Sunday, February 13, 2011

Bigger than Marcellus

The energy world got turned on its head and quickly by shale drilling. Innovation does that.  And now innovation has produced a commercial event bigger than shale natural gas drilling, bigger than Marcellus and the other shale plays.

In 2005 the first Marcellus Shale gas well was drilled in Pennsylvania, and the natural gas market was on an express train from shortage to glut, though most were not aware of the phenomenon until recently.  Shale gas development and huge new supplies have driven gas prices down from $13 in July 2008 to about $4 now.  Natural gas prices are lower today even after 6 quarters of economic growth than they were in 2009, while both oil and coal prices have increased sharply with global and US economic recovery. 

But the pace of change and innovation quickens.  We now have something bigger than Shale Drilling and Marcellus

It is the Biggest Energy Story of 2011 and perhaps for many years. 

Southern California Edison filed on January 31st with the California Public Utilities Commission approval to recover the costs of 20 solar projects that won its auction to provide 250 megawatts of power.  The solar PV projects are in two categories: up to 5 megawatts and 5 to 20 megawatts.  Competition in the auction was fierce, with projects amounting to ten times the 250 megawatts sought actually bid.

Now here is what is extraordinary.  Southern California Edison states that the prices for the 20 winning projects are all below the price of electrcity from a 500-MW combined cycle natural gas plant.

In California with a strong solar resource, solar pv is now at least cost competitive with natural gas. And what will next year bring? While natural gas is clearly at or near the bottom of its price range, solar power costs and prices continue to plummet. 

Unlike Vegas, what happens in California does not stay in California. 

1 comment:

  1. John, this blog is refreshing to see. I'm looking forward to following it.

    This is good news for the obvious but unstated reason that solar production has far less environmental impact that other forms of production. I'd like to see the comparison developed even further. I'm a big proponent of internalizing external costs, perticularly environmental impacts. The comparison of costs of various energy sources is even more dramatic when these impacts are considered. Years ago I was minutely involved with a book called "Environmental Costs of Electricity," an often-cited, comprehensive valuation of environmental degradation on a per killowat hour basis. Our world would be a better place, and our decisions much easier to make, if external costs were internalized.
    Paul M. Schmidt