A recent study from the University of Texas Austin’s Energy Institute has made it easier than ever to see how the American energy landscape has changed in the last decade. The study, which includes an interactive map of the U.S. broken down country by county, shows relative cost at $/kw and $/MMBtu in order to illustrate which forms of power are most competitive in different parts of the country.
The map makes one thing clear: in current market conditions, wind and natural gas are far and away the most cost-effective means of generating electricity in most parts of the country. Wind dominates the Great Plains, from Kansas to North Dakota, as well as western Pennsylvania. Natural gas is predominant nearly everywhere else, though parts of northern Minnesota, Wisconsin and the East Coast could be well served by nuclear power plants, once possible carbon prices are taken into account.
The study measures “externalities,” including the potential price of carbon, as well as “availability zones,” which measures whether certain energy sources could be built in a cost-effective fashion. Factoring this in, it’s clear that solar power could be effectively built up throughout the American southwest while nuclear power could expand in the Eastern United States.
The UT study uses the Levelized Cost of Electricity (LCOE) model, in order to measure both direct and indirect costs. In this way, the study attempts to measure what energy sources are cheapest in current conditions and over the long-term: coal, which remains cheaper than natural gas when measured in $/MMBtu terms ($3.17 and $5.07, respectively) is nearly five times more expensive when measured in dollars to kilowatts ($4861.80 and $1021). Wind, which has no measurable $/MMBtu, given that no fuel is actually involved, is the cheapest overall, but the study estimates that wind power is only cost effective in areas where solar power is un-competitive and where population density is lower. Related: After Burning Himself On The OPEC Deal: Gartman Says ‘’Buy Oil’’
The study comes as no surprise, given that wind, solar and natural gas are likely to make up the majority of new energy additions in 2016 and 2017, according to the EIA. While the UT study doesn’t take into account state regulations, such as subsidies for wind and solar power, as well as recent regulations passed to limit carbon emissions from coal plants, it paints a fairly accurate compelling picture of future US energy infrastructure. Coal, for instance, looks particularly uncompetitive when measured against its rivals. As one analyst has noted, should several restrictions to coal be lifted and natural gas use limited (neither of which are very likely to happen), coal would still be unable to compete with natural gas.
The study is still a work in progress, and it doesn’t take existing energy facilities into account. Rather, the UT analysis measures how cheap existing sources of energy would be in current conditions, without impediments. Related: OPEC Jump Starts Oil Bull Market
Renewable energy advocates have reason to be excited about the future, given that recent data suggest economic growth in the U.S. may finally be decoupling from carbon emissions. A study from the Brookings Institute found that the US has successfully decoupled since 2014, and that major increases in GDP within states where the shale boom has been most notable, such as North Dakota and Texas, came with only small increases in carbon emissions. Other states saw significant decreases in carbon emissions while GDP continued to grow along steady, acceptable lines.
Among large nations, the United States has been most successful in decoupling economic growth from carbon emissions, according to the World Resource Institute. The International Energy Agency, which examines energy trends worldwide, found that carbon emissions were steady in 2014 and 2015, while global GDP increased at around 3%. The Brookings study highlights the importance of individual states, and illustrates that once trends are in place (increased use of renewables, growth of natural gas, greater energy efficiency, slower growth in energy consumption), it will be up to states and cities to emphasize policies which further such trends.
By Gregory Brew for Oilprice.com
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