The recession has had a significant effect on renewable energy projects like wind farms. But it is not only wind energy that is suffering. As prices for conventional energy decline, so does interest in energy conservation and in nuclear plants, experts say.
The recession has had a significant effect on renewable energy projects like wind farms. But it is not only wind energy that is suffering. As prices for conventional energy decline, so does interest in energy conservation and in nuclear plants, experts say.
As Tom Zeller Jr. and I wrote in Monday's Times, the recession has had a significant effect on renewable energy projects like wind farms. But it is not only wind energy that is suffering. As prices for conventional energy decline, so does interest in energy conservation and in nuclear plants, experts say.
Part of the problem is the price of natural gas, which has fallen as demand for electricity has declined. Generators need less gas, and industries have used less as their output has shrunk. The price is also low because new drilling techniques have opened the promise of vast new supplies. But beyond depressing the price of electricity, low prices may also reduce the incentive to economize on natural gas consumption.
"One can't deny …
... more [truncated due to possible copyright]As Tom Zeller Jr. and I wrote in Monday's Times, the recession has had a significant effect on renewable energy projects like wind farms. But it is not only wind energy that is suffering. As prices for conventional energy decline, so does interest in energy conservation and in nuclear plants, experts say.
Part of the problem is the price of natural gas, which has fallen as demand for electricity has declined. Generators need less gas, and industries have used less as their output has shrunk. The price is also low because new drilling techniques have opened the promise of vast new supplies. But beyond depressing the price of electricity, low prices may also reduce the incentive to economize on natural gas consumption.
"One can't deny lower prices are going to reduce the incentive for people to spend money to save energy,'' said Andrew deLaski, executive director of the Appliance Standards Awareness Project, a Boston-based nonprofit that advocates higher efficiency for appliances that draw electricity or use gas directly.
"I do think we'll see less efficiency than happens when we see high prices,'' he said.
In addressing the problem that energy savings are worth less than they would be in a higher-priced market, efficiency proponents have focused on rules to keep the least efficient appliances out of the marketplace.
Low prices will also slow down the construction of new nuclear reactors, experts in that industry say. Gas is sold by a unit of a million BTU's, and the price has declined recently from as high as $13 to just over $3 at times. If gas prices were still near their peak, "you'd have utilities screaming to build nuclear plants,'' Alan Hanson, executive vice president of Areva NC, the American subsidiary of the French nuclear firm, argues. "At $3 to $4, it's not as attractive.''
By the time a reactor ordered today could be in commercial use, about seven years, the price of natural gas could be back up in the $13 range, he noted. "It's a really difficult decision to make," he said.
As for wind, said Edward Zaelke, a project finance expert at the Los Angeles office of the law firm Chadbourne & Parke, "I think if natural gas were still at $12 per million BTU, the growth of renewables would be far beyond what we could actually manufacture right now."
Low prices have choked off one of the two ways that wind farms are built. When natural gas prices were higher, some developers could build "merchant" plants, which sold their output into a daily power auction. What survives are plants with power purchase agreements, or contracts in which utilities agree to buy electricity for an extended period.
Tom Carnahan, the president and chief executive of the Wind Capital Group, a St. Louis company that builds wind farms, said he used to sell electricity through merchant projects, borrowing money for such ventures when electricity and gas prices were higher. But no one will lend money for a merchant wind project now, he said.
In 2008, the average price of a megawatt-hour on the wholesale market in New York was $95, but last year it was $47. Prices have been trending higher this year than last, but no one is sure when they will recover to pre-recession levels.
Eliot Roseman, a vice president of the consulting firm ICF International and formerly an energy official in the Carter administration, summed up the conundrum of lower prices' standing in the way of a cleaner electricity system.
"We constantly have this love affair with renewables and the desire to let the market work,' he said, "and those two things are hard to match up.''