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Holden Power Plant – dual-fuel (natural gas/oil) peaking facility (Photo: Associated Electric Cooperative Inc.)

 

By PAUL WESSLAND

The mix of fuels that keeps your lights on is changing. In fact, the fuel mix has changed so much over the last 3 years that energy statisticians have revised the way they collect data to get more information on things like rooftop solar and how utilities are using batteries to manage the power grid.

The trends creating that new fuel blend will continue for the next several years, says a report released last April by a panel of electric co-op experts in the Business and Technology Strategies Department at the National Rural Electric Cooperative Association (NRECA).

The rise of renewable energy paired with less expensive and abundant natural gas have cut into coal’s dominance as the top fuel source for electric generation. The report by NRECA says the forces behind those trends are so strong they will continue even as President Trump has come into office with plans to reverse previous energy policies.

“The electric industry has changed dramatically in just the last few years,” says the report, titled “Electric Industry Generation, Capacity, and Markets Outlook.”

The report continues: “Although the new administration in Washington may provide relief from pending environmental regulations, the industry is still faced with future uncertainty as electricity market fundamentals are driving substantial changes in the energy outlook.”

Why does natural gas have an advantage?

The biggest shift shows up in the decline of coal as the main electricity fuel, with the retirement of dozens of coal-fired generating units every year for the past 5 years. In 2013, coal generated 39 percent of the nation’s electricity, with natural gas in second place at 28 percent. Preliminary figures for last year show that natural gas moved into the lead, generating 33 percent of the electricity in 2016, compared with coal’s 30 percent.

Coal’s electricity market share could rebound in the next year or two. However, new reports from the U.S. Energy Information Administration (EIA) forecast that natural gas will remain the largest source of generation through at least 2018, says one of the authors of the report, Lauren Khair, regional economic analyst at NRECA. But over the long term, she says, “You are going to see that natural gas is going to be the largest share of electricity generation on an annual basis.”

The team that wrote the NRECA report cites several reasons why natural gas is overtaking coal:

  • The shale gas revolution has dramatically increased the supply and lowered the price of natural gas.
  • Environmental regulations, specifically rules limiting emissions of mercury, have forced coal plants to either invest millions of dollars in pollution control or shut down.
  • Natural gas plants, which are smaller and quicker to build, are more flexible, meaning they’re capable of starting up and shutting down – and adjusting their output as power demand changes.

Wind and solar energy are strong contenders

Wind and solar supplied 3 percent of the electricity in 2008, then more than doubled that figure to 7 percent in 2015. Changing fuel trends like these have caused the government’s collector of energy data, the EIA, to ask utilities for more information. The number of large solar power installations owned by utilities is growing, as well as the number of homeowners with solar panels on the roof.

“They saw a hole in the data and changed their forms to capture more of this information,” says Khair. The EIA is adding questions to its survey that indicate another change too: how utilities are using batteries and additional storage devices to avoid some of the problems caused by power outages – and storing renewable energy for times when the sun isn’t shining or the wind isn’t blowing.

The NRECA report says solar and wind energy will continue to increase their share of electricity generation because of falling prices resulting from improved technology and mass production, as well as from tax incentives and other government programs supporting renewable energy.

Although renewable energy is growing fast, there’s still a lot less of it than other fuels, so it’s only beginning to make a difference in the share of electricity it generates. In 2013, non-hydroelectric renewables generated 6 percent of the nation’s power. By 2015, that number grew to 7 percent, and EIA says it reached 10 percent for the first time last March.

The original source of renewable electricity, hydroelectric dams that generate power from flowing water, has been more stable, producing 7 percent of the electricity in 2015. That could increase, says another of the NRECA report’s authors, because of recent heavy rain and snow in the western United States.

“Hydro is driven by rain and snow, and there was a very bad drought in California and the west for the last few years,” says Michael Leitman, strategic analyst at NRECA. “You have seen a real turnaround in the snowpack and the rain. So it’s likely that 2016 and 2017 will show up with much more hydroelectric output.”

The steadiest share in the electricity fuel mix has been nuclear power, which has generated about a fifth of electricity for decades.

Utilities value that kind of consistency, because consumers want electricity available all the time. While the popularity of renewable energy grows, wind and solar are referred to as “intermittent” power sources because they’re not always available.

Another of the report’s authors, Joe Goodenbery, senior economist at NRECA, stresses the value of using several fuels – coal, natural gas, nuclear, hydroelectric and renewables: “With the changing generation mix, we shouldn’t overlook the continued importance of fuel diversity to ensure reliability.”  

Paul Wesslund writes on cooperative issues for the National Rural Electric Cooperative Association, the Arlington, Va.-based service arm of the nation’s 900-plus consumer-owned, not-for-profit electric cooperatives.

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