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    Letters From The Earth

    Passing Gas, Keeping Score

    ...

    Passing Gas, Keeping Score
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    Calvin Frost05.25.18
    First, apologies for that photo in the April issue. Suffice it to say, I had no idea our editor would connect it to my comments on California’s Cap & Trade scheme, as well as my admiration for Governor Jerry Brown. Nor had I looked closely to the size of the surf board and how it made me look like a shrimp! This was not a photo gimmick. I stand at about 6 feet and that board was two feet taller. Try carrying it, much less getting into a wet suit. All in a day’s work, right?!

    Notwithstanding the ecological benefits of Cap & Trade, I believe it’s worth spending a few more minutes on the changing energy landscape. There is a shift occurring that will ultimately affect us all, and there is no better place to look than the State of Texas, which is really a microcosm of the rest of the US. This is where enormous economic and environmental pressures loom for traditional power generators. Regardless of Mr. Trump’s loyalty to coal and nuclear power, the energy business in Texas is a true barometer of changes in power generation for the rest of us.
    In Texas, we can see the growth of wind and natural gas for electricity generation forcing many companies to close older plants. Electricity prices have fallen to historic levels as demand for electricity remains stagnant. Meanwhile, less expensive generating facilities come to life. 

    These new operations have forced power companies to close old facilities in favor of the new, less expensive, more environmentally friendly sources. Vista Energy, for example, has or soon will close three coal-fired facilities. Exelon, the nation’s largest owner of nuclear power plants, placed its Texas subsidiary under bankruptcy protection in late 2017. The company said, “historically low power prices within Texas have created challenging market conditions.” 

    In Texas, the average wholesale power price was less than $25 per megawatt hour last year on the grid that coordinates electricity distribution, according to the operator, the Electric Reliability Council of Texas (ERCOT). Ten years ago, it was $55. PJM Interconnection LLC, the power grid that serves some or all of 13 states, including Pennsylvania and Ohio, reported that the price per megawatt hour traded at $29.33 last year, the lowest since 1999, so obviously a similar story to the situation in Texas.

    In Texas, natural gas derived from fracking has surpassed coal as the leading source of electricity. And, “mining” gas is cheaper than mining coal. This has caused the price of electricity to fall. This hasn’t been passed on to businesses and homeowners. However, the lower prices have allowed utilities to avoid raising rates to customers, as well as making substantial investments in moderating transmission networks and in renewables. 

    Another interesting aspect that has led to lower consumption is that Americans have purchased more energy efficient items for industry and homes. Appliances, for example. Drives and timing devices in our plants, too. Energy has become more competitive than ever. It’s survival of the fittest. If you don’t add modern, more efficient capacity, you will fail.

    “Generators are just fighting for existing market share,” says Ari Peskoe, a Senior Fellow in Electricity Law at Harvard Law School. “The aging fleet of coal and nuke generators, combined with low prices, makes this intense.” 

    First Energy Corporation, an Ohio-based utility, announced recently it would sell four natural gas plants, along with other coal and nuclear plants. NRG Energy, another power company, said that it would sell up to $4 billion in power generation. And all of these changes include a dramatic increase in renewables, both wind and solar.

    In fact, wind is the fastest growing source of power in Texas. In 2016, wind generated 15% of electricity in ERCOT. ERCOT operates the electric grid and manages the deregulated market for 75% of the state. Nuclear power, in contrast, only accounted for 12%. By 2019, ERCOT estimates that wind generated electricity will surpass coal generated electricity. That’s in one year!

    Solar and wind are now competitive with natural gas. While most experts believe gas will continue to dominate the electric markets, the growth will be in renewables. This is made abundantly clear in an analysis by investment bank Lazard. The report shows that on an unsubsidized basis and over the lifetime of a facility in North America, it costs about $60 to generate a megawatt hour of electricity using a “combined-cycle” natural-gas plant compared with $102 burning coal and nearly $150 using nuclear.” 

    By that same criteria, Lazard estimates electricity from utility-scale solar and wind facilities is now even cheaper than gas. A megawatt hour from utility-scale solar is about $49.50 and wind is at $45. Of course, there is one caveat we need to keep in mind: wind and solar are intermittent power producers versus conventional generation sources because the sun doesn’t always shine and the wind doesn’t always blow. 

    The jury isn’t out any longer as the facts speak for themselves. In Texas, coal and nuclear are out while gas and renewables are in. As we look at gas and renewables, keep one final thought in mind: gas is finite and everyone is all over the map regarding the inventory remaining. Is it seven years or 30 years? There are plenty of arguments here. Naturally, we don’t have the same situation with renewables.

    I have one more dirty secret to share. It comes from a review by James Temple in the MIT Technology Review. Temple reports that Ken Caldeira, a senior scientist at the Carnegie Institution, estimated 15 years ago that the “world would need to add about a nuclear power plant’s worth of clean energy capacity every day between 2000 and 2050 to avoid catastrophic change.”  That was 15 years ago. 

    He recently did a scorecard to see how we’re doing. Not too well! Instead of the roughly 1,100 megawatts of carbon-free energy per day needed to prevent temperatures from rising more than two degrees Celsius, as the 2003 Science report by Caldeira and his colleagues found, we are adding only 151 megawatts. At that rate, it will take 400 years, not three decades, to transform to clean energy. Caldeira says, “It’s clear we’re overhauling the energy system about an order of magnitude too slowly, underscoring a point that few truly appreciate:  It’s not that we aren’t building clean energy fast enough to address the challenge of climate change. It’s that – even after decades of warnings, policy debates and clean-energy campaigns – the world has barely even begun to confront the problem.”

    While Texas is only a microcosm for our changing energy landscape here in America, the global situation is entirely different. We have a global energy crisis without a doubt, and the complexity and size is overwhelming. Temple’s report continues:

    For starters, global energy consumption is likely to soar by around 30% in the next few decades as developing economies expand. (China alone needs to add the equivalent of the entire US power sector by 2040, according to the International Energy Agency.) To cut emissions fast enough and keep up with growth, the world will need to develop 10 to 30 terawatts of clean-energy by 2050. On the high end, that would mean constructing the equivalent of around 30,000 nuclear power plants – or producing and installing 120 billion 250-watt solar panels.

    And Caldeira’s scorecard looks like this:

    Just to add fuel to the fire, keep in mind that some, not all to be sure, waste-to-energy operations are defined as renewable. Convergen Energy of Green Bay, for example, makes an engineered fuel from matrix that is sent to its commercial boiler for consumption. The energy that is generated and sold to the grid is defined as renewable. Voila, you have the perfect solution for our waste and at the same time can make a contribution to the Caldeira Scorecard.

    Another Letter from the Earth.


    Calvin Frost is chairman of Channeled Resources Group, headquartered in Chicago, the parent company of Maratech International and GMC Coating. His email address is
    cfrost@channeledresources.com.
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