You heard that right.
Texas.
Nearly half the electricity generated in Texas comes from natural-gas fired power plants, the state’s single biggest source of power. But don’t expect natural gas to continue that dominance.
In today’s electricity market in Texas, it doesn’t make much sense anymore for power generators to build natural gas plants. Plans to build them are getting put on hold or outright canceled because they’re expensive to operate compared to sources such as wind and solar energy.
Power prices repeatedly skyrocketed last summer to the state’s maximum price of $9,000 per megawatt hour during a heat wave in August when capacity was tight. But the price spikes, which last year boosted the bottom lines of power generators positioned to take advantage of peak prices, are never a sure thing. So far this summer, wholesale prices remained moderate.
Over the next five to 10 years, wholesale electricity prices in Texas are expected to hover about $26 per megawatt hour, or about 2.6 cents per kilowatt hour, according to an estimate by the energy research firm S&P Global Platts.
At that price, electricity would roughly cost about 6.5 cents per kilowatt hour when transmission and distribution charges are added, or about 2 cents per kilowatt hour less than the cheapest 12-month plans on the state’s shopping site Power to Choose.
“It’s hard to justify any gas plants,” said Manan Ahuja, manager of North America power analytics for S&P Global Platts. Generators also don’t have to look very far to see how newer gas plants are faring.
Panda Power of Dallas spent $2.2 billion to build three power plants in Texas after the state grid manager said in 2011 and 2012 that Texas desperately needed more generation to meet growing electricity demand. But those projections turned out to be wrong.
Panda ended up putting one of the plants into bankruptcy because the company couldn’t sell electricity at prices high enough to cover its debts.
A 484-megawatt gas-fired plant planned by Chicago-based power developer Halyard Energy Ventures for Wharton County near Houston is now on the list of inactive plants published by the state grid manager, the Electric Reliability Council of Texas, according to ERCOT records. Another plant, the 743-megawatt FGE Texas 1 gas plant that was to be built by FTG Power of The Woodlands and planned for Mitchell County in West Texas, was canceled last year, according to ERCOT records.
Neither company could be reached for comment.
Today, a combined cycle natural gas plant costs about $1,000 per kilowatt of capacity to build, or about $250 million for a relatively small 250-megawatt plant. It has to run at least 50 percent capacity to make it economical. Already, some gas-fired plants run only between March and October, mothballed during the rest of the year when wholesale prices fall.
Then there’s the cost of fuel. Generators of wind and solar farms don’t pay for wind and sun, lowering operational costs to a fraction of what it costs to run a gas plant. Consequently, many new wind and solar plants are in the pipeline in Texas. Hardly any natural gas projects are.
By 2025, wind will generate about 25 percent of the state’s energy needs, up from 20 percent last year, according to S&P Global’s estimates. And solar will produce as much as 5 percent in 2025, up from 1 percent last year.
Put it all together and nearly one-third of Texas power will be coming from wind and solar in five years. Maybe then it will be time to change the state’s ethos from oil and gas to wind and solar.
I do like to point out that a lot of oil is refined in the Greater Houston area (like Sugar Land), and those refineries are probably powered by the W.A. Parish coal/lignite plant (>2,700 MW).
This is my response to people using the old “EVs are powered by coal” talking points.
Two quotes from above:
1.) “Nearly half the electricity generated in Texas comes from natural-gas fired power plants, …”
2.) “… nearly one-third of Texas power will be coming from wind and solar in five years. “
In what sense is wind and sun killing gas in Texas?
The reality is wind and solar need backup, … and newfangled batteries are not it, as California is finding out. Wind and solar advocacy is all delusional, echo chamber, cult like happy talk. They never come near the hard realities of chemistry, economics and physics that say, Alex Epstein and Mark Mills do:
Why do people like you always pretend to be pointing out something nobody ever thought of when you mention that wind and solar are intermittent?
The new fangled batteries are a very cost efficient solution to variable power demands, ranging from milliseconds to sometimes hours. They are convincing to the utilities.
Power plants are also intermittent, requiring maintenance, sometimes showing sudden problems, all of which require balancing with other resources. Wind and solar are largely complementary (day/night), and variations in the power they generate are rarely global in scale. Yes, there is a lot of intermittency (in generation and in demand) that needs to be managed, but that is always the case … there are shifts in the nature of the problem, but everyone is aware of where the challenges lie.
Batteries are in no sense cost effective solutions to variable power demands.
Wind and solar are not complimentary. Solar is cyclical with a low capacity factor. Wind is erratic with a somewhat higher capacity factor.
Everyone might be aware of where the challenges lie, but they aren’t facing it.