Substituting Natural Gas with Electricity (In Texas)?
There is no shortage of new technologies that tout themselves as the next big thing in energy and saving consumers money. But according to a paper by Pecan Street, replacing natural gas usage for electricity would account for more than $400 for average annual savings in the ERCOT area of Texas.
Because close to a third of all natural gas in the country is burned within houses, a switch to electricity has vast benefits for the environment, minimizing emissions in the process.
A lot of naysayers will point out that the grid will buckle under the added demand, but this switch from natural gas to electricity would clearly not happen overnight. With enough delicacy, the powers at be and ERCOT can achieve a balancing act that doesn’t drain too much of the grid’s capacity.
ERCOT might not be the most open to hear these sorts of ideas coming off of the crazy summer that Texas had, but many are stating that the grid can handle it. This can lead to a lot of savings if operations are changed accordingly to reinforce a stronger electrification of households.
Natural Gas as a Long Term Plan?
Because natural gas is such a staple of the Texas economy, it’s hard to imagine that it will disappear any time soon. That hasn’t stopped cities from banning natural gas though. Cities like Berkeley, California and parts of Massachusetts are banning it outright.
Overall, what may win out is a collection of cities that are investing in the longevity of the climate – The Sierra Club being a notable mention as 100 cities have banded together to try and go 100% renewable by 2050. This could very well tip the dominos in favor of a more electrified grid.
Those who are rallying for the integrity of the natural gas industry – the suppliers and drillers – are fighting back against any bans. After all, natural gas usage has helped the recent coal phaseout in the Texas and abroad, but there’s a caveat, as Daniel Cohan of The Hill points out: natural gas means methane, which is “roughly 30 times as potent as carbon dioxide.” Sure, coal has fallen, but with it comes higher methane levels – often a result of natural gas ‘flaring’.
Again, all of this leads back to the central question:
Does it make sense to keep investing in natural gas for the long term, or is it a good idea to instead invest in a more electrified country?
Right now seems to be a crucial transitionary period for more electrical connectivity, versus the traditional fossil fuel route of old.
EIA Short Term Energy Outlook
The EIA recently put out a short-term energy outlook, which analyzed how the upcoming winter will look for all areas of the energy industry. Because of just how severe this summer was, perhaps it’s pressing to look ahead and contrast with what looks to be a completely manageable winter for the U.S. and by extension, Texas.
This is extrapolated from the EIA short-term winter fuels outlook as well. But as is discussed, a forecasted “milder weather” will mean less fuel usage to heat houses. Depending on region, a Texas home heated by natural gas will be more expensive due to natural gas markets, as is discussed in the same report:
“In contrast to the national average, EIA forecasts that expenditures will increase for homes that heat with natural gas in the Midwest and South as a result of higher retail natural gas prices.”
But on average, everything is expected to drop in the home-heating department, meaning that the majority of customers will see a drop in their bill by 1%.
The overall outlook also extends into the beginnings of 2020, so the data looks beyond the winter on a more surface level basis. We will briefly explore electricity, coal, renewables, emissions, and natural gas when considering the EIA’s projections.
Electricity, Coal, and Natural Gas: Greatest Hits of the Energy Outlook
Perhaps a positive effect of having warm overall temperatures this year is that we can expect a milder winter. This means less expensive energy bills due to decreased furnace usage and winter fuels in Texas and other southwestern states mainly, as discussed above.
Looking past the winter and into 2020, the amount of electricity generated by natural gas plants will rise. This will most likely be necessitated by the continual decrease of coal plants. The EIA says coal will continue to fall by another 11% in 2020.
Additionally, natural gas saw increased consumption this year, but because surplus storage, the prices stayed low in the last half of the year. The EIA forecasts natural gas production to stay relatively flat and prices to actually decrease through the early 2020 year because of the oversupply at the Henry Hub. This is all despite an increasing demand for natural gas to generate electricity across the country.
Renewables and Emissions
Electricity derived from wind energy will increase from 10% to 12% in 2020, owing to the continual rise in renewable energy initiatives (especially in Texas). As the outlook states, “Texas accounts for 19% of the U.S. non-hydropower renewables generation in 2019 and 22% in 2020.”
As coal slowly dies out, CO2 levels are going to keep falling. By this time next year, CO2 levels will have dropped 4.1% in comparison to 2018 levels. A lot of this has to do with what they project to be a year that sees less household energy consumption overall.
Natural Gas To Surpass Coal As Source Of CO2
Natural gas is expected to soon surpass coal as a source of CO2. As natural gas continues to replace coal as a fuel for the production of electricity for the nation’s electric grids, the total amount of emissions coming from natural gas activity will pass that of coal in 2016.
Energy related CO2 emissions from natural gas are expected to exceed that of coal by 10% in 2016. The total amount of electricity generated by natural gas reached record highs in the U.S. in July of 2016. The nearly 5,000 gigawatts per day surpassed the previous record in 2015 by around 9%. This was due partially to high temperatures as well as the continuing price advantage of natural gas over coal. For the year, electricity from natural gas is expected to account for around 34% of power output compared to 30% for coal.
As ever tightening federal mandates force coal plants to either modernize or shut down, coal based electricity output has been in a multi-year down trend in the US. This is expected to continue in the years to come. Much of this lost production has been replaced by renewable sources of power such as solar and wind. The latter is particularly the case in Texas.
This all comes on top of another trend that has seen overall electricity sales declining thanks in part to greater energy efficiency in residential construction as well as federal energy efficiency mandates. Lower peaks in electricity demand tend to favor cleaner sources of power. Coal and natural gas are considered more responsive sources of power generation and more likely to be ramped up in times of greater peak demand.
The gradual shift of electricity production away from coal and toward natural gas and renewable sources of power has not put upward pressure on electricity rates. The national average for electricity for July 2016 was 13.0 cents per kwh. By comparison, a 12 month electricity plan can be found for 6.3 cents per kwh in the Dallas, Texas area as of the time of this writing.
Coal’s Importance To Texas Electricity Continues To Decline
The use of coal to generate electricity in Texas continues to slide. Just ten years ago, half of the electricity in Texas came from the burning of coal. Today, coal only contributes 20%.
Why the huge drop off? The two main factors are natural gas and wind energy, with solar and hydro also playing a part.
Texas is by far the largest producer of natural gas in the U.S., more than doubling the production of the #2 state, Pennsylvania. Texas is now producing so much natural gas, that a pipeline is being built that will send a significant amount of natural gas to Mexico to be used by their electricity generators.
Texas also produces more electricity via wind energy than any other state. There have already been days when the state saw more electricity produced from wind than from coal.
It is expected that by 2020, more than half of all coal-burning power plants in Texas will be shuttered.
ERCOT Releases The 2014 Breakdown Of Electricity Generation In Texas
Just 10 years ago, the majority of electricity generated in Texas was derived from the burning of coal. Since then, the state has taken great strides to diversify away from the high carbon-emitting energy source.
The electricity production numbers are now available for 2014. Last year Texas generated 36% of its electricity from coal, 41% from natural gas, 12% from nuclear plants and 11% from wind.
Texas is the largest producer of wind energy in the U.S., accounting for 20% of all wind energy produced in the nation. As additional transmission lines get more of West Texas and the Panhandle connected to the ERCOT grid, that number should continue to grow.
University of Texas-San Antonio Releases Report on Economic Impact of Eagle Ford Shale
In a report released by the University of Texas-San Antonio (UTSA) entitled “Economic Impact of the Eagle Ford Shale”, researchers from the Center for Community and Business Research at the University’s Institute for Economic Development found that extraction of oil, condensate, and natural gas from the Eagle Ford Shale in South Texas generated over $87 billion in total economic output for Texas in 2013, including $42.8 billion in gross regional product for the 21 counties involved in the study.
In 2013, shale activity from Eagle Ford provided over $4.4 billion to state and local governments and supported almost 155,000 jobs, and UTSA projected that over the next ten years, the industry will support as many as 196,660 full-time-equivalent jobs and generate more than $137 billion for the region, far exceeding the $89 billion originally projected for 2022 in last March’s report. UTSA explains that the upward adjustment was a result of a continued rise in production that has exceeded expectations, as well as growth in the development of support industries such as refineries, processing and ports, among others.
Production from the Eagle Ford Shale has grown exponentially; oil and condensate production rose from 581 barrels per day in 2008 to over 1.1 million barrels per day as of June 2014, and natural gas production puts up equally impressive numbers, at more than 4 billion cubic feet per day. The report covers 21 counties that benefit economically from development in the Eagle Ford Shale; in addition to the 15 most directly-involved counties, in which 3,311 wells were actively producing in 2013, there are six surrounding counties that have seen a boom in economic growth from the development of related service and support industries.
The forecast for continued healthy growth has attracted more capital investment to Eagle Ford than to any other shale field in the country. Robert McKinley, UTSA Associate VP for Economic Development, said the revenue would provide the ability to develop and improve infrastructure that would benefit rural communities, such as roads, schools, broadband internet, and medical facilities. The report cautions that these infrastructure improvements are vital to the sustainability of communities in the region and recommends that community leaders should actively partner with state legislators to ensure that those communities can get support from revenue sources such as the Economic Stabilization Fund and from allowable city and county taxes.
The report also recommends that area communities should consider aesthetics, as well, and perhaps attempt diversification in less industrial-feeling investments, like olive farming and olive oil production, tourism, and recreation, to keep their surroundings attractive and enjoyable. Keeping the needs of local residents in mind rather than just focusing on the very impressive numbers will ensure that stability and economic success are long-lasting not just for investors, but for the whole community.
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.