Natural Gas & Renewable Energy, Friend or Foe?

According to a recent report that analyzes the short and long-term relationship between natural gas and renewable resources, the path to resource adequacy and low-carbon generation in the Texas electric power market will need the co-development and integration of both natural gas and renewable energy resources. The report focused on the Electric Reliability Council of Texas (ERCOT) electricity market and was conducts by economists with The Brattle Groupa nd prepared by the Texas Clean Energy Coalition (TCEC).

Natural-Gas-Rig Photo Joseph Bourk“Low-priced natural gas and clean renewable resources are complementary, not competing, resources to displace other fuels over the long term. Coordinated development of both will lead to a win-win for Texas and the environment,” said former state Sen. Kip Averitt and TCEC chairman. The report was sponsored by the Cynthia and George Mitchell Foundation. Mitchell, a pioneer in the Texas oil and gas industry, laid the groundwork for the shale gas revolution that is taking place across the U.S.

The first of a two-part study, “Partnering Natural Gas and Renewables in ERCOT” explains how gas and renewables can be complements, depending on the time frame of analysis as well as a number of additional factors. These factors include items such as the long-run trajectory of gas prices, renewable technology costs, electricity market rules and complementary policies affecting all power generation technologies.

The study explains that wind and solar power are inexpensive to dispatch because they have no fuel cost, and there is no charge for the sun to shine or the wind to blow. In comparison, natural gas-fired generation is more expensive to dispatch even at very low $4/MMBTU gas prices. However, when utility planners must build new electric plants, renewables are not necessarily the lowest cost resource because of their higher up-front capital costs.

tcec-logo“As a consequence, once wind and solar power is built, renewable resources are always cheaper to dispatch, and will be chosen to sell all their power whenever the wind blows or the sun shines regardless of the current price of gas,” Averitt said.

Brattle principal Dr. Peter Fox-Penner, a co-author of the study, also noted that cheap natural gas might also help renewable energy in a forward-looking sense because blending lower-cost gas generation with the higher costs of new renewables lowers the total rate impact on consumers.

The report also cites a number of technical reasons why gas and renewables complement each other; primarily the ability of natural gas to smooth the intermittent output of wind resources. The second half of this two-part study, to be finalized later this year, will utilize Brattle’s integrated modeling system to examine the impacts of renewable policies under a variety of future scenarios.

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