The path to resource adequacy and low-carbon generation in the Texas electric power market will likely require the co-development and integration of natural gas and renewable energy resources for years to come, economists at The Brattle Group find in a new report prepared for the Texas Clean Energy Coalition (TCEC).
The report analyzes the short- and long-term relationship between natural gas and renewable resources in the Electric Reliability Council of Texas (ERCOT) electricity market, which covers 85 percent of the state’s electric load.
The first of a two-part study, “Partnering Natural Gas and Renewables in ERCOT” explains how gas and renewables can be complements, depending on the time frame of analysis as well as a number of additional factors. These factors include items such as the long-run trajectory of gas prices, renewable technology costs, electricity market rules and complementary policies affecting all power generation technologies.
The paper explains that wind and solar power are inexpensive to dispatch because they have no fuel cost, ie. there is no charge for the sun to shine or the wind to blow. In comparison, natural gas-fired generation is more expensive to dispatch even at very low $4/MMBTU gas prices.
However, when utility planners must build new electric plants, renewables are not necessarily the lowest cost resource because of their higher up-front capital costs.
The report also cites a number of technical reasons why gas and renewables complement each other; primarily the ability of natural gas to smooth the intermittent output of wind resources. An overwhelming 96 percent of Texas’ renewable capacity comes from wind resources whose output is uncontrollable and not well-matched with the time pattern of ERCOT’s load. Natural gas resources are more flexible than nuclear and coal plants and can ramp up and down to complement wind output without incurring high costs, resulting in fewer spikes and dips caused by the mismatch between wind generation and demand.
Texas leads the nation in installed wind generation capacity and has the potential to further develop wind resources equal to twice the state’s total annual peak electric demand. Texas is also the leading U.S. producer of natural gas, providing 28 percent of all U.S. marketed natural gas production in 2011.
The second half of this two-part study, to be finalized later this year, will utilize Brattle’s integrated modeling system to examine the impacts of renewable policies under a variety of future scenarios.