The impact of recent Department of Energy pauses on export permits on the current and planned facilities for LNG exports
The recent DOE pause could impact projects past mid-2028. The near-term project queue, which is set to add 10.6 Bcf/day of capacity, is unaffected since these projects have already been approved and have the permits under review.
The impact of the Mountain Valley Pipeline to be completed this year
Following the volatility of 2022, basis pricing has been moving in a favorable direction both for the near-term and further out on the curve for the Northeastern markets. Some of the price movement was in response to the loosening of supply/demand coming off a mild 2023. However, since the permits for MVP were expedited, basis is trading significantly lower (over the past year and a half in particular) and, in most cases, is backwardated through 2028. With the expected growth of gas demand from power burn generation and export capacity, it may make sense to lock in that basis value longer term and create a layered approach for your natural gas purchases.
With demand response values down, is DR worth it?
DR values are primarily driven by capacity prices. Although the PJM enrollment season is closing, it’s worth noting that it is the biggest DR market. PJM DR values are quite low historically, but the next capacity auction results are expected this summer, which could have an impact. DR values in other markets, like New York (especially downstate) and New England, are quite strong (as high as $300k/MW in New York City when participating in both the utility and ISO programs). But it really comes down to the ability and willingness of an organization to curtail load for economic benefit.
A Strategic Load Management service could help you prepare for demand response. It could also help with strategies for reducing on peak load days to help lower your capacity and transmission obligations (i.e. “tags”) and thus your cap and trans costs.
Another option to consider that works with or without participation in DR is NRG’s proprietary Responsive Economic Dispatch (RED) program. This program has no penalties but provides an opportunity for you to earn for what you can curtail.
Always sign fixed price contracts but consider other alternatives based on the current index discount.
If you think about your investment strategy, it’s not really about putting all your money into one financial instrument. The same applies to your investment in electricity and energy. It could benefit you to diversify, especially in a dynamic price market. Concern about switching away from the familiarity and simplicity of a fixed price product is not uncommon. However, you have choices in how you manage your exposure to index pricing when you’re not on a straight fixed price plan that allow you to hedge against rising prices, while capitalizing on low pricing or dips as they occur.
A Load Following Block & Index (or LFBI) product offers the ability to layer energy hedges in percentages of your load—including the ability to execute one or multiple hedges to cover 100% of your requirements and eliminate index exposure. With this product structure, if market prices fall such that the index is no longer attractive, you can fix 100% of your load. We like to call this “enhanced fixed price” by achieving your fixed price in layers, with the option to participate in the index market
The El Niño Southern Oscillation (ENSO) region is currently experiencing lingering warm anomalies across the equator, but cooler-than-normal sea surface temperatures (SSTs) across the eastern Pacific. Positive ENSO anomalies are associated with El Niño and negative anomalies are associated with La Niña.
El Niño peaked back in December and has been slowly weakening through early this year. Current forecasts show a more rapid descent toward neutral through spring, then to La Niña by summer. The NOAA ENSO Probabilities indicates a medium chance (50-60%) of having La Niña conditions for early summer and higher chances later in the summer and into the fall.
Summer Weather Outlook
Since the year 2000, summers on average have increased by 6.7 population-weighted cooling degree days (PWCDDs)/year. Degree days are the difference between the daily temperature mean and 65°. While last summer ran hot across Texas, nationally it was under the 2000s trend. The top 10 warmest summers (from 1950 to present) have occurred since 2010, with last summer sliding in as the 10th hottest on record and 2022 as the hottest.
What does a summer La Niña imply? La Niña conditions typically indicate dryer/warmer summer weather.
Winter Power, Gas & Electricity Review
With another above-normal winter, the warmest on record for Dec.-Jan.-Feb. dating back to 1950, the natural gas market is over-supplied. Except for the short-lived January freezing temps, which prompted some volatility, index prices remained stable/low.
We exited winter with gas storage at a significant surplus to the 5-year average, finishing withdrawal season (March) at 2,275 Bcf. Natural gas exports hit a new record of 15.1 Bcf/day (in December) but then dipped in January following the cold weather and maintenance issues at Freeport. NYMEX remained low during December and February and only showed short-lived volatility in January in response to Winter Storm Heather.
Power burn demand set a new record in January and flirted with record 2023 levels for Feb/March. This may continue as we head into nuclear maintenance season if low index pricing continues.
Market Fundamentals of Natural Gas in 2024
Two warm winters ending in storage surpluses have resulted in sustained low prices, including sub-$2/MMBtu this spring. However, the supply/demand balance may be changing. Producers are starting to respond to low prices, with a forecasted 1.5 Bcf/day drop in production this summer over last, recently pushing below 100 Bcf/day which could continue for most of the summer.
Decreased production with increasing power burn demand (coal-to-gas switching) and LNG exports are bullish factors for prices. A hot summer would further increase demand for power burn. Pipeline infrastructure updates will help deliver supplies from key production sites to regions like the East Coast/Mid-Atlantic and Southeast, while regions like the Midwest may see a bullish impact to basis with gas now flowing to other regions.
Near-term pricing remains low compared to historicals, with upside risk outweighing downside opportunity, according to EIA confidence levels.
Buying Strategies
Buying in the shoulder months (spring or fall) might sound like the right thing to do—shoulder months don’t typically have the high demand or extreme weather that can cause price volatility. However, data indicates there’s no trend of consistent buying opportunities in Q2, as prompt month natural gas futures have risen in 4 of last 7 seasons. In 5 of last 7 seasons, the low price point has come between Christmas and end of March, with zero low points during Q2.
Buying in a contango natural gas market because near-term prices have declined—consistently—but long-term prices are higher than near-term and have had modest movement.
Near-term: “Waiting” has worked for the near-term, as buyers have reaped the benefits of the near-term price decline.
Long-term: While long-term prices are higherthan near-term, based on bullish fundamentals, those longer-term prices could rise and therefore today’s prices may be a value. Bullish fundamentals, like increased LNG exports and producer cuts, also make it less likely that longer-term prices will fall.
Regional basis considerations: basis is weak in the east, so a potential strategy in a contango market could include the NYMEX Plus product. You could lock in a longer-term basis then immediately trigger higher percentages for the lower-priced near-term, with a more gradual triggering strategy for the longer-term portion of your contract.
Regional Influences
ERCOT
Demand in Texas is growing much faster than elsewhere in the country and supply from dispatchable resources isn’t keeping up. As a result, net load has become more expensive to serve.
Forward prices for this summer are at or near all-time highs and are disconnected from NYMEX with modest backwardation.
Summer prices beyond this year have recently strengthened significantly given the potential future load growth from residential, AI, crypto, LNG projects, and hydrogen facilities.
When compared to forward prices ($50-60/MWh), the index for most hours of the day has shown value ($20-30/MWh), making forward purchases seem unattractive. But, certain hours on certain days can be in the thousands—which can blow up your index strategy and forward prices—so there may be value in some level of hedging (portions of your load) to protect yourself from extreme volatility and increases in longer-term prices.
Northeast
NYISO Zone J (and PJM as well to some extent) was seeing a downward trend in prices between last summer and this summer, until March-April 2024, when there’s been a sudden jump in long-term prices (’27-’28). This is due to the market being concerned about AI-driven data center load that is increasing across the east. The market is now in a steeper contango.
Near-term is showing the best value. Long-term (2026-2028 moving up), there is time to wait or consider a partial commitment with a lower percent forward hedge.
Non-energy Cost Components
PJM Cap & Trans Costs
Transmission costs are significantly higher than capacity behind most PJM utilities and, when combined with transmission, the two components can comprise 15-40% of your supply price. The next base residual capacity auction scheduled for July will be for the 2025-26 delivery year. Long-term, cap and trans fundamentals are bullish due to the increased reliance in this region on non-dispatchable generation assets and ongoing retirements of dispatchable resources.
NYISO Capacity Costs
Capacity prices are very strong, with in-city capacity up 3.6x in the last 12 months. Capacity costs now comprise 20-35% of supply costs in NYC and 10-15% for rest of state. These increases can be attributed to power exports to Canada and peaker plant retirements.
Strategies to Manage Demand
Consider cap and trans pass-through products with a peak load management program or demand response. Curtailing your load even for a few key hours during the peak load periods could result in savings.
Overall Considerations
Price trends have been favorable overall to start 2024, but procurement decisions remain difficult due to market inconsistencies and bullish longer-term pressures—including the impact of renewable generation comprising a larger chunk of the regional generation stack. A flexible strategy during times of uncertainty could help you better weather the storm through layered purchases for portions of your load requirements for various timeframes. And, if you’re located in PJM, NYISO or ERCOT, you may want to give serious consideration to load management services.
In 2021, a Houston-based group called Sage Geosystems, run by former Shell employees, started an energy company that wasn’t drilling for oil or gas. They were looking to experiment with new technology for producing geothermal energy.
They used a diesel-powered pump and fluid to create cracks in the rock deep below the surface, a technique similar to fracking for oil and gas. Some 20,000 barrels of water were pumped into the 2-mile-deep well. Hours later, an operator opened the well from a control room. Pipes above ground shook as the pressurized water gushed back up. The water spun their turbines and generated electricity!
Many other companies also believe geothermal power is key to replacing polluting coal- and gas-fired power plants in Texas and elsewhere. Even though solar and wind are proven clean energy sources, they only produce electricity when the sun shines or the wind blows. Geothermal power could provide continuous, emissions-free energy as the heat constantly radiates out from the center of Earth when radioactive elements break down.
But of course Texas, an energy hub, has become a “hot spot” for geothermal energy exploration. A handful of companies are based in Houston, and many oil industry workers are employing their knowledge of geology and skillset with drilling/extraction to a new sub sector.
A Long Way to Go to Reduce Electricity Prices
The total amount of geothermal electricity produced in America is tiny compared with other sources. It accounted for about 4 gigawatts last year, according to a federal analysis, or enough to power about 800,000 Texas homes.
Researchers say there’s a lot more geothermal power to be had by pumping fluid through hot rock where there is no natural water. With technological advances, geothermal power in the U.S. could grow to 90 gigawatts by 2050, so companies are racing to develop their technology and techniques to harness this energy source. They will vary in how deep they drill (7,000 ft, all the way to 66,000 ft), how they heat the water (in the well or in the rock), and how they bring the heated water back up (in the same well or through a secondary one).
Like oil prospectors, geothermal prospectors must figure out the best places to drill. And people will have the same concerns about triggering earthquakes like oil and gas fracking. In 2006, a geothermal plant in Switzerland caused a magnitude 3.4 earthquake that damaged buildings and led to the plant’s closure. In 2017, a magnitude 5.5 earthquake linked to a project in South Korea injured dozens. Texas should mandate protocols, but that will be tough to legislate in the state.
The more the technology is deployed, the more the costs come down.
The geothermal businesses will have to show it can compete with the cost of other power sources. Perhaps help from the federal government in the form of Inflation Reduction Act tax credits will spur more interest. The Department of Energy believes $20 – $25 billion is needed to be invested by 2030 to move toward widespread use.
There needs to a breakthrough for commercialization to put downward pressure on electricity prices.
The geothermal business has a lot of growing to do, like the early days of wind or solar. The technology needs to advance. The history of modern geothermal power goes back a century when the world’s first full-scale geothermal power plant started operating in 1913 in Italy. And in 1960, Pacific Gas and Electric built the first commercial geothermal power plant in the United States at a spot in Northern California known as “The Geysers.”
Then in the 70s, the federal Department of Energy started researching pulling power from what was referred to as hot, dry rock. Even though the country suffered through Arab embargo on exporting oil to America and high oil prices, the technology didn’t get far enough to gain traction.
Engineers built geothermal power plants where they could find existing water resources relatively easily, maybe marked by hot springs or fumaroles, which are holes where hot gases and vapors escape from underground, said Lauren Boyd, director of the U.S. Department of Energy’s geothermal technologies office. But building new plants got riskier as prime locations got harder to find.
There’s still opportunity because the O & G industry can develop technology quickly. Oil and gas people host a significant amount of insight and can be a huge asset if employed ethically.
Chris Anderson, the leader of TED, known for its conferences with TED talks by experts on various topics, has invested $16 million through his climate investment fund. Drilling firm Nabors has invested $9 million more.
They are not the only people who see the potential of leveraging expertise from the oil and gas industry to develop geothermal energy production. Drilling into high-temperature rock in Texas presents a huge opportunity for tech transfer into geothermal.
For Lubbock, cost was one of the many reasons the city council decided to take the step to join ERCOT. In a recent study, the utility found that electric costs could drop an estimated $148.9 million annually for the city of Lubbock. Additionally, due to overall electric demand, if Lubbock remained disconnected from the ERCOT grid, the city would require a new power plant with an estimated cost of more than $700 million.
Impact on Electricity Prices
In the years leading up to deregulation in the state, electricity prices in Texas were among the highest in the country. Since deregulation, prices have fallen significantly. Like any other product or service (e.g., mobile phone service), it is up to the consumer to make smart buying decisions or pursue calculated risks when selecting an electricity plan based on market conditions or short-term promotions.
Other Consequence of Electricity Deregulation
One negative consequence has been higher prices during peak demand periods. This is because the deregulation of the wholesale market has led to a number of power plants being shut down. This has reduced the amount of power available during peak demand periods, which can lead to higher prices during spikes in demand, like during the 2021 winter storm.
Another potentially negative consequence of deregulation for consumers has been the creation of a number of deceptive plans that have resulted in “rate shock” cases where people have been caught off guard by their utility bill. These are cases in which consumers have been switched to a higher-priced electricity plan without their knowledge or consent. This has led to a number of consumer complaints and has damaged the reputation of the deregulation process.
GET THE BEST ELECTRICTY FOR YOUR BUSINESS
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
While the Public Utility Commission of Texas regulates the state’s electric utilities, LubbockElectric.org is now available to help customers new to open-market competition. When it comes to an essential utility like electricity in Lubbock, service as import as electricity service, the organization hopes to protect customers and get people the lowest electric rate possible by making mart, informed choices when when they select an electric plan.
What is electric deregulation?
In 1999, the Texas Legislature passed a deregulation law that made it possible for consumers in most parts of Texas to choose their own electric company. The new law was passed to encourage free market competition and lower prices. Some areas, such as municipalities and cooperatives, were not required to deregulate, so customers in those areas may not have electric choice.
What changed in electric service?
People living in specific zip codes in and around Lubbock can choose their electric company (also called a Retail Electric Provider or REP). What did not change? The same wires companies (also called Transmission and Distribution Utilities) continue to deliver electricity to homes and businesses, regardless of which company is selling a customer electricity. Local wires companies still read meters, respond to service interruptions, and continue to maintain the poles and wires.
Does everyone in and around Lubbock get to choose their electric provider?
No. It depends on where in Texas you live. Some communities are served by municipalities, cooperatives, or investor-owned utilities, so electric choice is not available.
With competition, will the reliability of my electric service change?
No. Regardless of which electric company you choose, your electricity will continue to be delivered safely and reliably by the local wires company, which is regulated by the PUC.
The Texas Senate has put forward a number of proposals aimed at improving the state’s electricity infrastructure.
Senate Bill 6, for example, seeks to establish the Texas Energy Insurance Program, which would provide backup power in the event of an emergency. While some have expressed concerns about the cost of this program, it could ultimately help to ensure that the state’s power grid is more reliable and less vulnerable to blackouts.
Senate Bill 7 has been criticized for potentially hampering the development of wind and solar power. However, the bill also seeks to ensure that the state’s existing power infrastructure remains competitive and reliable, which could ultimately benefit consumers.
Senate Bill 2015 aims to increase the use of natural gas in the state’s power generation. While some have expressed concern about the cost of this shift, natural gas is a cleaner and more reliable source of power than coal, and could ultimately help to reduce emissions.
There are concerns about some of the proposals put forward by the Texas Senate. If they would simply invest in new technologies and infrastructure, the state could create a more reliable, sustainable, and affordable electricity system.
Sen. Charles Schwertner, R-Georgetown, Lt Gov. Dan Patrick, and Sen. Phil King, along with other lawmakers held a press conference to discuss Texas energy bills in the works in the senate at the Texas State Capitol.
Blame Lieutenant Governor Dan Patrick’s and his Enablers in the Texas Senate
Patrick and Schwertner want to funnel money away from clean energy and toward fossil fuels just as we need to phase them out to stop global warming. Their proposed laws ignore new technologies that are revolutionizing the electric industry by boosting efficiency and controlling demand.
Texas’ GOP leadership is trying to destroy the system it built, which encourages companies and technologies to compete to provide the cheapest, most reliable power. Our widely admired free market system would be replaced with the big-government structure we abandoned in 1999.
They are proposing plans that will drive up customers’ electricity bills, wreck the climate, and further enrich Warren Buffet’s Berkshire Hathaway Energy. These dinosaurs are going to waste billions on archaic solutions for 21st century problems.
GET THE BEST ELECTRICTY FOR YOUR BUSINESS
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
If the Dan Patrick’s bills become law, they will destroy the competitive electricity market and return Texas to the era of big government. Republican senators ill have squandered the opportunity to modernize the Electric Reliability Council of Texas grid and bring true reliability.
Senate Bill 6 establishes the Texas Energy Insurance Program. Senate Business and Commerce Committee Chair Charles Schwertner calls it a statewide backup generator. He wants consumers to pay government-mandated prices for companies to build 10,000 megawatts of natural gas-fueled power plants as backup power for 40 years. That’s enough power for 4 million homes that will sit idle at least 97 percent of the time. So consequently, many look at it and call it a multibillion-dollar waste of money designed to enrich Berkshire Hathaway Energy, earning the company a guaranteed 9 percent rate of return for the company.
Only the biggest companies would participate. Prerequisites include already operating 15,000 megawatts of generation and possessing $1 billion in assets for every 1,000 megawatts they provide. And Texas consumers would have to pick up a $10 billion price tag to have the brand-new, highly-efficient power plants sit idle, waiting for another, perfectly avoidable crisis.
Schwertner’s bill excludes battery storage and all other clean emergency power sources. Senate Bill 7 would essentially kill new wind and solar power, which are the cheapest sources of new electricity. The bill forces renewable facilities to subsidize fossil fuel power plants, which is just insane. It seems like the Republicans’ goal is to keep coal plants open and burn more natural gas.
Senate Bill 2015 puts a bow on Patrick’s plan by mandating that half of the state’s electricity come from natural gas, regardless of the cost to consumers. Everyone would have to pay higher prices for natural gas-generated electricity because the law would force ERCOT to reject cheaper wind and solar energy to obey the law.
Finally, there is Senate Bill 2012, Schwertner’s and Patrick’s nuclear option if the electricity industry fights too hard against the other bills. It implements the PUC’s favored reliability plan, the Performance Credit Mechanism, but with onerous obligations on generators. The measure would break up the retail electric business, which some generators rely on for profitability. The law would end the prohibition against transmission line companies owning power plants and force them to build natural gas facilities if existing generators do not build enough.
Lastly, Senate Bill 2404 is a do-nothing bill that establishes a toothless Texas Energy Efficiency Council to make recommendations to future legislatures.
After the gnarly 2021 winter storm, the Texas Legislature ordered an overhaul of the state’s power market to prevent future blackouts, but many legislators don’t like the option on the table
The Public Utility Commission of Texas unveiled a proposal (supported by Chair Peter Lake) that intends to pay power generators to make sure they have enough reserve electricity to feed the state’s electrical grid during extreme demand. After proving an ability to keep the lights on during those periods, power generators would receive performance credits. This will cost power customers an additional $460 million yearly, according to the PUC’s estimate. The plan’s complexity and the time it would take to implement such a novel system is in question as well.
There are huge reliability stakes and huge dollar stakes… Texas needs certainty, but there are ways to create certainty without potentially costing billions!
Last year the Texas Legislature ordered the commission to overhaul the state’s energy market, which functions mostly off of supply and demand. During their first chance to weigh in on potential reforms to the market, lawmakers on a key Senate panel this week made it clear they’re not impressed with the commission’s main proposal.
The plan is convoluted and has a long timeline… it’s a set-up for failure for Texas’ residents. The additional costs of the plan will ultimately be paid by power customers too. Many have expressed frustrations with making the state’s power customers pay more for an untested system on top of paying off billions of dollars in costs incurred during the storm event.
Texas residents have had a hard paying for electricity this year. As many cranked up their air conditioners during another sweltering summer, some 45% of Texans had to cut back on other necessities such as food and medicine to pay their electric bill. This is higher than the national average of 34% according to LendingTree.
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We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
Peter Lake of the PUCT defended the performance credit idea as a way to make the grid more reliable by providing a “market-based solution” to motivate power generators to ensure they produce enough electricity during periods of high demand. He thinks it will deliver an improvement in reliability for less money than.
In adding more money to the flames, the Texas commission paid E3, a California consulting firm, more than $600,000 to figure out what changes to the state’s electric market needed to be made to avoid blackouts during weather events. Of course Peter Lake denied the recommendation to overhaul the grid, which would require electric providers to buy reliability credits.
The good ‘ol boy club flexed its muscle.
But some lawmakers have pointed to what they call flaws in E3’s report, chief among them the fact that the consultant did not take into account weather conditions as severe as those that caused blackouts during the 2021 winter storm. Without that, man say that it’s difficult to know how the grid would hold up during extreme cold or heat as a result of any change — or how much consumers’ energy bills would go up.
According to the E3 report, the consultant does not expect the same levels of outage would be observed during similar weather conditions because of reforms such as new weatherization standards enacted. A PUC spokesperson said the study ran thousands of severe weather scenarios based on historical weather data. But climate change is making weather patterns more erratic creating more and more anomalies. The E3 report also assumed generators would have unlimited access to fuel in case of extreme weather, though many power plants struggled to obtain natural gas to keep running during the winter storm.
Worries also abound that the performance credit system will take too long to implement… up to four years, which will dissuade investment in new power production. Texas has made marginal improvements to the electrical grid but would still see a massive shortfall in power supply should a similar winter storm hit the state in the coming months, according to an October analysis by the Federal Energy Regulatory Commission.
There could be a gap and big risk, which is why the case for change is so urgent.
The Federal Highway Administration approved $408 million to build a network of electric vehicle (EV) charging facilities every 50-70 miles along select major highways in Texas.
Texas is getting the most of any state (it is the largest in the lower 48) and intends to build more than 50 new locations in the first year along major Texas interstates between El Paso, San Antonio, Austin, Dallas, Panhandle, Rio Grande Valley, and Houston using money from the Bipartisan Infrastructure Law from 2021.
For the next 5 years, the Texas Department of Transportation plans to expand the stations into rural areas and build at least one electric vehicle (EV) charger in every county.
The announcement comes after Governor Greg Abbott last year warned state agencies, like a petulant child, to be cautious before accepting funds from newly passed federal climate initiatives. Abbott said to avoid the funds if they constrain the state or require an agency to implement a policy that is contrary to the policy of Texas. Unfortunately in our republic, he does represent the citizens, but his idiocy knows no bounds. The man and his cohorts just hate progress, reason, and decency.
Climate Package Impact on Electricity Prices
In August, the Inflation Reduction Act included an ambitious climate package with the goal of reducing greenhouse gas emissions and the U.S. economy’s reliance on fossil fuels. The law will provide hundreds of billions of dollars in tax credits and subsidies for clean energy programs and also includes consumer tax credits to buy electric vehicles.
Though the Inflation Reduction Act passed without any Republican support (take away reason and accountability) based on the idea that it would “punish energy producers.” In other words, it will hurt the people and companies that give them money. Despite Texas Republicans’ political rhetoric and state legislation opposing climate action, TxDOT’s application for electric vehicle charging stations indicates that economics will prevail.
U.S. Transportation Secretary Pete Buttigieg said that “some of the best use cases for electric vehicles are in places like Texas,” arguing that widespread electric vehicle adoption could save Texans money on gasoline. Though slightly better for the environment, the reality is that it won’t. It just shifts the cost to electricity bills and higher taxes in the form of government subsidies. Why not just be honest and forthright about that?
Texas to Award Contracts to Build Stations in Spring 2023
The state’s plan is to build 55 new charging locations during the first year. Private companies have already installed 27 charging locations along the targeted highways and 26 more will be funded by the Volkswagen-emissions-cheating lawsuit settlement.
GET THE BEST ELECTRICTY FOR YOUR BUSINESS
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
Currently, around 150,000 electric vehicles are registered in Texas. That represents about 1% of vehicles. Current estimates shows Texas will have 1 million electric vehicles by 2028, which is still only a small portion of the 30+ million cars that will be on the road. Moving from 1% to 3.3% is an increase, yes, but that doesn’t really move the needle in terms of decarbonization. Furthermore, is it even practical?
Wait an Hour to Drive an Hour or Two
The state said that will satisfy the federal government’s requirement to have charging stations every 50-70 miles. After your first full charge of your EV, all you have to do is wait an hour to drive another hour or two. At that rate, you can get across the big state of Texas in about 4-5 days. Hilarious!
The new national climate adviser Ali Zaidi said “If we make it so that it’s not about sacrifice, but it’s about opportunity, I think it becomes irresistible.” Again, comments like this make the shift feel like a it’s just that… a shift and not actually better for anything or anyone. Though slightly better for the environment, the reality is that it will not be. It just shifts the business model of consumerism.
Though more EVs are being produced and sold every day and the adjustment in energy consumption will create jobs, will the shift really do anything for quality of life (noise, air pollution, the environment, etc.)? Many are skeptical. They are not doubting the science that electric vehicles can be better and are slightly cleaner (almost negligible at this time), but that the shift is just a shift in how most people consume too much and live their lives inefficiently.
A Better Way to Decarbonize
Doesn’t it feel like building a charging station every 50-70 miles is even more saturated than gas stations? What’s going to be the carbon footprint to build those out, building out enough electrical load, building out the grid, and managing all that? We haven’t run the numbers, but this initial step in what will be a lengthy transformation seems ill-advised.
For now, offering subsidies for more practical hybrid cars and/or home solar seems like it would be a better application of money to help all of us lower our electric bills and really make a progressive step toward decarbonization in the arena that needs to addresses first… where we get our energy and electricity to power all of this electric stuff.
In Texas, Solar & Wind Energy Kept the AC on This Summer
How about this fall and winter?
Texas lawmakers say changes should provide protection for our Power Grid this winter, but other critical changes will be harder to execute.
A hearing this week in the State House Energy and State Affairs committees began with an optimistic report that the reliability reforms that were passed in Texas and implemented at the PUC & ERCOT are working. The state continues to switch from the old extra-electricity-when-needed (crisis-based) structure to a reliability-based model that focuses on keeping the lights, heat, and AC running.
Unfortunately, the changes to Texas Electrical Grid is going to hit everyone’s pocketbook.
Rules are in place to fine energy producers for non-compliance is up to $1,000,000 per day.
Nonetheless, the costs for winterization, inflation, and higher energy prices thanks to Russia are driving up delivery charges by some 50%. That doesn’t include the upcharges coming from REPs (Retail Electricity Providers) either!
It will be a burden on both commercial and residential electricity customers throughout Texas.
There is concern about additional changes to restructure how energy producers are compensated.
It could become a turf battle to determine if more power plants are built. But if the state doesn’t get companies to build new power plants, it doesn’t matter what is done in the legislature.
If additional generation capacity is not added to the grid, we’re going to be in great trouble.
This summer got too hot too early, which has forced farmers to harvest a month early, slashing yields to 80 bushels per acre from their typical production of 130 to 150 bushels. But many farmers in Texas these days, don’t fret about the weather as much as he used to. Many have 30-year leases with renewable energy companies that have erected large turbines on their land in exchange for a set fee plus a share of the electricity revenue they generate. In a typical year, the extra cash helps farmers pay down land and equipment loans and get a head start on the next crop. This year, lease payments and royalties will cover many of their drought-related losses.
One of the most active players in communities like this is Engie, a French energy company. It has a wind farm northeast of Waco that began producing electricity in December 2020 with 100 turbines across 30,000 acres and a substation connecting it to Texas’ grid. It has a production capacity of 300 megawatts per day, enough to power 150,000 homes. Engie has two more power projects under construction… another 300 megawatt project called Limestone Wind and a 250-megawatt Sun Valley Solar project. The company also plans to add 100 megawatts of battery storage at Sun Valley to allow it to hold on to electricity that can be released when needed. These will give Engie seven wind and four solar projects in Texas with a combined capacity to produce more than 2.2 gigawatts of electricity. The 200-ton towers are as tall as a football field and are increasingly common in Central Texas. The turbines surprise many who thought they were only in West Texas.
Inflation Reduction Act
The legislation provides billions of dollars in tax breaks and incentives to increase renewable energy and affiliated manufacturing designed to drive down carbon emissions. Surprisingly, Texas is already one of the leader in the country for renewables. Only eight states produce more total electricity than Texas does solely from renewable sources. And the industry within the state is growing rapidly too. Wind generation in May increased 32 percent from a year earlier and was 63 percent higher than in May 2018. Solar generation, while still a small part of Texas’ total energy production, was up 545% over 2018.
Kickbacks to Rural Republican Landowners
There’s a lot of money involved in these projects. Building new wind and solar projects on the prairie east of where Texas’ Wind industry bloomed puts Engie closer to established transmission lines that can supply metro areas like Houston and San Antonio. Engie spent $300 million to get Prairie Hill Wind up and running, and the Limestone plant is expected to cost about the same. That requires abundant available land and property owners. A land owner who owns 735 acres, is one of 78 who signed leases with Engie. Though many say they were “on the fence” about how the turbines fit into an agricultural environment (noise, aesthetics, damage to roads and infrastructure), they have been more than happy to receive their payouts.
Projects like these highlight the extent to which investment capital for renewable energy is flowing primarily into blue, Republican strongholds despite the political rhetoric from many on the right. Records show 41 of the 50 (82%) of U.S. congressional districts with the most money going toward renewable-energy projects are represented by Republicans. Even so, Republicans in Congress voted unanimously against the Inflation Reduction Act, even though their districts are poised to reap the expected benefits of increased spending on renewable-energy initiatives. In Texas, Republicans lead 8 of the 10 that are home to the lion’s share of wind and solar projects. Meanwhile, Democratic-leaning metropolitan areas that want to decarbonize their energy sources, have to payout to conservative strongholds and lobbyists that funnel money to blue counties.
Economic Benefits for Rural Communities & Schools
Funny enough all that puffery and bluster about the windmills ruining the view and adversely affecting their livestock is gone. Those blue, conservative communities are raking it in. Local schools in rural communities are getting more than their share of tax revenue while urban schools are dealing with overcrowded schools and budget shortfalls. And of course those communities are going to say that renewable power can’t sustain itself without government subsidies… that money is too easy.
Lobbyists for deceptive energy companies and inept bureaucrats have made this way more complicated than it needs to be. Wizard Energy is committed to helping our commercial clints navigate these charges in the bids, contracts, and billing of retail electricity providers to make sure our clients get the best possible electric rate and save tons of money.
The “real” or “actual” electric rate you pay is the amount you pay each month divided by the amount of kWh (kilowatt hours) of electricity you used.
What Makes Up The Charges on Your Electric Bill in Texas?
1) TDU Delivery Charges (Regulated State Fees)
2) Rate Charged by Retail Electricity Provider
3) Fees Added by Retail Electricity Provider
Let’s go through each of those…
1) TDU Delivery Charges
This is what you pay the state to deliver electricity to your business (i.e. service and maintenance of the poles and wires) and the meters that measure it. TDU delivery charges are regulated by the Public Utility Commission of Texas (PUCT). They are impacted significantly by your Peak Demand.
Peak Demand
In Texas “demand charges” are based on the highest usage recorded over a 15-minute period for the previous year. Peak demand is measured so power generators know how much electricity is needed to service everyone on the grid.
If your peak demand is less than 10kW, you pay a base fee plus a rate per kWh:
If your peak demand is greater than 10kW, you pay a base fee plus a rate per kWh AND a Demand Charge:
2) Retail Electricity Provider (REP) Rate
REPs will offer customers a rate based on the amount of electricity they and their Load Factor, which is a measure of how predictable your electricity usage is on average.
If you use power consistently (few or low spikes when you need a large amount of electricity), then the potential for your business to adversely affect the grid is low. In this case, you would be considered a “low demand, high load” customer and tend to pay a lower rate.
Alternatively, if your business has inconsistent, big spikes in demand for a lot of electricity, then your business can potentially have a negative impact on the grid. In this case, you would be considered a “high demand, low load” customer and tend to pay a higher rate.
Calculate Load Factor
(Total Electricity Used (KWh) in Billing Cycle)
divided by
(Peak Demand X Hours in Billing Cycle)
As an example, let’s say your business used 14,000 kWh during the month and your previously established Peak Demand is 25 kW.
(14,000) / (25 X 720) = .77 or 77%
This would be considered a high load factor.
Low: 0-40 Medium: 41-75 High: 76+
Consequently, you are likely to get a better rate offer from an Retail Electricity Provider, like $.03/kWh instead of $.06/kWh. Remember that this rate is in addition to the state-regulated TDU charges for delivering the electricity to your house. Unfortunately, the electricity rate quoted by your REP is not always the sole fee charged to customers. Let’s look at those…
3) Retail Electricity Provider (REP) Fees
There should be only 2 fees in your contract/bill: Electricity Rate ($/kWh) & State Taxes/Fees
Again, unfortunately REPs bury other fees like monthly base fees, minimum usage fees, customer service fees (even for phone calls), etc. These all add up to significantly increase your actual electric rate.
It doesn’t end there. The worst culprits are not hidden fees but deceptive plans that quote potential customers a rate based on a “Market Rate”. These Market Rates are variable rates based on market conditions that are out of your control like weather events, seasonality, global events, or just odd spikes in demand. These risky plans are called:
Instead of your electric bill being a simple sum of (1) TDU Fees + (2) REP Rate + (3) REP Fees + (4) Taxes, you get charged (1) TDU Fees + (2) Market Rate (3) REP Rate + (4) REP Fees + (5) Taxes.
Let’s go back to our example where your business uses 14,000 kWh/month with a Peak Demand of 25 kW. And let’s say your energy company baited you and quoted an “Indexed Plan” with a rate of $.03/kWh.
Here’s the reality of what you are going to be charged:
(1) TDU Fees: $10.41 + (14000 X $.00314) + (25 X $7.749513) = $248.11
(2) Market Rate: $.12 X 14000 = $1680.00
(3) REP Rate: $.03 X 14000 = $420.00
(4) REP Fees: $50.00/month (assumes no other sneaky fees)
(5) Taxes: $2398.11 X .0625 = $149.88
TOTAL: $2547.99
REAL RATE: $2547.99 / 14000 = $.18/kWh
THAT WOULD BE INFURIATING… The Energy company can quote $.03/kWh and you end up getting charged $.18/kWh… 6X more than you might have been expecting or budgeting for.
Wizard Energy would never steer clients to indexed or variable rates
Plus we know how to review multiple bids, decipher the terms and weed out the sneaky fees or deceptive add-ons.
GET THE BEST ELECTRIC RATE
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down. Plus we confront all those sneaky practices of hidden fees or deceptive terms.
