlington, Texas Plant

electric-car-plantGM has recently announced its latest milestone in its drive to increase its use of renewable energy to power its operations. The company last year completed a deal to purchase sufficient wind-generated energy to power its major plant in Arlington, as well as 15 other separate facilities, which includes GM’s financial headquarters located in the downtown area of Fort Worth.

The company stated that it has agreed to buy 50 megawatts of electricity produced at the Cactus Flats wind farm, a massive 150-megawatt farm that is under development near San Angelo by Renewable Energy Systems. The Cactus Flats wind farm is another major investment in wind energy in Texas, which is currently the largest producer of wind energy in the country with over 10,000 turbines currently in operation.

The plant in Arlington builds some of GM’s most iconic models, focusing on the company’s top-selling sport utility vehicles. The plant already receives 50% of its power from renewable sources of energy, and the addition of the Cactus Flats wind farm will result in the plant being powered completely by green energy sources. It is estimated that the shift to wind power will reduce the plant’s total energy costs by up to $3 million a year, as well as reduce carbon dioxide emissions by more than 1 million tons over the entirety of the contract.

GM’s Worldwide Targets for Renewable Energy Part of Climate Change Commitments

Beginning in 2018, GM will be sourcing over 193,000 megawatt hours of power per year from wind alone. At the beginning of the contract over 6% of GM’s worldwide energy use will be from renewable sources. This recent deal is just a small part of GM’s long-term commitment to being powered entirely by renewable sources by 2050. This goal was set alongside other similar climate change commitments, such as the development of vehicles powered by electricity.

See Also: Amazon Comes To Texas For Electricity

See Also: Arlington Electricity Providers

 

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

New Transmission Lines To Bring West Texas Wind To Dallas And Austin

Texas is the largest producer of wind energy in the United States by a wide margin.  In fact, Texas is one of the largest producers of wind energy in the world; producing more than all but a hand full of countries.   The development of the state’s wind portfolio has not come without its challenges and setbacks.  For a while it seemed that development of new wind capacity had gone too far; outpacing the ability of the state’s electricity infrastructure to make use of the electricity being generated by the wind turbines sprouting like dandelion weeds in West Texas.

This spurred a multiyear, multi-billion dollar, project to build giant new transmission lines to carry the abundance of West Texas wind energy to the electricity hungry population centers in the eastern part of the state; including the Dallas/Fort Worth and San Antonio metro areas.   The huge project has recently been completed and is expected to boost the state’s electricity infrastructure and further bolster the already impressive wind energy market in Texas.

The transmission lines were first conceptualized in 2005 when lawmakers ordered the PUC to create regions in the state targeted for renewable energy development.  The PUC designated 5 such zones known as Competitive Renewable Energy Zones (CREZ).

In total the project consisted of around 180 transmission projects with an estimated price tag of around $7 billion.  In the early days of the project the price was estimated at closer to $5 billion with 109 transmission projects.

The completed project is capable of transmitting 18,500 megawatts of electricity across thousands of miles of transmission lines. This increases the states capacity by some 50% and even further widens the gap between Texas and California, the nearest state in terms of wind energy capacity.

Wind is already a large and growing contributor to the electricity mix in Texas.  For example, on January 29th, 2013 wind accounted for fully one-third of the electricity needed across the state.   That displaces a significant amount of more carbon-intensive electricity generation such as natural gas and coal.  Natural gas is still the largest source of Texas electricity.

The integration between wind production assets and the state’s electricity grid is seen as a model for other electricity grids struggling to integrate renewable energy into existing infrastructures.   Texas has the benefit of having a more-or-less completely self-contained electric grid that is separate from most of the North American electricity infrastructure.  This allows Texas a level of control that other states don’t have. Not having to deal with a tangled knot of overlapping state and federal regulations and approvals has allowed the state to be successful in such a massive undertaking as the CREZ transmission project as well as other grid modernization initiatives.

The phenomenal growth in Texas wind capacity can be at least partially credited to the foresight of Texas planners who put these transmission plans into motion years ago.  Producers would have been quite reluctant to build new turbines without being assured of the infrastructure to sell their product to the more populous eastern half of the state.

Texans should expect to see new fees on their electric bills as the cost of the project is recouped.

See Also: Largest Federal Wind Farm To Be Built In Texas

 

Texas Clean Energy Coalition Report Provides Incentive For Renewable Energy

The clean energy advocacy group Texas Clean Energy Coalition (TCEC), in a new report entitled Exploring Natural Gas and Renewables in ERCOT II, Future Generation Scenarios for Texas, provides an in-depth analysis of the future energy supply prospects of the State of Texas, based on existing technology, with a realistic and somewhat conservative analysis. It is the first report of its kind, overshadowing previous somewhat simplistic modeling, and utilizing high-end modeling techniques and highly developed statistical analysis.

The study examines the current Texas electricity grid, based on the current power supply supplied through the Electric Reliability Council of Texas (ERCOT) —power grid. ERCOT manages electricity provided to 23 million Texas residents, supplying 85% of the state’s electric load. Varied energy sources are considered in the present grid, from coal-fired electric plants, electricity supplied by natural gas, as well as renewable energy’s current contribution to Texas power in the form of wind-powered electricity and solar energy.

Texas is already the state producing the most wind-powered electricity in the country, with more than 12,000 megawatts of current capacity, more than double that of any other state in the U.S.  40% of Texas’ electricity is currently produced from natural gas plants, while the state itself is the leading producer of natural gas in the United States. Additionally, the state of Texas has an abundance of natural sunlight all year round, which makes increased reliance on electricity through solar power both a reliable and economically advantageous proposition. Texas currently gets 10% of its energy from renewable sources, and the study suggests an increase in reliance on renewable resources prospectively reaching between 25% to 43% over the 20 year scope of the report.

Using various scenarios and models with major factors considered such as possible public environmental policy, the likelihood of a slight decrease in the cost of producing electricity through renewable sources, relative stability in the cost of natural gas vs. significantly higher prices for natural gas, and the required power reserve margin, the topic is examined not in the context of a “tree huggers” utopia, but realistically, and more importantly, in terms of costs and profits for power companies—how planning for the future, based on numerous likely scenarios and variables, may make investing in facilities for renewable resources along with an increase in reliance on natural gas powered plants, a strategy with long-term economic benefit for the state. The report, then, takes a pragmatic approach rather than taking on the tone of an environmental crusade.

A by-product of the report, is that it can provide incentive for policy makers who are interested in reducing reliance on “dirty” energy, such as supplied by coal powered plants, to pursue a stricter policy in reduction of carbon emissions, with a resultant increase in reliance on wind, solar and natural gas. Such an incentive for policy makers is not directly insisted on by the report, but it could be a beneficial by-product, in that a stricter policies on carbon emissions, one of the scenarios explored here, while perhaps making coal-fired plants less profitable, or in the strictest scenario, making them unprofitable and essentially forcing coal-operated plants closed, would not necessarily result in higher energy prices or loss of profit as a whole to the industry. With planning, low-cost energy could be maintained with clean energy supplies, alongside a stable profit margin for power producers, by investing more heavily in renewable energy resources, alongside an increase in reliance on the clean energy produced by natural gas fired power plants.

Through the study all involved can take a realistic look at the next 20 years of increasing energy needs in Texas, and while the study does not focus on environmental benefits, the thrust of the report is that there are both economic benefits to a greater investment in renewable energy and gas, with the implied side benefit of less impact on the environment (less pollution). If power companies can maintain profits while saving the environment, why not? It is a win-win situation for everyone involved. This is especially poignant in view of the fact that Texas’ energy requirements are expected to double over this same 20 year time period, placing a tremendous demand on existing resources. The topic of how to meet future energy demands is something that needs to be addressed regardless of the one’s environmental position, so the question becomes, simply, which direction to point the arrow. The report implies that pointing in the direction of clean energy makes economic sense for everyone involved by adequately covering a wide range of possible scenarios including future technological developments.

 

See Also: Microsoft Makes Large Texas Wind Power Purchase
See Also: Texas State Senator Pressures ERCOT to Leave Reserve Margins Unchanged

 

 

 

Largest Federal Wind Farm To Be Built In Texas

Pantex wind farm to provide electricityAlready a leader in wind energy, Texas will soon be home to the largest federally owned wind project.  In May, the National Nuclear Security Administration (NNSA) awarded a contract to Siemens Government Technologies to construct and maintain an 11.5 megawatt wind farm in the Texas panhandle to provide electricity to the Pantex nuclear weapons facility.   The project is expected to break ground this summer and be operational by next year.

The project will consist of five 2.3 megawatt turbines which will add to the state’s already substantial portfolio of wind energy.  Texas produces three times more wind energy annually than the next state.  Most of the state’s wind turbines are located in West Texas where abundant land and wind create ideal conditions for wind energy.

The Pantex facility near Amarillo, Texas is the nation’s only facility for the assembly and disassembly of nuclear weapons.  It has been in continuous operation since 1951.  Its primary function today is carrying out the NNSA’s mission of nuclear nonproliferation and management and security of the nation’s nuclear stockpile.  The wind power produced by the project is expected to provide Pantex with about two-thirds of its electricity requirement.   It’s unlikely that wind energy could ever provide 100% of the power for such a facility because of the intermittent nature of wind power.

The project is to be financed using an Energy Savings Performance Contract.  Using such an agreement, Siemens will provide the upfront costs to build the wind farm while the government pays the company over time using the electricity cost savings the project is expected to deliver. The window farm is expected to result in a savings of around $2.9 million annually over the next 20 years.

Energy savings performance contracts (ESPCs) are designed to allow federal agencies to take advantage of programs to reduce energy costs while paying for the project cost from the actually energy cost savings realized by the project.  The company who is awarded a contract under such an agreement guarantees that the improvements implemented will result in the projected cost savings.

ESPCs are seen as an important tool for allowing federal agencies to participate in energy saving programs and meet the goals outlined by President Obama to meet federal clean energy and energy efficiency goals.   The federal government is the largest consumer of energy in the US.

See Also: The U.S. Military’s Green Mission
See Also: Has The Wind Energy Industry Peaked?

 

Has The Wind Energy Industry Peaked?

Even as Texas was setting another in a string of records in wind production in 2012, industry insiders were aware that time was running out on the wind energy boom. Wind has flourished over the last few decades in the U.S. as a result of generous tax credits offered by the federal government.  The Production Tax Credit has paid wind producers a fixed amount for every megawatt of electricity generated by wind turbines and sold to the grid.

The Production Tax Credit was set to expire at the end of 2012 and, in light of the fiscal cliff drama unfolding in Washington, didn’t seem to have a good chance of being renewed.  The industry claimed that loss of the tax credit would have cost 37,000 jobs.  Things looked so bleak for the tax credit that the industry even attempted a last minute Hail Mary; voluntarily suggesting a phase out of the credit over time rather than seeing it disappear entirely.

Ultimately the industry was saved, at least temporarily, when congress gave wind producers a late Christmas gift in the form of a one year extension with a cost to tax payers of an estimated $12.1 Billion over the next 10 years.   While certainly welcomed by those who stand to benefit from it, the one year extension does little create certainty within the industry. 

Challenges for 2013 and Beyond

2012 was a big year for wind power as producers scrambled to complete projects before year-end to be eligible for the federal money.  44% of all new electricity generation in the U.S. came from wind. That’s more than any other energy source.  As it was written, the law required producers to begin generating electricity by the end of the year to collect the tax credit money.  For that reason, very few producers had plans to come online in 2013. 

Wind projects, like any energy production project, take a long time to get off the ground.  The typical project takes from 18 to 24 months to complete.  This would have made the 2013 extension all but worthless if not for a subtle change in the wording of the rule.  The new extension pays out for any project that begins construction in 2013.   The old wording would have required new project to begin producing electricity this year to get the subsidies.

It will be interesting to see if the industry sticks by its plan for a gradual phase out of the tax credit.  Since the move was borne of desperation in an attempt avoid a cold turkey loss of subsidies for the industry they may look for a way to remove the proposal from the table. 

On the other hand, it may make sense to push for the certainty that such a plan would bring.  It should come as no surprise that congress’s one year extension simply pushes the tough decision down the road.  After all, that seems to be the preferred method in Washington these days.  Even a gradual phase out might be preferential to the uncertainty of annual last minute renewals that make long term planning for energy companies extremely challenging.   

See Also:  Texas Electricity: 2013 Outlook Improves

 

Wind Industry’s Desperate Move to Retain Federal Subsidies

The wind power industry is so desperate to maintain its lifeline of federal subsidies that it has put forth a plan to phase out the wind energy tax credit in the next several years in exchange for an immediate extension of the current production tax credit into 2013. 

The wind energy sector has benefited substantially for years from a federal tax credit paid to companies that produce electricity from wind and sell it to the grid.   The credit equals 2.2 cents per kilowatt hour and has been essential to the growth of the industry. 

According to the American Wind Energy Association (AWEA), the Production Tax Credit “has succeeded in incentivizing an average of $15.5 billion a year in private investment in U.S. wind farms over the past five years.”

However, the tax credit is set by law to expire at the end of 2012 and despite a long battle, proponents of the credit have failed to get an extension of the subsides passed in to law.  As a result, the federal money will run out on December 31st, 2012,  leaving the economics of electricity generated from wind substantially changed.

With time running out and Fiscal Cliff debate dominating the agenda in Washington, the proposal by AWEA is a Hail Mary attempt to get an extension of tax credits passed in some form and perhaps buy more time to secure a more favorable deal for the industry at a later time.

The proposal would sunset the tax credit in 2018 after slowly reducing it for the next several years.

For projects put in service in:

  • 2013 – 100% of the 2.2 cents per kilowatt hour
  • 2014 – 90%
  • 2015 – 80%
  • 2016 – 70%
  • 2017 – 60%
  • 2018 – 60%
  • 2019 – Subsidy ends for projects coming on line this year and beyond.

Clearly the new proposal is not the kind of deal the wind energy industry would prefer.  But these are desperate times for an industry that despite years of government subsidies is not able to compete with other energy sources on a purely economic basis. 

Texas is the largest producer of wind electricity in the United States despite the fact that extremely low natural gas prices have meant cheap electricity for the state in recent years.  With electricity rates being so low, the state has struggled to insure there will be enough capacity to meet future demand for power.  This loss of federal subsidies for wind could further hinder the state’s efforts to gain more capacity.

 

Texas Set To Store Energy In Underground Salt Caverns

If Texas were a country, it would have the sixth largest wind energy capacity among any nation on earth just behind India and just ahead of France.  But there are some major issues with relying too heavily on wind to power the state’s electricity grid. 

Getting electricity out of wind is like coaxing a stubborn mule down a trail. It moves at its own pace and stops and starts when it wants to.  The challenge for grid operators is to integrate electricity produced by wind at irregular and unpredictable intervals into the grid which requires a close balance between electricity in and electricity out.

Basically the capacity of the Texas electricity grid is built around July and August; the peak months for electricity demand.   Inconveniently, this is also the time when West Texas winds tend to calm down.   At night time the wind does pick up but by then electricity demand has gone down along with the temperature.  

A cheap and efficient way to store that off-peak electricity is the missing piece of the puzzle needed to make wind electricity reach its full potential. One energy company has a plan to turn underground salt caverns into giant electricity storage devices.  The idea is to buy the electricity wind turbines produce at night and use that electricity to fill the caverns with compressed air. 

In doing this they will have, in essence, created giant batteries full of stored energy.   In this way the energy is available for use during the day when it is needed more.  The compressed air will be released and used to fuel electricity generators. This electricity is then sold to the grid at higher prices creating a profit for the company and increasing the daytime capacity of the grid.  

While there have been a handful of other energy storage projects brought online in Texas, this one will be by far the largest. It certainly won’t be the last either.  Investment in energy storage capacity has significant benefits not just for investors but for grid operators and electricity consumers.   For investors energy storage projects are becoming an attractive opportunity. As the efficiency of energy storage techniques including large-scale batteries, compressed air energy storage systems, and other mechanical storage systems goes up and the cost of such technologies goes down it is inevitable that smart operators are going to step in and seize the opportunity.  

In Texas the rules have recently been changed to allow energy storage operators to pay the wholesale rate for electricity taken from the grid.  This should clear the way for more storage projects by making it possible for such facilities to buy cheap when demand is low and make a profit by releasing power into the grid when prices go up.  

All of this is good news for electricity rates in Texas. Energy storage capability added to an electricity grid multiplies the capacity of the group without need to add new power plants. This will reduce the amount of new power generation capacity that will need to be built in the future.   If enough energy storage is built, it will ultimately help to reduce the occurrence of wholesale price spikes.  

This reduction in wholesale rate volatility would benefit retail providers in Texas who typically absorb the risk of short-term wholesale rates while selling fixed-rate plans to consumers.   The spread between retail and wholesale electricity rates is going to price in that risk – meaning that ultimately retail consumers will pay the price for wholesale rate volatility.  

ERCOT, for its part, is happy to see more energy storage capacity in the grid because it makes their job easier.  Electricity supply that can be brought online fast whether it is newly generated power or stored power makes it easier for them to maintain the balance on the grid and react to events.