Texas is a surprising poster-child for robust investment in renewable energy generation. “No other State comes close to Texas’ more than 12 GW [gigawatts] of installed wind capacity,” says economic and financial research firm the Brattle Group in a report for the Texas Clean Energy Coalition, Partnering Natural Gas and Renewables in ERCOT.
Both gas and wind are abundant in Texas. The state has the potential to build out wind generation capacity to twice the level of total annual peak demand, and produced 28% of all US marketed gas in 2011, the report says.
Though natural gas and renewables are often portrayed as competitive fuels – low natural gas prices over the past few years have put a dent in some of the enthusiasm for investing in renewables – they can actually be complementary, the report says. When used in combination, they can advance the goals of satisfying power generation needs and cutting carbon dioxide emissions.
Renewables’ Downsides
Renewables have an inherent cost advantage, since wind and solar are free. “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,” the paper says.
But generation plants fueled by renewables may require more in up-front capital investments. “Over the long term, as new plants are planned and built, it is possible that new gas-fired plants will compete with new sources of solar and wind generation.”
Renewables, such as solar and wind, face another major drawback – they are intermittent power sources. The wind does not always blow and the sun does not always shine.
Gas Advantage
Natural gas can help to mitigate the impact on consumers of the high cost of renewable generation investments, the report says. Using a combination of gas and renewables for generation can soften the impact on rate-payers, with lower-cost gas offsetting some of renewables’ high up-front costs.
“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 [production tax credit]. However, due to low natural gas prices, electricity bills, as a percentage of household income, are near their historical lows,” the paper says.
Natural gas can also resolve the intermittency issue by providing backup generation. “Natural gas resources are more flexible than nuclear and coal plants and can ramp up and down to complement wind output without incurring high costs, resulting in fewer spikes and dips caused by the mismatch between wind generation and demand.”
The Price Factor
Though current conditions are right for renewables and natural gas to play complementary roles in Texas’ power generation sector, the outlook for the future depends on price trajectories. “The relative roles renewables and natural gas might play in supplying electric power in Texas in the future will depend primarily on the costs of potentially competing resources,” the report says.
A run-up in gas prices, a technological breakthrough that brings down the cost of wind, changes to federal or state renewables incentives or environmental regulations – any of these could change the calculus completely.
You can read the full report here.
