Texas has been blessed with abundant sources of energy. Crude oil and natural gas have made Texas a powerhouse for about 100 years. Coal has been prevalent, too. Now, solar and wind are bringing new sources of power to the Lone Star State’s electric grid.
The competition between these energy sources provides consumers with a reliable source of electricity to power our homes and businesses.
In the marketplace, there are always winners and losers. The market for sources of energy to generate electricity in Texas has evolved so that the demand for natural gas and wind is rising and the demand for coal is declining.
Last week, the utility firm Luminant announced that it will close two power plants, Sandow and Big Brown, in 2018, which provide enough electricity for 2.1 million homes. Sandow and Big Brown use coal.
“Sustained low wholesale power prices, an oversupplied renewable generation market, and low natural gas prices” led to the demise of the coal-fired power facilities, according to Luminant.
Wholesale prices for electricity have declined from $49 per MW in 2014 to $25 today.
The Electric Reliability Council of Texas (ERCOT), the primary electric grid agency for Texas, anticipates an increase in electric demand in 2018, and meeting those demands will be a challenge.
“ERCOT will study whether these specific units are needed for transmission system reliability in their respective areas of the grid and will make those determinations by December,” according to a statement. It forecasts a record-breaking winter with demand reaching 61,000 megawatts (MW). However, ERCOT believes that total generation capacity during peak demand will be 86,000 MW.
Natural gas and wind will fill the gap left by the closure of coal-fired generation plants.
The dramatic increase in natural gas produced from Texas shale formations has created a cheap source of energy right in our backyard.
Anyone who has lived in Texas for a day or two knows that the wind blows hard nearly 24-hours a day, 365 days a year. ERCOT puts wind capacity at around 21,000 MW this year, increasing to 24,000 in 2018. Meanwhile, coal will generate about 20,000 MW in 2017 and decline further next year.
Natural gas is the largest source, accounting for 34,000 MW generated.
Even though demand for electricity in Texas is expected to grow next year, national predictions are flat.
Secretary of Energy Rick Perry, former governor of Texas, proposed a change in federal regulations designed to keep coal and nuclear plants in operation even if they cannot compete economically. He reasoned that coal and nuclear are more reliable because both can have large supplies available for immediate usage.
Many believe that Perry’s proposal will not have a direct impact on Texas electricity generation, but it most certainly could impact future demand for natural gas nationally
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
Subscribe to OILMAN Today, our industry newsletter covering oil and gas business news, events, information and trends shaping the market, delivered to your inbox.