Natural Gas or Renewables? Who’s Getting the Job Done Today?
Natural gas versus renewables is the root issue dividing natural gas supporters and opponents. Are renewables getting the job done? Is natural gas getting the job done? Let’s take a look.
Natural gas is helping our economy in several different ways. Job and wealth creation from natural gas development has been documented over and over again (see this post for the recent example). What we haven’t done adequately is to compare natural gas with renewables on the same basis. Natural gas, as it turns out, creates jobs and wealth at rates far surpassing renewable energy sources and is every bit as clean and safe. Let’s review the facts.
Economic Contributions of Natural Gas
The Marcellus Shale Commission recently assembled some of the employment numbers for Pennsylvania’s natural gas industry. This data makes it as clear as can be, the natural gas industry has carried the economy of much of the Commonwealth, that part with natural gas development, through some very difficult times. Here are the essentials:
Employment (2009Q2 to 2012Q2):
• Core industries were up 19,945 (+182.8%).
• Ancillary industries were up 16,037 (+8.2%).
• All industries increased 111,651 (+2.0%).
• 2012Q2 Marcellus Shale related industries total employment was 243,116.
Wages (2011Q3 through 2012Q2):
• The average wage across all industries was $48,087.
• The average wage in the core industries was $89,116, which was approximately $41,029 greater than the average for all industries.
• The average wage in the ancillary industries was $65,122, which was approximately $17,035 greater than the average for all industries.
New Hires (2009Q3 to 2012Q3):
• Statewide new hires in the core industries were 122.7% higher in 2012Q3 than in 2009Q3.
• Statewide new hires in the ancillary industries were 30.0% higher in 2012Q3 than in 2009Q3.
• Statewide new hires across all industries were 11.3% higher in 2012Q3 than in 2009Q3.
• In 2010Q2, 71% of new hires in the core industries were PA residents; in 2011Q2, this increased to 74%. 2012Q2 research is underway.”
Economic Contributions of Renewables
Now let’s look at the renewables side of the ledger. A study by the Beacon Hill Institute at Suffolk University, in Boston, which came out recently analyzes the impacts of Pennsylvania’s Alternative Energy Portfolio Standard (AEPS) – a fancy name for a state mandate enacted in 2004 requiring utilities in the Commonwealth to generate 8% percentage of electricity from renewable sources such as solar, hydro, wind and biomass. One might ask why states are involving themselves in economic decisions better made by utilities themselves, but the reason, of course, is because they can, they want to be politically correct and the voter seldom makes the connection between such political decisions and their electric bills. The Beacon Hill study took a hard look at this issue from this perspective, analyzing the benefits and costs of such mandates, as well as assumptions being used by the Energy Information Administration. The second paragraph sort of sums it all it up, doesn’t it?
Since renewable energy generally costs more than conventional energy, many have voiced concerns about higher electric rates. A wide variety of cost estimates exist for renewable electricity sources. The EIA provides estimates for the cost of conventional and renewable electricity generating technologies. However, the EIA’s assumptions are optimistic about the capacity of renewable electricity to generate cost‐efficient and reliable energy.
Governments enact AEPS policies because most sources of renewable electricity generation are less efficient and thus more costly than conventional sources of generation. The AEPS policy forces utilities to buy electricity from renewable sources and thus guarantees a market for them. These higher costs are passed on to electricity consumers, including residential, commercial and industrial customers.
Let’s look at what the data from the study said a little more closely, focusing first on the costs of Pennsylvania’s renewables mandate.
Notice the study has concluded the renewables mandate will cost Pennsylvania electric ratepayers somewhere between 8.0% to 15.2% more in electricity costs by 2021, eight years from now. This is the real cost of renewable energy. Obviously, some incentives for renewables to encourage research and development and advance the overall cause may make sense, but are ratepayers prepared to pay those kinds of costs for the thrill of being green? One wonders, especially when there are cost-effective alternatives such as natural gas available. But, this isn’t half of it. Consider these study findings regarding the economic impacts:
Notice the levelized cost of electricity for natural gas is lower than anything but biomass and hydroelectric generation, both of which can be large users of land. Notice, also, the income and jobs impacts, which are supported by other data sources. Let’s look at a Marcellus Shale Commission (MSC) fact sheet, for example, to examine the jobs expected in the coming years for natural gas development.
Natural gas will, in other words, increase the job numbers while mandating premature switching to renewables would drastically decrease them.
The Beacon Hill study also predicts the renewables mandates will decrease investment. Meanwhile natural gas related companies are included in investment portfolios everywhere, including New York State’s pension funds. Below is a list of some of the natural gas related companies we see and hear about often, along with the holdings in each by New York State, along with the capital gains made on those stocks.
The Comptroller’s investments as a whole have enjoyed capital gains of 43.3% over the period held as of March, 2012, but notice natural gas related companies have produced gains of 125.1% – nearly three times the capital gains associated with the pension fund as a whole. Compare that to expected declines in renewables.
There have, in fact, been some spectacular losses in renewable energy. Here’s a recent headline we couldn’t help noticing, for example:
Hedge Fund Wins Big Bet against Solar
In a quarterly newsletter, the hedge fund Greenlight Capital, Inc. announced that it has closed its short position in First Solar, “one of the most profitable shorts in the history” of its funds. Stock prices for First Solar, which received a $1.4 billion stimulus loan from the same program that propped up Solyndra, plummeted primarily because Germany rolled back solar power subsidies.
These examples and the Beacon Hill study demonstrate the renewables industry has a long way to go before it can do what natural gas does for our economy. The number of jobs created in that industry is also tiny compared to the number of jobs in the natural gas industry. Renewables have a future, to be sure, but that future is only going to come incrementally and natural gas is the bridge to get us there and the backup energy source for the inherent difficulties associated with the fact the sun doesn’t always shine and the wind doesn’t always blow.
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T. Boone Pickens famously called gas “A bridge to the future” meaning that gas would allow us to survive as we switched over to green energy. I would suggest that gas is a great bridge and that we should still work on green energy because someday we will run out of gas. After we run out of gas is a bad time to start thinking about green energy. Gas works very well with wind and solar because it can be fired up on those still nights when wind and solar are not producing. Such a joint effort would also extend the life of gas (and oil) fields which I would submit are also not bad outcomes.
You agree that gas is the bridge and is good back-up for wind/solar, yet you spend most of the article bad-mouthing wind/solar when I think that we should all be working to support alternative energy — and gas.
It’s a matter of timing. The mandates impose uneconomic choices. Renewables will happen, are happening, but forcing the issue leads to Solyndras and hedge funds making fortunes betting against them.
It is surprising to no one that renewables are inefficient, expensive, and generally unprofitable. That picture only changes when you start to incorporate costs that are now externalised from the fossil fuel market — security, environment, infrastructure and the risk of sudden scarcity.
In pure energy terms, a typical solar installation is to a gas-fired turbine as a teaspoon of rice is to a Porterhouse steak. If anyone tells you that solar and wind can sustain our current level of energy consumption — you can safely ignore them. Even at their maximum efficiencies, they are a feeble substitute for fossil fuels, which are packed with energy like no other source.
But both Ms Colley and the Beacon Hill paper she cites fail to acknowledge the security, environmental and economic imperatives behind renewable energy. The more complete our reliance on fossil sources of energy, the more vulnerable we are, and the greater the likelihood of crippling scarcity crises into the future.
If we wait until prevailing market forces dictate a move toward renewable energy, we won’t get very far until the price of oil is several hundred dollars a barrel. We must start bearing the cost and the pain of this transition well before fossil fuel production peaks, or we undermine the security and birthright of our children. That requires meaningful policy and conscious expenditure, now.
There may be better ways to to do it than Pennsylvania’s renewables plan. Thank God we live in a democracy, at least. But any successful policy is going to entail an uphill struggle against entrenched market structures, with all the vigorous political conflict that implies.
This is an ingenuous portrayal of an industry, who has to compete with the monster business of fossil fuels, but will eventually be a larger part of where we get our power, regardless of premature death notices . There are many success stories in the renewable energy business if one takes the time to look. G-20 countries are all adding % of renewables YOY. Renewables biggest enemy is political. NG is a crucial part of the energy mix and will be. It is also the “play of the week” and if extraction conservation is carefully managed, should last a few decades. The price right now will not last. NG companies need higher prices to survive and sooner than later, the consumer will be paying more to heat their homes and cook with NG, so let’s revisit this article in a year or two and compare.
http://www.newenergyfinance.com/PressReleases/view/208
http://en.wikipedia.org/wiki/Merit_Order
http://www.smartplanet.com/blog/intelligent-energy/renewable-energy-scorecard-how-the-g20-nations-stack-up/16691
No, the biggest enemy to renewables is cost, efficiency, scale-ability, reliability and the amount of energy produced. It’s hard to argue its political while the President and Congress have provided hundreds of billions in subsidies in just the past few years and just restored the PTC and others. Of course renewables have a role but this idea they can meet all of our energy needs is misguided and misplaced
JD……..anyone who thinks any one energy source can meet the world demand should have their head examined. The only three that come close and in order are: Coal, oil and NG…..with nuclear a distant 4th. No one is really saying renewables can do it all. That’s just not feasible and it’s expensive because it’s newer technology and as that technology progresses and becomes more popular (and EID stops highlighting it’s problems) it will become cheaper for public consumption. I’m not really sure why EID harps on this technology. It’s share of the market is minimal and comparing it to the big “3″ is ridiculous and pointless. So what if folks are saying renewables will grow and some how take over fossil fuels……let em, as anyone who knows the real facts, knows that will be 50, 100 years from now if ever……if we are still here (North Korea, Iran) ya know, crazy SOB’s. Then no energy source can save us. Renewables roll is crucial at some point, but when that point is, is hotly debated, but it is not a threat to the huge fossil fuel industry, they get their share of Gov. welfare handouts, which I always find funny when they are the richest corps. on the planet. I have no problem paying taxes and having some go to renewables. There are a lot worse things I feel my good hard earned money gets squandered by the Gov. on.
Oh……and if the Gov. wanted to subsidize me and put solar panels on my roof……..I’d do it in a heartbeat. Anything to get off the grid. I’m not holding my breath though :)
some things people should be aware of with FREE energy: http://www.jlcny.org/site/index.php/news-articles/32-frontpage/1549-renewable-vs-natural-gas-
here’s a direct link to article attachment at link referenced above:
http://www.jlcny.org/site/attachments/article/1549/If%20Not%20Natural%20Gas%20POWERPOINT-rev012013.pdf