Fossil fuels are making a comeback when it comes to generating electricity. For years construction of new fossil fuel capacity declined as renewables gained popularity. But a new report from the American Wind Energy Association documents a new trend.
Natural gas accounted for almost 40 percent of all new energy generation in 2010. In contrast, wind accounted for 26 percent, a drop from 39 percent in 2009.
The numbers are not surprising considering the nation?s new natural gas boom is in full swing in shale formations across the country. Among the most active are the Barnett Shale in Texas, the Haynesville Shale in Louisiana, the Fayetteville Shale in Arkansas and the Marcellus Shale in Pennsylvania. It?s estimated that the Marcellus Shale alone could contain enough recoverable natural gas to meet our nation?s energy needs for fourteen years.
The unexpected increase in fossil fuel supply is translating into static electricity prices across the nation. During 2010, retail prices for electricity changed little from 2009, according to the Energy Information Administration. EIA expects retail prices in the industrial sector to rise by only 0.9 percent in 2011, with a slight fall in 2012.
New supplies of natural gas are to blame, because electricity prices tend to reflect the price of natural gas, especially in Texas where much of the electricity is generated from natural gas. After hurricane Katrina, electricity prices spiked as natural gas drilling in the Gulf of Mexico and surrounding regions ground to a halt. In Maryland, politicians pulled the plug on the state?s newly competitive electricity market after electricity rates soared by over 70% for some residential customers.
Today, electricity rates are so low companies can?t even afford to build new generation plants. Jonathan Siegler, chief financial officer for Bluescape Resources, claims the cost of any type of new generation; coal, nuclear, solar, wind or natural gas is higher than the current price of power. Siegeler figures coal plants need about $63 per megawatt-hour, or $87 if you include the cost to mitigate carbon dioxide to break even. Similarly, natural gas generators need about $57 per megawatt-hour, or $67 including the cost to mitigate carbon dioxide. Compare those prices to the Texas wholesale power market, where electricity recently has been trading between $20 to $50 per megawatt-hour.
No one knows how long this trend will last. Economic recovery across the United States continues at a painfully slow pace, but if the recovery picks up rising energy prices will not be far behind.
With so much uncertainty in the future one thing is clear. Thanks to the domestic natural gas boom and the sluggish economy, now is a great time to shop for electricity.