Market Forces are Driving Coal’s Demise and Cleaning Up the Grid in Texas

power lines unsplash croppedWhat do economists and environmentalists have in common? When it comes to Texas’ energy future, more than you may think.

According to a new study from the Brattle Group, a reputable, national economics consulting firm with extensive experience in Texas’ electricity sector, market forces are leading to coal’s rapid decline in the Lone Star State. Moreover, rapidly-growing cleaner electricity sources like natural gas and renewable energy will be able to entirely meet Texas’ additional power needs – without increasing electric bills. We couldn’t agree more.

That said, we’re confident the impacts are going to be even more powerful in terms of Texas’ wind, solar, and energy efficiency. And the latest report from Texas’ main grid operator, the Electric Reliability Council of Texas (ERCOT), continues to support that expectation.

New report foretells a cleaner Texas grid

Commissioned by the Texas Clean Energy Coalition, the Brattle Group’s new analysis examines how market factors will affect Texas’ electric makeup over the next 20 years.

Here’s what you need to know:

As Texas’ grid becomes significantly cleaner, wholesale electricity prices will stay around the same as 2014 prices.

  • The price of natural gas is the primary driver of change. It’s no secret the cost of natural gas has plummeted over the past decade. In fact, Energy Information Administration data shows natural gas prices were more or less cut in half during 2008-2014. New technology unlocked massive amounts of gas, and the electricity market hasn’t been the same since. The Brattle Group study assumes natural gas prices will remain low, at $4.00 per MMBTU or less through 2035. This assumption was based on forecasts from the National Renewable Energy Laboratory and ERCOT.
  • Coal is going down, while natural gas and renewables are going up. Things are not looking good for Old King Coal. The analysis breaks down the generation mix for 2035, and coal is reduced to producing a measly six percent of energy in ERCOT – down from 45 percent in 2002. Taking its place is greater reliance on low-carbon natural gas, wind, and solar.
  • Other than inflation, electricity prices will stay the same. Many coal industry water-carriers will have you believe the transition to a clean energy economy is costly. Not only does this misinformation fail to take into account external costs – like the public health benefits of cleaner air – it also ignores the fact that this transition in Texas is occurring as a result of the competitive market. The Brattle Group study demonstrates that, as Texas’ grid becomes significantly cleaner, wholesale electricity prices will stay around the same as 2014 prices, with adjustments for inflation.

In a nutshell, Texas’ grid is undergoing a major scrubbing – i.e. it’s going to be a lot cleaner 20 years down the road because of market forces already underfoot. Since that translates to a major reduction in carbon and other forms of air pollution, all Texans will be breathing easier thanks to these changes.

We can go further on renewables and efficiency

Although it’s clear wind and solar will continue to play a bigger role in powering Texas, we think the pieces are in place to see an even greater impact than the Brattle Group is projecting. And it’s not just us – ERCOT’s newest generation report predicts big wind and solar gains.

For one, the percentage of electricity provided by wind generation in the Brattle Group study estimates there will be about 25,000 MW of wind generation installed by 2019. In contrast, ERCOT is projecting installed wind generation in Texas is on track to surpass that amount 2 years early – with more additions anticipated thereafter.

Similarly, the amount of installed solar generation in the Brattle Group study peaks by 2022, but ERCOT forecasts solar will keep growing through 2031 – more than 40 percent higher than the figure used in the analysis.

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Plus, the Brattle Group study uses conservative numbers, assuming no technological changes or breakthroughs. But anyone with an eye on clean energy can tell you it’s a rapidly developing, exciting time. For example, energy storage – including compressed air energy storage and battery technologies – has the potential to address concerns regarding renewables’ intermittency through the ability to store and quickly release energy. The U.S. storage market grew 245 percent in 2015 over 2014, and experts predict full viability is not far off.

Finally, the Brattle Group study assumes energy efficiency will grow, resulting in lower electricity demand, costs, and pollution. Definitely true. But the study underestimates efficiency growth, predicting energy efficiency will reduce demand by only five percent by 2035. A recent analysis by Environmental Defense Fund and Southcentral Partnership for Energy Efficiency as a Resource demonstrates state building codes and existing utility programs – already in place – will add about seven percent savings in 2030. In other words, efficiency will play a bigger role in cleaning up our electric grid than the Brattle Group included in its study.

Economists and environmentalists clearly agree the market is leading Texas to a cleaner energy future – the results of the Brattle Group’s study even echo those of our report from last year. This transition will help protect our communities’ health from pollution, grow the state’s economy, and save this drought-ridden state substantial water. We look forward to ushering in, as the Brattle Group put it, “a cleaner, affordable, and more reliable electric grid that relies on Texas-produced energy.”

This post originally appeared on our Texas Clean Air Matters blog.

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