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Thursday, June 13, 2013

Texas report – natgas and renewables are complementary

A new report from the Texas Clean Energy Coalition (TCEC) says that low-priced natural gas and renewable energy are complementary - not competing - resources, and they together provide a path to a low-carbon Texas economy.

Partnering Natural Gas and Renewables in ERCOT echoes the finding of important work on the same subject done on a national scale by the Worldwatch Institute and others that will be familiar to regular readers of this blog. 

The report, produced by the Brattle Group with funding from the Cynthia and George Mitchell Foundation, looks at the relationship between natural gas and renewable resources on the grid run by the Electric Reliability Council of Texas (ERCOT), which covers 85 percent of the state.
TCEC finds:

The main conclusions of this white paper are that in the short run low gas prices are extremely unlikely to change the fact that existing renewables will  nearly always have priority over gas-fired plants since, due to the absence of  fuel costs, their  variable costs are lower than those of essentially all  other resources.   Over the long term, as new plants are planned and built, it is possible that new gas-fired plants will compete with new sources solar and wind generation. Which source is cheaper will depend on the levels of gas prices, the existence (or lack thereof) of continued federal (and perhaps state) support and the technological progress of both wind and solar resources.  In addition, it is possible that in the long run some combination of renewables and gas will displace existing coal-fired generation.

This is possible because, despite this competition, there is a strong complimentary relationship between natural gas and renewables.  Not only may increasing concerns about air pollution and associated health and environmental consequences create additional costs for coal-fired generation, but gas-fired generation also matches much better with intermittent renewable generation from solar and wind projects than do coal-fired power plants.  The path to low-carbon generation in Texas will therefore likely require the co-development and integration of both gas and renewable resources.

Low natural gas prices also facilitate Texas’ continued transition towards a low-carbon emissions electricity sector by dampening any potential additional costs of renewable over conventional power generation sources.  The cost of both wind and solar power has decreased significantly, but they are still not necessarily the lowest cost options, at least not without some explicit consideration of greenhouse gas emissions or continued federal subsidies such as the PTC.  However, due to low natural gas prices, electricity bills, as a percentage of household income, are near their historical lows.   Consequently, increased levels of a combination of renewable energy and new lower-cost gas power can likely be accomplished without materially increasing the share of income Texans have to dedicate to paying for electricity relative to the past.

Texas has two legs up in this race because it already leads the nation in wind energy production and it sits atop massive natural gas deposits.  Will the Lone Star State smartly use gas and renewables to create a strong, low-carbon economy and provide an example to the nation and the world?  

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