Why Less Coal

I have been assuming that gains in electricity generation by natural gas were the reason for loss in generation by coal. This is not quite true. In 2016 coal generation was down by about 750 million kilowatt-hours (kWh) from its 2006-2008 average, a 38 percent drop. About two-thirds of the drop was due to natural gas and about one-third to renewables.

Source EIA Electric Data Browser, accessed 21 June 2017

Cost of Withdrawal from Paris Accords

Ohio’s electricity sources are diverse, as shown in the following table:

Sources of Ohio’s Electricity, 2016

Data from electric Power Monthly, Feb. 2017

Source

Percent
Coal 47
Natural Gas 20
Nuclear 11
Renewables 2
Imports from Other States 19

 

The difference from 2008 is that coal has lost ground to both natural gas and imports.

The distribution in the table appears to be ideal for supporters of withdrawal from the Paris Accords on climate change. However, it would be expensive to sustain. Specifically, additions to all residents’ bills would be about $11 per month minimum due to coal, and perhaps much higher. Also, Ohio residents in the First Energy area would have an added $5 monthly charge to support nuclear plants.

Note: Coal costs are from the LSC Fiscal Analysis of 132-SB155. Nuclear costs are from testimony on 132-HB178. Data in the Table is from Electric Power Monthly.

Price of Conventional Fuels

Revised 31 March 2017

As is well known, natural gas has become cheaper than other conventional fuels. The price estimates below show that gas is less expensive than the competition. However all of the cost estimates are high compared with the actual price, which is given in the bottom row.

Cost/Price of Electricity from Conventional Sources, $/MWh

Coal Natural Gas Nuclear Ref.
60-143 47-78 97-136 (1)
N.A. 45-57 100-108 (2)
80-98 66-73 93-96 (3)
N.A. 50-70 N.A. (4)
N.A. 41-56 (a) N.A. (5)
34 (b) N.A. (6)

Notes:

(a) Increases linearly with gas price. Range shown is for $2.5 to $5 per 1000 cu.ft. Gas price on 16 Dec. 2016 was $3.43, giving a price of  $48 per MWh

(b) Unknown mix of gas and coal; April 2017 future

References:

(1) Lazard’s Levelized Cost of Energy Analysis – Version 10.0, December 2016

(2) EIA, Annual Energy Outlook, August 2016

(3) T.F. Stacy & G. S. Taylor, The Levilized Cost of Electricity from Existing Generation Resources, June 2015 http://instituteforenergyresearch.org/wp-content/uploads/2015/06/ier_lcoe_2015.pdf

(4) ”Solar going big: large-scale installations now outpacing small ones”, Toledo Blade, 22 July 2016

(5) Al Rosenfield, “Natural Gas vs. Wind Background” <alanpeg.blogspot.com>, 30 Jan. 2013

(6) PJM AEP Dayton Hub 5MW Peak Calendar-Month Real-Time LMP Futures Quotes

http://www.cmegroup.com/trading/energy/electricity/pjm-ad-hub-5-mw-peak-real-time-lmp-swap-futures.html, accessed 30 March 2017

 

LTE to dispatch (Not published)

Electric rates are spiraling out of control. It is not clear why they have been rising at twice the rate of inflation for the past several years. The higher cost does not mean that we are paying for a new and improved product. It is the same electricity that we always have used – only the price is higher.

Since electricity is also a necessity, it is proper that it is subject to state oversight. But, somehow, Ohio has let us down and allowed the inflated prices. For example, our Legislature is addressing the skyrocketing rates by worrying about the less-than-one-percent of our electric bill that is due to renewable energy.

 

Sources:

ELECTRIC RATES: Electricity Data Browser, http://www.eia.gov/electricity/data/browser/ (note: as of July, Rates have decreased one percent in 2016 compared to 2015)

INFLATION: CPI Detailed Report Data for December 2015, Table 24, http://www.bls.gov/cpi/cpid1512.pdf

RENEWABLE ENERGY COST: IEU-Ohio Mandate Cost Calculator, http://www.ieu-ohio.org/mandate-cost-calculator.aspx

Critique of Utah State Report

Ohio’s Energy Mandates Study Committee (EMSC) report (a) uses a Utah State University (USU) report (b) to justify continuing Ohio’s freeze on our renewable energy goals. The USU report is deeply flawed in its attempts to show negative effects on a state’s economy due to a legislated renewable energy portfolio.

Since twenty one states have had renewable energy portfolios for over ten years, USU should be able to make a comparison of states with and without portfolios, based on current and past economic performance.  They make no such comparison. Instead the USU report relies on predictions of the future.  This is a poor approach, since predictions in this field are notoriously inaccurate, as Sen. Seitz pointed out in his sponsor testimony for 130-SB310.

As noted below, the USU predictions contain numerous errors. The chief problems are ignoring any research in conflict with theirs and using obsolete data.

Specifically:

  1. USU assumes that Ohio law requires construction of wind farms to satisfy the law. Actually the law is satisfied by purchase of renewable energy certificates (c).
  2.  USU uses cost data by the Energy Information Administration, as reported in the Annual Energy Outlook (AEO) (d). Specifically, they use 2013 predictions of costs for 2018 and assume that these predictions hold through 2026. Although 2014 data were available, they did not use them or explain why they used the older data in a field characterized falling prices. The 2015 AEO, which was not available when the USU report was written, shows wind to be competitive with fossil fuels, making the construction of wind farms cost-neutral in the USU approach.
  3. Cost data are also available annually from the investment firm of Lazard (e) and are lower than those from EIA. USU did not explain why they used the EIA data in preference to the Lazard data.
  4. The American Tradition Institute (ATI) issued an earlier report using the same computer program as USU (f). The table below shows that there is great disagreement between the two studies, which USU does not explain.
ATI USU Percent Change
Total Net Cost, Final Year, $ billion 1.427 0.281 -80
Total Net Cost, Final Ten Years, $ billion 8.629 1.923 -78
Electricity Price Increase, Final Year, ¢/kWh 0.97 0.20 -79
Percentage Increase 9.3 1.86 -80
Total Employment (Jobs) (9,753) (3,590) 63
Investment, $ million (79) (52) 34
Real Disposable Income, $ million (1,097) (258) 76

 

  1. USU used two different prediction techniques and their results varied significantly (e.g. job losses of 3,600 and 29,000). When two results differ, at least one is wrong. The conclusion of the USU report favors the 3,600 number, while the EMSC report uses the 29,000 number and we do not know which, if either, is correct.
  2. Since wind farms need to be constructed and operated, the portfolio creates jobs, which the USU report ignores.

In conclusion, with so many problems, it is difficult to see how the USU report can be used to justify continuing Ohio’s renewable energy freeze.

References

(a) Kristina Roegner & Troy Balderson, The Energy Mandates Study Committee Co-Chairs’ Report September 30, 2015

(b) Randy T Simmons, et al. Renewable Portfolio Standards: Ohio, April 2015

(c) Galen Barbose, U.S. Renewables Portfolio Standards 2016 Annual Status Report, Report LBL-1005057, April 2016

(d) Energy Information Administration, Annual Energy Outlook, issued annually

(e) Lazard’s Levelized Cost of Energy Analysis – Version 9.0, November 2015

(f) American Tradition Institute, The Cost and Economic Impact of Ohio’s Alternative Energy Portfolio Standard, April 2011