electric utility fuel sources and prices
TRANSCRIPT
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About ElectricityMatch
About Charlie HewittCharlie Hewitt has 25 years of in-depth energy experience having served in executive and managerial roles at some of the largest retail energy providers in North America. His expertise covers a wide range of retail energy disciplines including pricing, contracting, risk management, and credit. He holds an MBA from UT Arlington, MA and BS degrees in geology from UT Austin, and was a TXU environmental research fellow.
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Electric power generation sources are receiving more attention now than in the past. The call to reduce carbon emissions has resulted in a debate on how to meet growing energy demand while keeping electricity costs at reasonable levels.
Topics being debated on the national stage include:
• Shale gas production from hydraulic fracturing• Standards to increase renewable energy installed capacity• EPA proposals that would require a significant reduction in coal-fired
electricity generation
When considering these issues, it is important to separate emotion from fact. This presentation will provide a brief overview of how our electricity is generated, price trends for fossil fuels used in electric generation, and price trends in retail electric prices
Introduction
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The following slide shows electric utility net generation in terawatt-hours for the time period 2001 thru 2013.
Key points illustrated on the graph include:
• Electricity production from coal has trended downward due to plant retirements and the increase in natural gas-fired generation.
• Natural gas-fired electricity generation has surged due to its preferable emissions byproducts levels and the increase in fuel supply from shale gas production.
• Conventional hydroelectric generation has remained steady as new projects are difficult to permit due to environmental concerns.
• Nuclear power generation has declined slightly through unit retirement.• Electricity from renewable energy generation sources, while growing at
an ever-increasing rate, is still a small component of our national generation mix.
Fuel Sources
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U.S. ELECTRIC UTILITY NET GENERATIONBY FUEL SOURCE
2000 2002 2004 2006 2008 2010 2012 20140
200
400
600
800
1000
1200
1400
1600
1800
COAL NATURAL GAS NUCLEARCONVENTIONAL HYDRO OTHER RENEWABLES
TWH
Source: U.S. Energy Information Administration
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The following slide shows the delivered cost to electric utilities for coal and natural gas from 2008 thru 2014.
The key point here is that the cost of coal has been extremely flat and stable during this time period. This has occurred despite a general downward trend in productivity (short tons/labor hour) during that time period. While the U.S. coal industry is far from thriving, it has excelled in delivering its product at a consistent price.
Natural gas, while seen as a cleaner fossil fuel alternative to coal, is subject to significant price volatility. The extreme cold experienced in early 2014 in the northeastern U.S. demonstrates that natural gas prices can be highly volatile due to transportation and short-term supply challenges.
Coal and Natural Gas Price Trends
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Source: U.S. Energy Information Administration
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14$0
$2
$4
$6
$8
$10
$12
NATURAL GAS COAL
DEL
IVER
ED C
OST
PER
/MM
BTU
U.S. AVERAGE DELIVERED FUEL COSTFOR ELECTRIC UTILITIES
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The following slide shows the average retail electric price by sector for 2001 thru 2013.
The overall trend is that prices are steadily increasing. There is a muted spike in late 2005 associated with hurricanes Katrina and Rita that impacted production and transportation hubs. A more pronounced increase occurred in the late 2007 and early 2008 as natural gas prices spiked.
Most marginal generation is natural gas fired which results in a high correlation between retail electricity prices and natural gas prices.
Retail Electricity Price Trends
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Source: U.S. Energy Information Administration
2000 2002 2004 2006 2008 2010 2012 20140
2
4
6
8
10
12
14
RESIDENTIAL COMMERCIAL INDUSTRIAL TRANSPORTATION
CEN
TS/K
WH
AVERAGE RETAIL PRICE OF ELECTRICITYBY SECTOR
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Coal-fired generation still accounts for about half of all U.S. electricity generation. Renewable energy generation remains a growing but very small component of overall electricity generation. Hydroelectric and nuclear generation are relatively stable contributors to the generation mix but new capacity in these categories is not being contemplated.
Before shuttering the coal-fired generation fleet, it is important to consider what other electricity generation sources could reasonably take its place without significantly changing energy rates. Also, we must consider what timeline would be reasonable to accomplish even a partial phasing-out of coal-fired generation.
Increasing electric price volatility by greater reliance on natural gas generation is likely. Expecting renewable energy generation to pick up coal’s market share is unrealistic unless the time horizon for this concept is extended several decades.
Conclusion