Monday, January 28, 2013

Proving Shale Gas Is Not Killing Renewables, 2012 Saw Lowest Gas Prices In Decade But Record Wind & Solar Construction

Three extraordinary facts in 2012--lowest gas prices in a decade, record solar construction, and record wind installation--should end the oft-repeated, mistaken claim that shale gas is killing renewables.

As a result of massive shale gas production, 2012 saw the US natural gas price fall to below $2 for a brief period in April and natural gas for the year averaged $2.73, according to the Energy Information Administration.  The 2012 gas price collapse followed years of steadily declining gas prices since 2008 when the national shale boom started flooding the gas market with massive new amounts of supply.

Yet, while gas prices have been falling as a result of shale gas, America has had a wind and solar boom that has coincided with the shale gas boom.  Since 2008, the US has increased its solar capacity from 500 megawatts to about 7,000 megawatts or a 14-fold increase.  And when gas prices reached their lowest levels in 2012, the solar industry had its best year ever, building an astonishing 3,000 megawatts last year.

If shale gas is not killing solar, how about wind?

Since 2008 and the start of the shale gas boom, US wind capacity has skyrocketed from 25,000 to 60,000 megawatts.  Last year, when gas prices were at their lowest in more than a decade, the US wind industry, like solar, had its best year ever, building a record 13,200 megawatts of new capacity.

Do the facts that 2012 had low, low gas prices and new record amounts of solar and wind capacity mean that low gas prices help build wind and solar?  Of course not.

But the facts that wind and solar had record construction years in 2012, while gas averaged $2.73 for a thousand cubic feet, mean that wind and solar can prosper even when gas prices are low, low, low.  Wind and solar have sharply falling costs that are essential to their future as well as enjoy significant policy support at the federal and state levels.

Wind and solar are strong enough that they can prosper even when gas is below $3, as it was in 2012.
With gas prices now rising, the future of both is bright indeed!


  1. John,

    This post is a bit misleading on the wind front. We all know 2012 was a huge year for wind because all the 2013-2014 builds were pulled forward for installation before the expiration of the PTC. Yes, it was a great year, but it was only because government aid for the industry created mass volatility. Now, many manufacturers for the wind industry remain closed or are projecting significantly reduced sales. That does not exactly sound like a very strong industry.

    It seems by comparing the two, you are comparing apples and oranges. Gas production is being fueled by natural market forces, while wind is specifically driven by government intervention (Yes, RPS will facilitate some wind growth, but nothing compared to the 2012 total builds we saw). In theory if Washington DC wanted to spend billions of dollars on anything, we would see large build numbers for that industry, but that is very different than being deemed competitive. I work with manufacturers in the wind industry, and every presentation I have seen has cited cheap gas and the expiration of PTC as huge threats. Soon we will have both on our hands....

    I dont know enough about solar to question that claim, so I will give you the benefit of the doubt.

    1. In your prior post you state "The reduction in wind power costs means that wind power is competitive with natural gas when gas prices are about $5 per thousand cubic feet". So yes, maybe internationally wind is competitive, but here in the US, we certainly are far from $5 per thousand cubic feet.

      So it seems you are making two claims here...first, that wind isnt competitive unless gas is at $5, while at the same time stating that wind is competitive right despite gas at $3 per thousand cubic feet.

    2. The prior post is pointing out that wind had a great year even when gas was at $2.73. The post pointed out that wind enjoys large public support that has gives it state and federal policy support. The PTC is one example of that support. The PTC means that lots of wind gets built even when gas is sub $3. The $5 number refers to what price gas would need to be at for wind to prosper if there were NO policy supports for wind. Wind also has total fuel price certainty and that advantage is not reflected in the $5 estimate.

  2. Wind and solar grow with subsidies and mandates.
    Cut subsidies and mandates and there will be no wind and no solar.

    The gas price is irrelevant, wind and solar never developed on a competitive basis, and will drop dead the moment subsidies and mandates stop.

    You are fooling yourself, and misleading your readers.

    1. To say the gas price is irrelevant is just wrong. The gas price is a key variable in setting the wholesale generation price in many markets. When gas is at $5 the wholesale spot price is about 5 to 6 cents per kwh. Declining wind costs put the levelized cost of wind in that zone. Distributed solar competes against the full bundled electric rate. Nationally that averages more than 11 cents for residential. In NY the rate is 17 cents. It is higher than that in some states. Solar competes well against those rates already. And the price keeps falling.

  3. Wind does not enjoy large public support - it enjoys support by politicians who want subsidy money rolling into their state, so they grease the back of the big corporations with subsidies, while the lobbyists grease the backs of the politicians.

    It is always dangerous to predict what will happen in 2013, but we will most likely see a huge dip in wind development because the PTC was in limbo for so long.

    Read the industry reports and they say wind just can't compete with natural gas prices. Neither can coal, for that matter.

    Wind may have total fuel price certainty, but it is a dead industry without massive subsidies like the PTC.

    1. Wind consistently enjoys 70% or higher public approval. Only solar does better. Lots of people like wind because it is zero air pollution, requires no water to be withdrawn, has no polluted water to dispose of, creates no solid waste. It is not perfect but it has lots of advantages. Wind is also now the second or third cheapest way to make electricity--behind gas and possibly new hydro. And if gas gets to around $5, then wind will be as cheap as gas. And that's before another round of innovation drives down costs and increases output from wind machines. Wind just gets cheaper.

  4. I read about utilities rejecting wind because it is too expensive. Ontario buys wind power at 11 cents per kWh, while natural gas is 7-8 cents per kWh. Studies in Great Britain of 3,000 wind turbines show they only last about half of their expected lifespan of 25 years.

    Wind can not survive without subsidies, so it doesn't make sense to say that wind is cheap.

    1. Laura, it all depends what areas you are installing wind. Wind in Texas is going to be more profitable than say, wind in Georgia. It is true that that government subsidies have propped up wind farms in less than sustainable places, but to write it off totally is probably not accurate.