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Page added on January 18, 2014
Nuclear and Wind Energy Blocked by Cheap Natural Gas—For Now
To say that recent energy trends both in the US and abroad have been confusing is a considerable understatement. Over the last several years, concerns over carbon emissions and government policies have led to significant investment and growth in solar, wind and nuclear. But aggressive development of domestic oil and gas resources, including shale gas, tight oil, tar sands and deep offshore resources, have led to a resurgence in domestic production that has tilted the energy playing field, reshuffling the pecking order in the process. Of particular significance is the widespread adaption of natural gas for electricity generation. This has left both nuclear and wind, which were previously competing successfully against coal, in a position to compete against natural gas, which has been more difficult.
Given the falling natural gas prices, both nuclear and wind are having trouble competing. And, according to The New York Times, they’re fighting each other as well. Because there is no national, comprehensive energy policy, but rather only what the Obama administration calls an “all of the above” approach, which ends up diluting the both the effort and the investments needed. The market needs a clear signal because of the large investments involved. You can see this confusion at work also in the biofuels area, where we’ve seen a backing off of the commitment—under a lot of pressure from the oil industry, I might add. That could potentially scare away investors.
It’s true that falling gas prices have held back renewables. Prices were even lower in 2013 than they were in 2012, which were low enough to shake things up. It’s a very dynamic market comprised of two major segments that are quite different: power generation and industrial/buildings. In the power generation world, utilities own both coal and gas plants, and have the opportunity to switch back and forth between them by flipping a switch in response to price signals. So the price of coal will drop in response to the low price of natural gas and vice versa. So much so that gas, which accounted for 40 percent of electricity generation power in 2012, fell to 35 percent in 2013, due to the decline in coal prices.
In the case of both buildings and industry, fuel selection is a question of capital infrastructure that is not so easily changed. That is why some analysts say that oil and gas companies, seeing the looming threat of renewables to their profitability, are making a deliberate effort to drive natural gas prices down as a survival tactic, hoping to induce customers to make such investments, lured by the low gas prices, thereby locking in those sales for years to come. The use of gas for industrial purposes, according to the International Energy Association, has remained high this year for exactly this reason.
But the low prices are clearly not sustainable, as witnessed by Shell’s recent profit plummet due to production costs that are quickly going up. The extreme and controversial measures like fracking that are being used to extract increasingly inaccessible gas out of the ground are only going to get more expensive. I’ve written previously about Canadian geologist David Hughes, who says they’re going to spend more money getting the gas out of the ground then what they can sell it for at today’s prices. There’s obviously a price bubble built in there. Deborah Rogers has been calling out the Wall Street firms on all the merger and acquisition activity around this because there’s so much money to be made.
Until we have a comprehensive national energy policy that doesn’t simply bow to the highest bidder, but is based instead on the broadest measures of benefit, we can expect to see a continuing confusing landscape, dotted with each year’s and each region’s king of the mountain rather than the steady and concerted progress towards the rational goal that is calling so urgently to anyone who cares to listen.
6 Comments on "Nuclear and Wind Energy Blocked by Cheap Natural Gas—For Now"
rockman on Sat, 18th Jan 2014 5:05 pm
“Prices were even lower in 2013 than they were in 2012”. A great way to make yourself look credible: lie your ass off hoping no one bothers to fact check. During 2012 NG prices ranged from $1.89 to $3.35. During 2013 NG prices ranged from $4.03 to $4.84.
There’s probably more misleading statements and out right lies. So I’ll not waste more time reading this crap. FYI: during a period of much higher NG Texas significantly increased it’s wind power capacity with expansion still going strong. And this happened in a state with some of the lowest NG prices in the country. Maybe part of the explanation is that we have a much higher percentage of the population that has an intimate knowledge of our energy situation. In addition to abundant NG we also burn more cheap coal to create electricity than any other state. There may be a lot of hares in the US when it comes to the race with PO but Texas, despite our abundant fossil fuel resources, has clearly taken the role of the turtle in the contest.
All the alts will continue to compete with fossil fuels on an economic basis. But some folks have figured out how to at least stay semi-even. Trust me: no one in Texas is going to build out wind if they don’t think they’ll make a profit. We ain’t “doing it for the children”. LOL.
J-Gav on Sat, 18th Jan 2014 5:52 pm
In addition to Rockman’s critique, comparing wind and nuclear is like comparing apples and oranges. Nuclear is uncompetitive cost-wise with anything if an honest life-cycle, tooth-to-tail analysis is done.
DC on Sat, 18th Jan 2014 7:19 pm
ROFL! Nuclear is being blocked by NUCLEAR itself. The most dirty, toxic and incredibly expensive way to boil water ever devised. Although we are trying half-heartedly to one-up that with tinkering about with fusion. NG has nothing to do with nuclears issues. Nuclear is becoming MORE expensive, MORE complex and producing ever more piles of the most the lethal industrial wastes ever seen.
That is whats ‘hurting’ nuclear, not wind or even unnatural frak gas.
Mike2 on Sat, 18th Jan 2014 11:41 pm
@DC and J-GAV. You fools, nothing is more environmental friendly in its life-cycle than for example the French nuclear industry(closed-FC). nuclear is blocked by paperwork an politics, if its get “freed” it can wipe out most fossils from the market.
Kenz300 on Sat, 18th Jan 2014 11:59 pm
Quote — ” The extreme and controversial measures like fracking that are being used to extract increasingly inaccessible gas out of the ground are only going to get more expensive. I’ve written previously about Canadian geologist David Hughes, who says they’re going to spend more money getting the gas out of the ground then what they can sell it for at today’s prices.”
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Oil, coal and nuclear continue to rise in price as more expensive extraction technology is used. They also continue to damage the environment.
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste continue to grow in use and become cheaper every year as the technology improves and economies of scale kick in. We are nearing the tipping point where alternative energy sources are not only better for the environment but they will be better on price.
As China begins to seriously tackle their environmental problems by using more alternative energy sources they will drive down the cost and make alternatives even more competitive. That will increase the transition to alternative energy sources throughout the world.
Kenz300 on Sun, 19th Jan 2014 12:04 am
Nuclear energy was said to be “too cheap to meter”.
Now after Chernobyl and Fukishima we find out it is “too costly and too dangerous to produce”
Fukishima has a 40 year plan to dismantle and clean up the site and then will be required to store the nuclear waste FOREVER. What will FOREVER COST?
Chernobly is spending a billion dollars on another new containment structure 25 years after their disaster. There is no end in sight to the cost of this nuclear disaster and no cleanup will ever be done.