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New ERCOT Report Shows Texas Wind And Solar Are Highly Competitive With Natural Gas

By Climate Guest Contributor on January 29, 2013 at 10:44 am

"New ERCOT Report Shows Texas Wind And Solar Are Highly Competitive With Natural Gas"

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by Colin Meehan via EDF

An interesting fact seemed to go unnoticed in all the press around the Electric Reliability Council of Texas’s (ERCOT) Long Term System Assessment, a biennial report submitted to the Texas Legislature on “the need for increased transmission and generation capacity throughout the state of Texas.”

ERCOT found that if you use updated wind and solar power characteristics like cost and actual output to reflect real world conditions, rather than the previously used 2006 assumed characteristics, wind and solar are more competitive than natural gas over the next 20 years.  This might seem a bit strange since we’ve been told for years by renewable energy skeptics that wind and solar power can’t compete with low natural gas prices. Let me back up a second and explain what’s going on here, and what it means for both the energy crunch and Texas’ ongoing drought.

Every two years since 2005, ERCOT has used a series of complex energy system models to model and estimate future conditions on the Texas electric grid.  This serves a critical function for legislators, utilities and regulators and others who need to prepare for changes as our electric use continues to expand and evolve.  As with any model of this kind, the assumptions are critical: everything from the price of natural gas, to the cost to build power plants and transmission lines. Facing an acute energy crunch and given that solar and wind costs have come down a great deal since the first study in 2006, ERCOT dug a little deeper into their historical assumptions and developed a version of the model that used current, real-world cost and performance data for wind and solar power.

What they found was astounding: without these real-world data points, ERCOT found that 20,000 MW of natural gas will be built over the next 20 years, along with a little bit of demand response and nothing else.  Once they updated their assumptions to reflect a real-world scenario (which they call “BAU with Updated Wind Shapes”) ERCOT found that about 17,000 MWs of wind units, along with 10,000 MW of solar power, will be built in future years.

*In their Updated BAU scenario ERCOT only specific combined cycle natural gas units built, the inclusion of combustion turbines may increase the total capacity of natural gas built in the scenario.

In addition to demonstrating the economic viability of renewable energy, these results show two drastically different futures: one in which we rely overwhelmingly on natural gas for our electricity, and one in which we have a diverse portfolio of comparable amounts of renewable energy (which does not use water) and natural gas.  All of this is crucial to keep in mind as the Legislature, the Public Utility Commission and ERCOT evaluate proposals to address resource adequacy concerns and the impacts of a continuing drought on our state’s energy supply.

Finally, one ERCOT statement in particular stands out from this analysis, in direct contradiction to renewable energy opponents who say that renewable energy is too expensive: “the added renewable generation in this sensitivity results in lower market prices in many hours [of the year].”  This means that when real-world assumptions are used for our various sources of power, wind and solar are highly competitive with natural gas. In turn, that competition from renewables results in lower power prices and lower water use for Texas.

As state leaders look for ways to encourage new capacity in the midst of a drought, it’s important to realize that renewable energy is now competitive over the long term with conventional resources.  The fact that renewable energy resources can reduce our water dependency while hedging against higher long-term prices means that however state leaders decide to address the energy crunch, renewables need to be part of the plan.

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8 Responses to New ERCOT Report Shows Texas Wind And Solar Are Highly Competitive With Natural Gas

  1. Robert Nagle says:

    I can’t speak of “production costs,” but on the consumer side the price of renewable energy in Texas has been only 5-10% higher than that of nonrenewables. Sometimes, in fact, the price of renewables are the same or less than that of nonrenewables. Here’s a longer comparison of Texas electricity rates .

  2. Leif says:

    Considering the current drought conditions in Texas and throughout out the mid west and the amount of fresh water needed to support the fracking pillage, I would think that would further tip the scales in favor of green renewable energy.

  3. Sasparilla says:

    You see this report regarding longer term costs and then the fact that Wind was the largest install of electrical generating capacity in the U.S. in 2012 (still blows me away considering how cheap natural gas was) and it starts to make me ask the question – have we passed a tipping point in the market with regards to green energy and Wind in particular?

    If Wind leads again (somehow) in 2013 – can’t imagine how it would with the planned expiration of the tax credit at the end 2012 (delayed for one year now) – but if it did again, I’d take that as a confirmation that the game has changed.

  4. It is great to see a group like ERCOT doing strong technical work like this.

  5. And that’s without adding any of the cost of carbon & methane. Once you factor in the catastrophic damage being done to our entire planet there is no cost at all to renewable energy. It is free. It is a net saving. Methane burning literally costs the earth. So let’s put a price on carbon. (and methane)

  6. Dave Bradley says:

    Texas is a very windy state, and it has 2 climate regions with huge areas and average fast winds (8 m/s or more at 80 meters height) that are the envy of many places. The onshore regions (mostly west and north Texas) have a delivered capability of 740 GW (the average US usage is only 470 GW). The offshore capability is in excess of 450 GW – a 700 mile long coastline and mostly shallow water for several miles offshore.

    There is no good reason why most wind turbines (the cheapies, with small rotor to generator capacity ratios) can’t do a 40% net average output. And using the new wind turbine models being introduced, 50% average outputs are also quite possible. The major tasks needed to tap this awesome capacity are transmission lines and compressed air electrical energy storage in cities (which allows for central district cooling by the “spent air” that exhausts from the power generation units). And yes, they have a big solar potential as more and more of the state devolves into a hard core desert from semi-arid desert thanks to Global Warming, but PV can never come close to the electrical production costs from wind turbines in Texas, especially on an unsubsidized basis.

    So let’s be pessimistic, and assume that a 1.5 MW (small and obsolete by 2013 standards) turbine only has an average output of 5000 MW-hr/yr. At $3 million installed, that would give an unsubsidized production cost of 7 c/kw-hr, and the PTC/MACRS tax avoidance subsidies should drop that to 4.2 c/kw-hr. A price of 5 cents/kw-hr (subsidized via tax avoidance) or around 7.5 c/kw-hr (no subsidies), for the next 25 years should be modestly profitable (though corporate types will cringe in horror at such a term).

    Looking ahead for 20 years, nobody knows what the average nat gas price for the year to year, month to month will be. And despite the humongous conventional methane reserves in Texas still remaining or those rapidly depleting shale gas supplies, the Enron fraud-fest showed that long term nat gas pricing knowledge is meaningless. Bulk prices were $13/MBtu five years ago, and now pipeline (Henry Hub) prices are around $3.50/MBtu. Once the current glut of shale sourced methane goes away (this glut is partly a result of wind energy electricity production in the US nowadays cutting nat gas annual demand by 1.5 trillion cubic feet/yr), nat gas prices will be set by the marginal cost to make fracking based methane, which is near $10/MBtu.

    That delivered price of nat gas means electricity production costs of 8.3 c/kw-hr for combined cycle units, and more than 11 c/kw-hr for single cycle (peaking) units. It is more expensive than UNSUBSIDIZED wind energy in Texas. And that’s the end of nat gas use for electricity in Texas, at a time in the NEAR future, but exactly when, it is hard to know.

    Needless to say, the boys with gas in the ground are not happy about this. Wind trashes the extraordinary profits that can go to the coal, nuke and gas generators in the Texas casino electricity pricing system. And needless to say, they want those extrteme profits pouring in until there is no more nat gas. Of course, climate-wise, that is stupid on steroids, but the gas and oil boys are still ruling Texas, despite the so-called elections we have in this country. All the wind power (over 12 GW capacity now installed in Texas and a lot of people employed in the wind biz) is not making the gas boys (or the nuke and coal generation owners, who profit on the price difference between coal/nuke and nat gas, as well as single and combined cycle generation facilities) happy.

    Tough beans, I say. Grow a pair. The bulk of future Texas electricity generation lies with the wind. It will probably be making more electricity from wind than is consumed in Texas when desertification and lack of water in the non-coastal regions forces mass evacuations of Texas (ocean water can always be desalinated using wind based reverse osmosis systems), and much of presently coastal flatland Texas gets evacuated inland a bit due to rising ocean levels.

    • Mulga Mumblebrain says:

      The Texan boneheads (‘All hat, no neuro cortex’)insist on fossil fuels and ignore the renewable bounty because they are too lazy to change their bad habits, and because they have been brainwashed to hate ‘Greens’ so very much that they reject renewable energy out of ideological rigidity alone. Wouldn’t want to see those ‘watermelons’ winning the argument, now would we?

  7. Consider the Connection to:
    The Economic Pyramid CTC3
    ______CONSUMER
    _____RECREATION
    ____COMMUNICATIONS
    ___TRANSPORTATION
    __BUSINESS
    _INDUSTRY
    AGRICULTURE
    |SOIL|MINERALS|FORESTS|WATER|
    |WIND|SOLAR|GEOTHERMAL|ETC._|
    Our economy rest on a base of natural resources.
    Conservation is the wise-use, management & development of the Earths natural resources.
    Conservation & clean energy is needed at all levels of the Economic Pyramid!
    http://www.twitter.com/CTC123GREEN
    http://www.pbckt.com/aY.8V1o