Renewables could mitigate price spikes in natural gas, says report
WASHINGTON, DC, US, May 4, 2005 (Refocus Weekly)
Expanded use of renewables and energy efficiency in the United States could reduce wholesale natural gas prices by 37% over the next 12 months, according to an updated study.
The original report prepared in 2003 by the American Council for an Energy
Efficient Economy (ACEEE) suggested that policy initiatives to increase
investments in renewables and efficiency could reduce gas prices by 20% within
five years, saving US$100 billion. The update, ‘Impacts of Energy Efficiency
& Renewable Energy on Natural Gas Markets: Updated & Expanded
Analysis,’ suggests the impact could be even higher.
“Compared with our 2003 study, this updated analysis reflects a further
tightening in natural gas markets,” it explains. “As a result, the price
response to changes in natural gas demand from energy efficiency and renewable
energy investments is greater than in the previous analysis.”
The update extends the analysis period from five years to 15 years, although a
significant price response is seen in the first five years with most of the
benefits coming from energy efficiency. “However, as we move into the second
five years, the importance of renewable energy increases, with renewables
becoming the dominant incremental effect in the final years of the study.”
“This study demonstrates more clearly than ever the price impacts and other
economic benefits impacts that would flow from a rigorous new policy commitment
to energy efficiency and renewables,” it concludes. “No single policy
strategy will achieve the results outlined here. Rather, a portfolio of policies
is needed to achieve quick and sustained savings from energy efficiency and
renewable energy sources.”
Among the policy strategies are Renewable Portfolio Standards and better
policies to deploy distributed generation technologies, as well as energy
efficiency performance targets for utilities, expanded federal funding for
renewable energy deployment programs at DOE and EPA, and public awareness
campaigns by state and national leaders, coordinated with increased funding for
implementation programs.
The impact of combing renewables and efficiency was greatest and would decrease
gas prices by $2.05 per Mcf (37%) in the first year, declining to a price
reduction of $1.19 (20%) by 2010 as gas markets come into better balance.
Initially, energy efficiency investments achieve three-quarters of the price
impacts of the combined investments with renewables but, as the installed base
of renewables increases after five years, “the price impact from the renewable
investments becomes more important, stabilizing long-term natural gas prices.”
“Energy efficiency and renewable energy are very complementary with respect to
balancing natural gas markets, with energy efficiency being of critical
near-term importance with renewable energy investments playing an important role
in the longer-term, diversified resource portfolio,” it explains. “Energy
efficiency and renewable energy do not by themselves constitute a sufficient
solution to long-term natural gas supply concerns” but the analysis confirms
that both efficiency and renewables “should clearly be a major part of the
nation’s energy resource portfolio. If they are not, we will experience higher
gas prices, market instability, and greater economic damage in gas-dependent
sectors of the economy.”
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