The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

What Do Falling Natural Gas Prices Mean for Renewables?

With a glut of shale gas on the market, natural gas prices continue to tumble in the U.S. And they'll only fall more throughout the year.

According to the U.S. Energy Information Administration, average natural gas prices on the wholesale spot market dropped another 9% in 2011, falling to the second-lowest price average since 2002. And the agency expects prices to fall substantially in 2012 due to record-high inventories of supply.

In a few short years, domestic energy supply has undergone a major shift in favor of natural gas, challenging the economics of renewable energy technologies that compete directly with the resource. It’s not exactly the kind of shift that renewable energy proponents imagined. But it has helped keep electricity and heating prices low, while also shifting enthusiasm away from coal. Those are notable short-term victories — assuming renewables don’t get swept aside in the process.

The picture is mixed. Although wind development has dropped off a cliff in states like Texas, in part because of low gas prices, Bloomberg New Energy Finance believes that wind will be competitive across the board with natural gas by 2016. And in utility-scale solar, large photovoltaic projects are also keeping pace with projected prices of natural gas.

However, a study released earlier this month by the Massachusetts Institute of Technology modeled an energy scenario with and without shale gas, finding that renewables were indeed being negatively impacted:

The continued need for strong renewables prompts concerns, as the study finds that shale use suppresses the development of renewables. Under one scenario, for example, the researchers impose a renewable-fuel mandate. They find that, with shale, renewable use never goes beyond the 25 percent minimum standard they set — but when shale is removed from the market, renewables gain more ground.

We should also always remember that some of the leading (center-right) economists in the country — Nicholas Z. Muller, Robert Mendelsohn, and William Nordhaus — publishing in a top economics journal found that natural gas damages were larger than its value added for electricity generation even at a low-ball carbon price of $27 per ton. At a price of $65 a ton of carbon, the total damages from natural gas are more than double its value-added.

That means renewable energy deserves strong support by state and federal policymakers even in the face of low natural gas prices.

So will the slide in gas prices continue? Not according to some forecasts. EIA expects prices to riseagain in 2013. With an increase in exports, a build out of new combined cycle power plants and continued questions about how much shale gas is actually in the ground (it’s still a lot, even on the low end of estimates), IDC Energy Insights Analyst Sam Jaffe doesn’t see how prices can stay as low as they are today:

 

Electric power production accounted for approximately 24% of overall U.S. gas consumption. Keep in mind that much of that power production is done with peaker plants, not baseload plants. The new plants that are being built are mostly combined cycle baseload plants, thus if we were to double NG-sourced electricity over the next decade, it would actually end up with a tripling of NG consumption by the power sector. That means an overall doubling (approximately) of NG demand. There’s no way that you can double demand in a product and expect its price to remain the same.

The MIT researchers who found that shale gas has a substantial impact to renewable energy argued the same thing:

But [Henry Jacoby, co-director emeritus of MIT’s Joint Program on the Science and Policy of Global Change] warns, “Natural gas is a finite resource. We will eventually run into depletion and higher cost.” He adds, “It still releases greenhouse gas emissions. So if we’re going to get to a point where we strictly limit those emissions, we need renewables.”

In the meantime, however, gas prices are very low. And aside from the political freeze in Washington, this will be one of the biggest challenges for renewable energy in 2012.

However, it does say a lot that renewable energy technologies continue to nip at the heels of natural gas, even with a “revolution” underway in shale gas production.

This article was originally published on Climate Progress and was republished with permission.

Untitled Document

RELATED ARTICLES

Sunrise in Pakistan as the Country Delves into Solar PV

Robert Harker Pakistan has joined the list of countries that are exploring solar power as a means to bridge critical energy generat...

Global Renewable Energy Roundup: China, Kenya, Turkey, India Seeking More Renewables

Bloomberg News Editors China is being encouraged by three industry groups to double the nation’s solar-power goal for 2020 to make up for sh...

Why Smarter Grids Demand Smarter Communications Networks

Mark Madden

Historically, utility networks and communications networks have had little in common.

The Importance of “Switching Costs” to the US Residential Solar Industry

Paula Mints The DoE and numerous organizations and governments globally are focused on driving down the cost of solar convinced t...

PRESS RELEASES

Array Technologies’ DuraTrack HZ v3 Continues to (R)evolutionize at SPI

Array Technologies, Inc. (ATI) prepares to showcase its recently launched tracking syst...

Appalachian's Energy Center assists counties with landfill gas to energy projects

The Appalachian Energy Center at Appalachian State University recently completed a proj...

Redesigned HydroWorld.com Video Gallery

Hydropower news and information, and interesting promotional announcements are now avai...

30 days to GRC Annual Meeting & GEA Geothermal Energy Expo

The Geothermal Resources Council (GRC) has announced that it is only 30 days to go to t...

FEATURED BLOGS

The Coming Multi-trillion Dollar Energy Investment Drive

In coming years, a multi-trillion dollar low-emission energy investment drive will get underway. Three catalysts wil...

Appalachian's Energy Center assists counties with landfill gas to energy projects

Activity supported with Z. Smith Reynolds Foundation funding BOONE—The Appalachian Energy Center at Appalachia...

Discounted Room Rates for Geothermal Event end Friday

Discounted room rates for GRC Annual Meeting & GEA Geothermal Energy Expo end Friday Room rates for this prestigi...

3 Reasons To Follow-Up

It’s very important to begin nurturing your relationship with a customer immediately after the project you sold...

FINANCIAL NEWS

I am a reporter with ClimateProgress.org, a blog published by the Center for American Progress. I am former editor and producer for RenewableEnergyWorld.com, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep in to...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @jennrunyon

FEATURED PARTNERS



EVENTS

Doing Business in South Africa – in partnership with GWEC, the Glob...

Wind Energy in South Africa has been expanding dramatically, growing fro...

Intersolar North America 2016

Exhibition: July 12 - 14, 2016; Conference: July 11 - 13, 2016 Intersola...

Intersolar South America 2015

Exhibition and Conference: September 1-3, 2015 Intersolar South America ...

COMPANY BLOGS

Less Is More

When you’re giving a presentation, one of the easiest things to do...

Captivology

One of the biggest challenges we face as efficiency sales professionals ...

How To Optimize Your Meeting Schedule

Do you spend more time in meetings than you do actually working? While m...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS