Ohio Renewable Electricity Costs

Ohio residents can obtain electricity plans that include renewable energy. For example, everyone can choose a plan with 100 percent wind for three dollars per month, or less, anywhere in the state. Prices were taken from the PUCO Apples to Apples comparison on 19 August 2013.

Ohio law specifies that utilities must provide 12.5 percent renewable energy in twelve years time. There is also a limit of cost of three dollars per month. The apples-to-Apples data show that this limitation should not be a problem.

The tabulated data are available from alanpeg@alum.mit.edu.

Electricity From Natural Gas

During the last fifteen years a marked upsurge in electricity generation using natural gas has begun to threaten coal‘s traditional dominance (1). Since current prices of coal and natural gas are competitive (2), and the nation has excess electric capacity for all but the hottest summer days, utilities can choose which power plant to use, one powered by coal or one powered by natural gas.

Natural gas plants are more efficient than coal plants (3), so they produce less pollution (4). Thus, greater use of natural gas may be an environmental benefit, particularly because electric power plants are the largest source of energy wastage and greenhouse gasses in the nation (5). Unfortunately, coal’s cost to the utilities does not include pollution costs, which are large (6,7). While the pollution costs of natural gas electricity-generating plants are tiny, the pollution costs associated with natural gas production (commonly called fracking) are unknown (8), and they may also be large. It is important to note that economic analyses of electricity production do not account for pollution costs.

About two-thirds of our electricity is now produced by fossil fuels that generate greenhouse gasses; the remainder is generated by methods that do not produce greenhouse gasses – nuclear reactors [19 percent] and renewable sources [12 percent] (9). Since high costs will likely limit the increase of nuclear energy in the next few years (10,11), the burden of reducing fossil fuels appears to fall on renewables. However, even if electricity generated using renewables were to double by 2020, as in the President’s plan (12), fossil fuels would still provide about half of our electricity. But, according to several recent studies, renewables are unlikely to double in the foreseeable future (13).

Use of fossil fuels can be cut by conservation. There are two ways of conserving: having utility customers use less electricity or operating power plants more efficiently. Ohio law originally only encouraged customer restraint (e.g., energy-efficient appliances and lighting). Senate Bill 315, passed last year, provides encouragement to utilities by giving credit for waste-heat recovery and for combined heat and power modifications to their generating plants. This approach is more realistic; asking utility customers to use less electricity is like asking citizens to drive fewer miles.

The Federal Government has imposed mileage goals in motor vehicles, in order to restrict the use of gasoline. A less prescriptive approach is more appropriate at the state level for electricity generation. Utilities should be more required or encouraged to operate their generating plants more efficiently. There appears to belittle incentive currently for them to do this(14).

It is clear that coal and natural gas will provide substantial amounts of electricity for many years. Because fossil-fuel prices are volatile, it is difficult to predict whether coal or natural gas will be less expensive in the long run. However, old coal plants are being retired (15) and new natural gas plants are being built (16). Increasingly, power plant capacity will shift from coal to natural gas. And this means that it is imperative that natural gas production, ‘fracking’, be carried out as cleanly as possible.

At our 2010 National Convention, the League of Women Voters resolved to “Support and lobby for significant strengthening of appropriate regulation, oversight, inspection, and penalties associated with the development of fossil fuel resources.” In view of the above discussion this resolution makes sense. As a practical matter, the likeliest alternative to natural gas is coal. Of course, efforts need to be made to increase renewable energy usage and to conserve energy. But fossil fuels will be with us for a long time.
Notes

(1) Wikipedia, Electricity sector of the United States, According to the table entitled “Yearly Electric Energy (B KWh (or Twh) per year) by Fuel Source”, the share of natural gas rose from 15 % to 31 %, while the share of coal fell from 51 % to 37 % between 1999 and 2012. http://tinyurl.com/arr-1301

(2) There is a way to estimate which fuel is cheaper. Use New York Mercantile Exchange prices and multiply the price of 1000 cubic feet of natural gas by 18. If the result is larger than the price of one ton of Central Appalachian coal, coal is cheaper, and vice versa if the result is smaller.

From the WTRG Economics Web Page on 27 July 2013, the Henry Hub natural gas price was $3.555 http://www.wtrg.com/. From EIA: Coal News and Markets, also on 27 July 2013, the Central Appalachian coal price was $67.27. http://tinyurl.com/arr-1302 Multiplying the gas price by 18, coal was five percent more expensive on that day. This method was developed using information from Note (3)

 

(3) Sandy Fielden, The Economics of Coal-to-Gas Switching
Powermag.com, August 21, 2012 http://tinyurl.com/arr-1303-a

(4) Spencer Hunt and Dan Gearino, Natural-gas use by power plants helps keep smog down, Columbus Dispatch, 29 July 2013 http://tinyurl.com/arr-1304

(5) Lawrence Livermore National Laboratory, Estimated Energy Use in 2012: 95.1 Quads, and Estimated U.S. Carbon Dioxide Emission in 2012: 5290 Million Metric Tons,
https://flowcharts.llnl.gov. Overall, electric power plants are about one-third efficient; they are the source of 44 percent of the energy wasted in the U.S and almost forty percent of the carbon dioxide generated.

(6) National Research Council, Hidden Costs of Energy, 2010, http://tinyurl.com/arr-1306

(7) Paul R. Epstein, et al., Full cost accounting for the life cycle of coal, Ann. N.Y. Acad. Sci. 1219 (2011) 73–98 http://tinyurl.com/arr-1307

(8) Jonathan Buonocore, Harvard University School of Public Health, e-mail, 20 May 2013

(9) Energy Information Administration, FREQUENTLY ASKED QUESTIONS, What is U.S. electricity generation by energy source? http://tinyurl.com/arr-1309

(10) Jeff McMahon, How Fracking Killed Nuclear Power, Forbes, TECH, 16 June 2013 http://tinyurl.com/arr-1310

(11) The amount of nuclear generating capacity currently under construction and slated to open by 2017 is almost exactly the capacity of plants whose retirements has been announced since October, 2012. Compare: Nuclear Energy Institute Nuclear Units Under Construction Worldwide, http://tinyurl.com/arr-1305 with Energy Information Administration, Lower power prices and high repair costs drive nuclear retirements, 02 July 2013, http://tinyurl.com/arr-1308

(12) The White House, President Obama’s Plan to Fight Climate Change, 25 June 2013 http://tinyurl.com/arr-1312

(13) The following table gives numerical results.

Summary of Recent Predictions of
Renewable Energy Increase

Years Renewables Increase, % Ref 2011-2025 26 (13a) 2012-2018 28 (est.) (13b) 2010-2025 50 (est.) (13c)

(13a)Energy Iinformation Administration, Electric Generation by Fuel 2011, 2025, and 2040 (billion kilowatt-hours) http://tinyurl.com/arr-1313a. Renewable increase derived directly from table in reference (13a).

(13b) Maria van der Hoeven, International Energy Agency, Medium-Term Renewable energy Market Report 2013, 26 June 2013 http://tinyurl.com/arr-1313b Stated increase in reference (13b) is 150 million Megawatt-hours. My calculation assumed 2012 energy was two percent greater than that for 2011 in reference (13a), or 536 million Megawatt-hours.

(13c) Union Concerned Scientists, Renewable Electricity Standards Deliver Economic Benefits, 07 May 2013 http://tinyurl.com/arr-1313c They predict an increase of about 87,000 Megawatts over 2011. Since each megawatt of wind supplies about 3000 Megawatt-hours of electricity annually, the UCS prediction is an increase of about 260 million Megawatt-hours.

(14) Karen Ulenhuth, Study: Utilities still lack incentives for efficiency, Midwest Energy News, 21 June 2013 http://tinyurl.com/arr-1314

(15) A. Saha, M.J. Bradley & Associates LLC, Coal Plant Retirement Review, April 12, 2013, http://tinyurl.com/arr-1315

(16) John Hanger, Natural Gas Accounts For More Than 90% Of New Power Plants Added Nationally In April, May 17, 2013, http://tinyurl.com/arr-1311

Al Rosenfield

alanpeg@alum.mit.edu

10 August 2013