Economics, politics, grid constraints, and a fair amount of luck have set in motion an awkward relationship between the natural gas and cleantech industries that could be characterized as “frenemies with benefits.” My colleagues Kerry-Ann Adamson and Mackinnon Lawrence have already shared their views on this complex dynamic, and their outlooks are relatively optimistic. But make no mistake, this could turn into a trainwreck in a moment’s notice.
Low-cost natural gas has been the energy story of 2011 and 2012. Indeed, low-cost shale gas procured using previously unconventional methods such as fracking has fundamentally changed the energy landscape for both renewables and competing fossil fuels. Today natural gas is trading at less than $2 MBTU, compared to a height of $14 in late 2005 – in the wake of Hurricane Katrina. Politicians are increasingly pushing for a “low-carbon” energy standard so that natural gas can be included with renewables. Natural gas companies and industry associations are claiming they can tap 100 years of natural gas at today’s low prices. Natural gas is contributing significantly to meager U.S. economic growth.
This is where things get awkward.
The U.S. wind (and to a lesser extent, solar) power industry is in a very tight spot because its production tax credits are set to expire at the end of this year. Wind can compete with natural gas at $4-$5 gas – but not $2. Wind industry advocates must increasingly accept the reality that, as wind represents a higher percentage of our energy mix, grid operators are increasingly facing pressure to “firm up” capacity that can swing from hundreds of megawatts down to zero in 15 minutes or less. Increasingly utilities, developers, and natural gas supporters are eager to point out that natural gas is well suited for this “ramping” role.
At the political level, the U.S. wind industry, already on the defensive with the looming expiration of the production tax credits at the end of this year, may be trying to show some support for natural gas as a quid pro quo to entice swing-state Congressional representatives to commit to a longer extension of the tax credits that are critical to the U.S. market. At the recent Future Energy Conference in Portland, Oregon, the director of sales for Vestas said that to date, wind and natural gas have been intentionally ignoring each other – but now he is getting phone calls from developers who want to respond to utility RFPs with a combination of both resources, which Vestas welcomes.
That could turn a competitive relationship into a cooperative one. For years, in the seemingly zero-sum political energy arena, wind and natural gas have been sworn enemies. When gas was at its price peak, wind had a field day; but with gas now its historic lows it appears the tables have turned. One complicating factor is that fracking poses extremely serious environmental risks – and the wind industry does not necessarily want to be seen actively promoting it – let alone be associated with the baggage that comes with it.
To complicate things more – few have dared to even question the figures that the natural gas industry proclaims. What if 100 year gas is more like 11? Bringing on huge amounts of gas will require major infrastructure and storage upgrades – how will that affect the final cost to ratepayers? What if natural gas faces growing NIMBY issues that delay drilling, reduce supply, and prices shoot up? The natural gas train has left the station, but how far it gets, and to what extent it positively or negatively impacts renewables, remains to be seen.
Article by Dexter Gauntlett, appearing courtesy the Matter Network.
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