Renewables Lose To Natural Gas In Power Market

“The significance of these two maps, especially the one utilizing current natural gas prices, is that natural gas wins in the battle to be the cheapest source of electricity in almost every region where solar and wind power are being forced into the grid via government mandates and/or subsidies.”

“A truly competitive playing field for power fuels would leave renewables with a much smaller national footprint.  That might be an outcome utility customers would welcome.”

A recently updated analysis by the Energy Institute of the University of Texas at Austin (UT) shows natural gas combined cycle, wind and residential solar photovoltaic technologies to be the least-expensive ways to generate electricity across much of the United States.  The interactive model uses a range of power generating technologies and ranks them based on their levelized cost of electricity (LCOE).

The map evolved from an analysis conducted, and initially reported in 2016, with input from a wide range of UT experts.  Their expertise covered mechanical engineering, electromechanics, chemical engineering, public policy, public affairs, and finance, among others, all used to help calculate the LCOE of new power plants on a county-by-county basis and by congressional districts in the country, while also providing estimates of some environmental externalities.

The technologies examined for generating electricity included: coal (bituminous and sub-bituminous, with 30% and 90% carbon capture and sequestration); natural gas combined cycle, with and without carbon capture and sequestration; natural gas combustion turbine; nuclear; onshore wind; solar photovoltaic (PV) at both utility and residential scale; and concentrating solar power (with six hours of storage).

The methodology employed by the UT Energy Institute is designed to overcome some of the inherent flaws in LCOE calculations. The cost of building and operating an identical power plant in different geographies will be different due to local construction cost differentials. Likewise, fuel costs, capacity factors and financing terms will differ across regions. LCOE does not incorporate these differences.

Additionally, LCOE can be problematic due to the assumption of constant capacity factors over the life of the plant’s operation.  As a result of these concerns, the Energy Institute’s analysis incorporates region-specific data on plant capital expenditures, operating and maintenance expense, as well as fuel costs.  The result of this effort to more closely identify the true costs of new power plants by region is to produce calculated LCOEs that are more reflective of true electricity costs by region.

The Latest

The latest map (generated in early October) shows that natural gas combined cycle is the cheapest technology for large swathes of the eastern and western regions of the United States (light brown). This conclusion is true even at a natural gas fuel cost of $5.07 per million British thermal units (MMBtu).

Solar PV is the cheapest power for most of Arizona, Colorado, Wisconsin, Minnesota and Missouri (purple). Wind provides the cheapest power for much of the central U.S., New York, and small swathes of Appalachia (green)–if, and only if, the costs of intermittency and remoteness (as in transmission costs) are not included.

Exhibit 1.  Where Natural Gas Is Cheapest Power 

Source:  Powermag.com

What is most enlightening is a similar map showing the cheapest technologies based on current natural gas prices (in this case, $3.24/MMBtu).  In contrast to the previous map, this one shows natural gas winning in Arizona, much of the Panhandle of Texas, most of Oklahoma, and nearly half of New York.

The latter is amusing as Governor Andrew Cuomo (D) has banned the development of natural gas resources in the state by fracturing, including blocking new and expanded pipelines crossing the state to haul gas to New England.

Exhibit 2.  Low Gas Prices Wins More Of Country’s Power

Source:  Powermag.com

The significance of these two maps, especially the one utilizing current natural gas prices, is that natural gas wins in the battle to be the cheapest source of electricity in almost every region where solar and wind power are being forced into the grid via government mandates and/or subsidies.

An argument for emphasizing wind and solar is the significant declines in their capital costs – an 80% drop in the cost of solar panels in recent years, for example.  The reality is that when based on more precise cost data for building new power plants, wind and solar prove to be less competitive than touted by environmentalists and politicians.

Quite possibly, the message delivered by these maps is what is prompting the growing attacks against increased use of natural gas as a “bridge” fuel to a cleaner energy world. A truly competitive playing field for power fuels would leave renewables with a much smaller national footprint.  That might be an outcome utility customers would welcome.