This year marks a major turning point in energy in America. Wind and solar power beats natural gas “fracking” (hydraulic fracturing). With recent cost declines, they are the lowest cost new energy sources.
The cost advantage widens considering “apples to apples” financing, environmental impacts, price stability and energy security — and in 20 years, their fuel price will still be zero. Energy efficiencies from wind and solar, “the measure of how much energy you can capture, transform and deliver from the available fuel source,” continue to increase. Solar cells, which require no new transmission lines, are approaching 20 percent efficiency, close to the ability of a coal-fired plant to deliver electricity to your home electric meter. At some wind speeds, wind turbines operate well over 40 percent efficiency approaching the “Betz limit” of 59 percent.
Though efficiency does not matter much when the fuel does not pollute, increasing efficiency will continue pushing renewable energy prices down.
Natural gas, heretofore the cheapest and primary space and hot-water heating source in cooler North American climates, is sold on the retail market at a price that now can be matched with wind power. Varying with efficiencies, natural gas heating costs (not counting environmental costs) are between 4 and 5 cents per kilowatt hour (kWh) (gasoline is 12 to 14 cents per kWh). Recent wholesale bids for wind power with tall towers in moderate wind regimes are coming in under 5 cents per kWh due to technology advances — and on a windy night, a marginal cost of under 2 cents per kWh.
While justified tax incentives help wind and solar power, they also help natural gas. Recent competitive proposals for new electric generation in Minnesota showed commercial solar systems beating natural gas electric generation.
In spite of the massive advertising and the claims of large reserves of natural gas held in shale that can be released with “fracking,” the natural gas fracking industry is in a market pickle.
While conventionally drilled natural gas wells may be cost effective (but limited), with low wholesale prices it is questionable that fracking is cost-competitive — unless more valuable liquid fuels come along in the fracking. Combined with end-use efficiency improvements, marketing of low-cost “nega-watts”, and constrained natural gas storage, a glut in the market will keep natural gas prices low. With this, fracking for gas has a limited economic future.
For fracking to be financially viable, natural gas wholesale prices must go up. If natural gas prices go up, often with supply bottlenecks during cold times, the wind and solar power advantage increases further.
With higher natural gas prices, solar photovoltaic electricity, a peak power energy source, will then capture an increasing part of the daytime electric market, competing with and complementing natural gas peaking power plants (their one advantage) that can quickly vary their generation.
Concurrently, nighttime wind power can easily be put in hot water storage for use throughout the day, displacing natural gas — with or without the leverage of heat pumps, when on a cold windy night the marginal cost of wind power falls below 2 cents per kWh. Whole communities can be heated by wind power with existing off-peak electric distribution capacity, cheaper than natural gas.
Some argue that the integration and energy storage challenges with renewable energy limit the potential utilization of these intermittent fuels. But the integration and storage of renewables is no more challenging than all the other energy sources. Each day we integrate dozens of technologies into the electric grid with consumption and generation constantly changing hour by hour.
All energy sources and technologies require storage; whether it is the gas tank in your car, underground fuel-station tanks, natural gas caverns, huge coal and ash piles, radioactive waste storage, and large lakes of pumped water storage that subsidize and enable coal and atomic plants to run when not needed.
Now that wind and solar power beats fracking, the last utility board argument that “we don’t want to increase customer energy costs with renewable energy” is now a dead argument. Communities, politicians, utility managers and board leaders of municipal, investor-owned and electric cooperatives need to aggressively implement these most cost-effective renewable energy technologies. Citizens must demand this of our energy public servants.
Steven B. Smiley is an energy economist focusing on the practical analysis, development and implementation of energy efficiency and renewable energy technologies. He was born in Cleveland and currently lives in Traverse City, Michigan.