Most Texans already know that the state’s fortunes were and are fueled by oil and natural gas. What many don’t realize, however, is just how much the future of the Lone Star State will be powered by renewable energy. With the Green Energy in Texas series, we will explore various aspects of the green energy industry and keep you informed on how those changes and innovations might affect your Texas electricity bill.
Is Renewable Energy in Texas Burying Coal?
Market numbers from this past June emphasized what most energy analysts already knew: coal is in grave trouble.
Global prices for the once mighty black diamond retreated as consumption has dropped to lows not seen since 2004. BP’s June 2017 Statistical Review of World Energy showed US coal consumption fell in 2016 and so did China, which used nearly half the world’s supply of coal last year. US coal production fell by 19% to the lowest level of coal production since 1978. In the UK, production and consumption fell back to levels of the mid-1700s. One statistic particularly stood out — renewables accounted for nearly one-third of the increase in primary energy use last year.
For decades, Texas has enjoyed a harmonious relationship with coal as the fuel that kept electric rates low. While 40% of the coal now burned comes from the state’s own lignite mines, the rest is shipped by train from the strip mines of the Powder River Basin in Wyoming. In 2010, Texas purchased 62 million tons of coal from the Powder River Basin. By 2015, that amount fell by 14% to 55 million tons. By the same token, natural gas production in the US from fracking has created a glut. Prices for natural gas fell to where they competed for historically cheap coal. Because natural gas burns more cleanly than coal, there was greater incentive to build more natural gas power plants and retire old coal-fired plants. In 2016, natural gas provided 34% of total electricity generation, surpassing coal to become the leading generation source.
Yet, while it looks like natural gas probably administered the lethal beating to King Coal, it looks like renewables will be the one doing the actual burying. As coal-fired plants are retired, solar and wind are taking their places on the grid, especially in Texas. In fact, for the past ten years, ERCOT has seen more new wind farms come on-line than natural gas plants. Since wind and solar have the least volatile price because they use no fuel, they usually have the lowest price and so are dispatched before natural gas or coal or nuclear plants.
If power plants like coal or nuclear don’t sell their electricity, they don’t make money. That’s even more reason for their owners to close these plants rather than update or modernize them. While the current administration is examining some sort of subsidy to be forced onto consumers by regulators, some critics are pointing out that keeping a 19th century energy technology on life support in the 21 Century is a costly proposition.
The Coming Year
EIA expects natural gas prices to rise modestly through 2018. Consequently, some generators will use coal this coming year, but the increase in production is expected to be 8%. Coal expansion, meanwhile, has been disappointing. Of the two clean coal projects in the US, only the Petra Nova Plant in Texas is operating, capturing CO2 and sending it via pipeline to the West Ranch oil field where it is used to boost oil production. The Southern Company suspended operation at the Kemper coal gasification plant in Mississippi after the Mississippi Public Service Commission quashed Mississippi Power Co.’s plan to pass the costs for the $7.5 billion plant onto its customers. The Mississippi PSC ordered Kemper to only use natural gas to operate plant – and not add to ratepayers’ burden. Already more than 7 years, the plant is not yet finished, reportedly having been dogged by engineering problems.
Meanwhile, generation from renewables is expected to grow by 11% in 2017 and then remain relatively unchanged in 2018. Growth in this sector is forecast to grow by 10% in 2017 and by 6% in 2018. Much of that growth will be in Texas. Growth might accelerate as more electricity storage projects launch. A proposed 317 MW compressed air energy storage near Palestine by Apex-CAES will use off-peak wind turbine electricity to pump compressed air into a stable salt dome once used for natural gas storage. It would release the air to spin up generators during peak demand hours or use its capacity to provide valuable ancillary services to maintain grid frequency.