ENERGY MARKETS:

Shale gale is blowing business to wind power in Texas -- report

HOUSTON -- Texas' natural gas boom is proving a boon to the state's substantial wind power energy industry as well, a consulting house concludes in a new report.

The Brattle Group, commissioned earlier to assess Texas' expanding power grid and electricity market for the Electric Reliability Council of Texas (ERCOT), took aim at comparing and contrasting the state's fleet of natural gas power plants and its massive wind farms. In "Partnering Natural Gas and Renewables in ERCOT," written for the Texas Clean Energy Coalition, analysts took stock of how well wind has been performing ever since the shale gas revolution transformed the energy market here.

As natural gas prices have fallen, the cost of electricity provided by power plants has also fallen, and many observers suspect this is making things more difficult for renewable energy providers across the country.

But that's not happening, at least in Texas, the report's authors say. Rather, they see this state as providing a model for how the nation as a whole can dramatically reduce air pollution and greenhouse gas emissions.

The Brattle Group's analysts conclude that wind power has been doing nicely in Texas despite the rush of new shale gas supplies.

While the report concedes that the industry still depends on tax credits and other government support, wind developers have proved themselves adept at weathering recent financial storms. And ERCOT finds that wind energy is providing more power for the grid than initially expected, helping to somewhat placate fears that Texas could face power shortages during peak summer periods as too little new generation gets built to meet the rapidly growing population here.

The report authors suspect that wind is still popular because, once built, the fuel source its wind turbines employ is free, making it competitive no matter how low gas prices fall. The same holds true for solar power, which is much less broadly distributed in Texas than wind but is nonetheless rising in popularity, particularly at the municipally controlled utilities in San Antonio and Austin.

"Recent ERCOT analysis found wind and solar resources to be competitive with natural gas over the next 20 years under a number of plausible scenarios," Brattle Group analysts write. "In the short run low gas prices are extremely unlikely to change the fact that existing renewables will nearly always have priority over gas-fired plants since, due to the absence of fuel costs, their variable costs are lower than those of essentially all other resources."

The authors caution that it's impossible to predict changes in future costs of gas relative to renewable resources, making it difficult to see how the gas-wind relationship plays out in ERCOT's grid over the long run. But currently the two power sources are proving to be complementary, they conclude, particularly as the costs of building new wind and solar power have fallen.

Big capacity, support

Texas is estimated to hold roughly 12,000 megawatts of wind power capacity, far more than any other state. Most wind towers can be found in the northwestern side of the state or along the Gulf of Mexico coastline. Some developers are pushing to have Texas host offshore wind power as well.

The wind industry enjoys fairly broad support in Texas, even among the oil and gas community. The seamlessness with which Texas has added so much wind-generating capacity to its grid could serve as a lesson for other states seeking to emulate it, Brattle Group researchers say.

"Having ramped up in particular wind generation faster than any other state, Texas' ability to integrate this renewable resource into its existing power system has the potential to be a model for other states as they see the share of wind in their electricity supply increase," they said.

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