Report: Renewable energy, natural gas should work together on the grid

Renewable energy and natural gas should work together as sources of electricity generation, rather than as competitors on the Texas grid, according to a new report produced for the Texas Clean Energy Coalition.

“The bottom line is that Texas is going to require a significant source of new generation in the immediate future,” said former state Sen. Kip Averitt, the coalition chairman. “We believe there is a place for renewable energies, especially when backed up with natural gas as the base.”

Averitt, a Republican who represented Ellis and McLennan counties, served as chairman of the Senate Natural Resources Committee before leaving the Legislature in 2010.

The report, produced by the Brattle Group with funding from the Cynthia and George Mitchell Foundation, looks at the relationship between natural gas and renewable resources on the grid run by the Electric Reliability Council of Texas, which covers 85 percent of the state.

A second report, due out in a few months, will consider how best to integrate the two sources.

Texas is a key test market for the issue, since it has both the nation’s largest installed wind generation capacity, at 12 gigawatts, and is also the leading producer of natural gas. Solar capacity plays a much smaller role.

But electric reserves here traditionally are tight on hot summer days, leading to threats of rolling brownouts. Still, efforts to encourage investors to build new generating capacity have fallen short.

The Brattle Group report, Partnering Natural Gas and Renewables in ERCOT, notes that wind power tends to displace natural gas-generated electricity on the grid because it’s cheaper — wind is free.

Add in the federal production tax credit, and “wind generators are willing to bid their generation into the ERCOT market at a price of zero or even lower,” according to the report.

Even with low natural gas prices, a gas-fired generating plant can’t compete.

Mixing the two can help keep costs lower for consumers, said Peter Fox-Penner, one of the report co-authors.

But wind energy isn’t always available, because the wind blows mainly at night. Natural gas plants can more easily ramp up and down to complement wind output than coal or nuclear plants, according to the report.

“My concern is that our portfolio of generation needs to include the whole gamut of fuel sources,” Averitt said. “Going forward, there’s going to be room for some of the historical sources and some of the new. I don’t buy into the fact that just because we’ve always done it this way, that’s the way we have to do it in the future.”

Air and water quality weren’t major concerns during the last major generation construction effort three decades ago, he noted.

“Today they are, and those concerns are going to weigh more heavily into decision-making,” he said. “It’s not ever going to be the way it was.”

Renewable energy still faces antagonism in some quarters, especially because of the federal production tax credit, which provides a 2.2 cent tax break for every kilowatt-hour of energy produced during the first 10 years of operation.

Renewables don’t receive state tax breaks in Texas, although they do in some other states.

But Averitt suggested the federal tax credit is a worthy way to jumpstart a new business model.

“When the Internet started, we didn’t collect sales tax on Internet sales,” he said. “The reason was, we wanted to let them get started. Now we are starting to collect sales tax. Sometimes it’s worth public investment to let something develop.”

He said wind energy will follow the same model.

“We think the problems associated with wind generation can be overcome and are being overcome,” he said. “That’s a threat to some people, because it’s change. But it’s change for the better. It’s going to lead to jobs, a new tax base. Cleaner air, less dependence on our scarce water resources. There are a lot of benefits.”

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