Fracking: Energy Abundance or Crisis?

August 11, 2014 | 3:17 pm
Mike Jacobs
Senior Energy Analyst

As the boom in fracking wells in the northern Appalachian Marcellus shale region now produces seven times more natural gas (methane) than in 2010, the implications for policy and impacts on the energy market are starting to show.

There are many repercussions in this region that go along with supplying 20 percent of the gas produced in the continental U.S. However, in the past decade, sustainable energy supplies have also grown in similar amounts. Wind power in the U.S. grew seven times from 2006, U.S. solar increased 10 times since 2009, and customer-based demand response in the Northeast grew seven times from 2006. We enjoy an abundance of energy supplies, but which we choose will affect our health and the well-being of our communities.

A look at the gas boom

The market reaction to cheap gas is not all good. For example, during the January 2014 polar vortex, grid operator PJM saw 20 percent of electric power plants unable to produce. Many of those power plants burn natural gas. In the market, there is a dramatic rush to use gas to fuel electricity generation, which has relied on gas pipeline capacity that has not been expanded.

Cheap gas, and competition from demand-side responses, has led generators to cut corners, reducing staff and maintenance, says PJM. The negative impacts on reliability from over-reliance on natural gas have spread with the gas boom.

Clampdown impacts clean energy

To improve electric system reliability in response, grid operators are tightening their requirements on power plant performance. This is not a new trend, and the intentions are to make comprehensive reforms to reward good performance and penalize the plants that do not produce when needed. In the past, the focus was just on the summer afternoons and evenings when electricity demand was highest. New efforts motivated to include winter needs are more complex and opaque. Wind and demand response have demonstrated added grid support in winter, but the rule changes may not count this.

It is unclear, but the indications are the penalties and incentives in these capacity performance rules will result in less participation by demand response, wind, and solar in the formal counting of supply resources. ISO-NE’s proposal will cause wind farms to receive no incentive for any energy provided during a scarcity event. Worse, they could potentially face a massive charge even if they were performing at or above their obligation. See slide 18 in particular in the ISO’s presentation. State renewable energy standards are the best answer to re-directing these technical mistreatments.

More bad reactions to change

The growing supply of non-fossil fuel sources of electricity has triggered push-back. Court challenges and other efforts to roll back the value and compensation of customer-side choices, demand response, solar, and efficiency show these sustainable alternatives are real competition to the old fossil fuels. California, with its renewables portfolio and growing solar, and Texas wind are reducing the use of natural gas. However, a decision by the U.S. Court of Appeals for the DC Circuit put the hurt on payments to demand response from wholesale markets, leaving electricity consumers waiting for states (or further court reviews) to clarify a very important part of the market.

In response to this court decision, the Independent Market Monitor for PJM (think Sheriff Joe, with a badge and bushy mustache) made a report showing the participation of consumer-based efficiency and demand response saved all PJM-region consumers between $9 and 16 Billion. Sherriff Joe qualifies this as “what the market results would have been, holding everything else constant.” That is a significant simplifying assumption, but decision-makers should get the hint that this is a big deal for consumers.

What about renewable energy?

Solar skyrocketing (Source:

Solar skyrocketing (Source:

The huge growth in solar and wind demonstrate that the energy supply is available, but it is policy and infrastructure that determine what we use. Wind farms completing construction this year just in Texas will add over 8,000 MW, contributing significantly more than two nuclear plants and further cutting the use of natural gas in power plants. Texas policy has encouraged, and economics have propelled, wind development.

Solar is seeing more installed in the U.S. in the last eighteen months than in the 30 years prior, and is just getting started. UCS reports that solar is viable everywhere, and economical on rooftops in half of U.S. states.

Handling the boom in renewables requires infrastructure and adaptation by grid operators, no different than other abundant energy supplies. Two hefty documents describe this. The DOE Wind Vision report coming soon, and a new book “Renewable Energy Integration” edited by L. Jones describe how grid management both unlocks renewable energy and brings consumer and reliability benefits. The Jones book provides examples from around the world. In the U.S., estimated cost for pipelines needed for the gas boom is higher than what is needed for renewable energy. The Jones book also points to power system flexibility, contributed from both supply and demand sources, as critical to achieving a sustainable energy supply with very high renewable energy content.

What we should do

Get the facts, and get the votes. Renewable energy is available, and your legislators should know your preference for infrastructure and policy.