How Natural Gas Keeps Electricity Cheap and Plentiful in Pennsylvania

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How Natural Gas Keeps Electricity Cheap and Plentiful in Pennsylvania

A recent article at the Energy Information Administration’s “Today In Energy” site reveals an important but seldom appreciated fact about natural gas: that an electricity generating facility using it can achieve capacity factors of over 70%, which is ordinarily more than twice that of solar and wind.


Additionally, gas-fueled power plants can dispatch electricity whenever needed, and the efficiency of the equipment is getting better every day. Gas is king when it comes to electricity generation and for a good reason. And, outside Texas, Pennsylvania is king in producing the stuff, giving tremendous comparative economic advantages to the Commonwealth in relation to other Northeast states.


The following EIA chart illustrates the increased capacity factors with respect to electricity generation as higher technology takes over.

 

This increase in capacity factors, of course, is the wonderful little secret of natural-gas technology — that it is improving at a rapid pace, easily matching or exceeding the media-extolled gains in renewables efficiency. This means there is no foreseeable point at which the capacity factors of solar or wind will ever equal that of natural gas, and capacity factors are the only thing that counts when it comes to ensuring energy security.

Here are the key points from the “Today in Energy” article by Scott Jell, points which serve to explain a good deal of the reason capacity factors matter:

The rapid development of shale gas resources in Pennsylvania, Ohio, and West Virginia has contributed to sustained low natural gas prices and encouraged the construction of natural gas-fired power plants. About one-third of the new natural gas-fired generating capacity built in the United States since 2010 is located in PJM Interconnection (PJM), the grid operator for all or parts of 13 states in the mid-Atlantic region, including Pennsylvania, Ohio, and West Virginia. In 2020, the utilization rate, called capacity factor, of natural gas-fired combined-cycle (NGCC) units built from 2010 to 2020 in PJM was 71%, which was higher than that of older units in the region.

Two factors affect the utilization of a combined-cycle natural gas generator: the efficiency of the generator and the delivered cost of natural gas. Newer NGCC generators use more efficient turbine technology and are generally larger than older units. Although all NGCC generators tend to increase or decrease utilization in response to changes in the price of natural gas, older units tend not to be used when natural gas prices rise because they are less efficient and more expensive to run than newer technology units…

Grid operators, such as PJM, dispatch generators sequentially from lowest to highest cost. Because NGCC units built from 2010 to 2020 generally have the lowest operating costs, they are dispatched more frequently. Because of their lower efficiency, units built from 1990 to 1999 have higher operating costs and are more likely to be the marginal generators in the dispatch order, meaning they are the last combined-cycle generators to be dispatched.


This information is why the PJM Interconnection is so concerned about going too green as Tom Wolf, Pennsylvania’s trust-funder governor, wants to do to impress his prep school friends and other elitist brethren. It’s all about virtue signaling with him, but Pennsylvanians need cheap, plentiful energy, and clean natural gas has provided it in a way wind and solar never can.


We need to concentrate on that 71% capacity factor and the recent experience in Texas (the only state to produce more natural gas than Pennsylvania) to understand the advantage natural gas has over solar and wind, which typically operate within the range of 25% to 40%. It’s a lot easier to ensure energy security with a mix of generators producing 71% of the time than a collection of renewable energy facilities only generating a quarter or third of the time.


The problem in the latter instance, of course, is the amount of juggling that is demanded. Theoretically, wind that often blows harder at night should be able to help offset the solar energy that dies with the setting of the sun. But, there is no predictability as to how hard the wind will blow or how much the sun will shine. Natural gas, by contrast, is much more available and highly predictable. It can usually be dispatched at will, which is the whole point.


The Texas issue did involve issues with natural gas equipment freezing; that was a function of engineers not designing systems for the perfect cold spell. We know natural-gas systems can be designed for much uglier winter periods than the one Texas experienced. They just weren’t.


That failure only exacerbated a root problem, the one the PJM Interconnection is concerned about in the Keystone State. It was quite simply an over-reliance, in response to demands for political correctness (the stick) and corollary carrots in the form of subsidies, on renewable energy systems. There were way too many 25% balls in the air for anyone to juggle when the 70% backup generators just weren’t available.


The Texas debacle, in other words, teaches us exactly what happens when one more or less removes natural gas as the baseline or backup source of fuel for generating electricity. It was a terrible test run for renewables by any measure. Throw too many light balls into the air at one time, and it’s an unmanageable juggling act. When natural gas is available and can be dispatched as necessary to supply basic needs, the juggling act is just for fun again, and it all works.


We know this is the case because, once Texas was able to address the freezing problem with natural-gas-distribution systems, natural gas quickly became the predominant source of energy for generating electricity as wind energy fell to almost zero. Indeed, between February 8 and 16, wind generation fell by 93%. Coal increased by 47%, and natural gas grew by 450%.

Moreover, the Clear Energy Alliance also notes, “Wind subsidies have made older baseload power generators unprofitable. Texas has shut down more than 3,000-megawatt-hours of power from coal and natural gas over the past few years while adding 20,000-megawatts of unreliable wind. This has made the grid far less reliable.”


This vividly illustrates the problem with any mix of generators that is too heavily tilted away from cheap and plentiful natural gas. Renewables directly undermine energy reliability and security because of their physical nature and lack of dispatchability while also indirectly weakening the entire system financially. They simultaneously demand subsidies and draw revenue away from natural gas systems that are the only cost-efficient mechanism to ensure that energy security.


As the PJM Interconnection explained in a paper entitled “Reliability in PJM: Today and Tomorrow” and published March 11, 2021:


Historically, adequate system capacity has resulted in adequate energy, as most traditional generation is capable of running 24 hours a day. As the level of renewables and storage rises, however, ensuring adequate energy across all hours of the day will be an increasingly important consideration because the available output of those resources can vary significantly throughout the day.

We rely on excess renewables at our peril. We need natural gas, first and foremost.

 

About the author: Tom Shepstone is the owner of Shepstone Management Company Inc., a planning and research consulting firm located in northeastern Pennsylvania. He has advised many counties in both New York state and Pennsylvania, as well as other states, on economic development strategies, especially as they relate to rural and agricultural areas. He is also the publisher of NaturalGasNOW.org, a blog focused on the same objective.

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