Natural Gas in Texas: What’s the Big Deal?
Yet another thing that’s bigger in Texas: our dependence upon natural gas as a resource for generating electricity. It’s true—nearly half of the state’s electricity is derived from natural gas. In fact, along with coal, natural gas is one of the largest producers of electricity in the country. Why is it so prominent in Texas? The state of Texas is the largest producer of natural gas in the country. Texas has long-since had the means to produce it and the means to transport it, so it also makes sense it would be one of its biggest consumers. In addition, natural gas power plants are generally cleaner than coal power plants. They’re also easier to build and can launch into production more quickly.
How is natural gas used to generate electricity?
When you think of gas, you might think of burning or combustion. Converting natural gas to electricity begins the same way. To produce electricity, natural gas is burned to produce hot combustion gases that pass through a turbine (a type of engine that converts chemical energy into mechanical energy). When gas goes through this process, it spins the turbine blades, which rotates large magnets inserted inside metal coils, which causes the movement of electrons. This is what generates electricity.
What sets the price of natural gas?
The price of natural gas is set by supply and demand. Because natural gas is also used for heating, traditionally, demand is cyclical—people typically use more during the coldest months of winter and less in the warm months of summer.
But in Texas, since most of our electricity is generated from natural gas, natural gas prices can break that traditional cycle. We experience high demand for natural gas during the summer months, when demand for electricity is greatest. Those changes in the price of natural gas can change the rate you pay for electricity; creating higher rates and higher bills during summer months.
So how does natural gas relate to the price I pay for electricity?
It depends on what electric plan you choose. With an indexed rate electricity plan, the price you pay for electricity is often directly related to a natural gas index. At First Choice Power, we feel that indexed rate electricity plans are too volatile for residential consumers—the price can go up too high, too quickly—and we don’t recommend them.
With a variable rate electricity plan, your electric company can manage and moderate their rates to navigate through times of large changes in natural gas prices. So unlike indexed rate electricity plans that can change dramatically with changes to natural gas prices, changes in variable rate electricity plans can be less frequent. See variable rate electricity plans from First Choice Power.
With a fixed rate electricity plan, your contract locks in your electricity rate. That means that even if the price of natural gas (and thus, the market price of electricity) goes up, you’ll still be paying the same low rate. See fixed rate electricity plans from First Choice Power.