The Greening of Texas?

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The Greening of Texas? June 24, 2009 Jay Zarnikau, PhD Frontier Associates, LLC and University of Texas at Austin LBJ School of Public Affairs and College of Natural Sciences

Questions.... Can one of the leading states in fossil fuel production and consumption become a leader in renewable energy and energy efficiency? Can the transition be achieved through market mechanisms within relatively-competitive market structures? And without global warming concerns as a motivation? Solar

Consumption Texas ranks first in total energy consumption. Solar Source of data: US DOE EIA Texas consumes almost 12% of all energy used in the US. In 2005, Texas energy consumption exceeded that of California, the nation s second largest energy consumer, by 38 percent.

Consumption Total Consumption by Sector (Trillion Btu), 2005 Texas⁴ U.S. Texas Percent of Total U.S. Consumption Residential 1,618 21,652 7.5% Commercial 1,399 17,971 7.8% Industrial 5,812 32,733 17.8% Transportation 2,730 28,331 9.6% Total 11,558 100,687 11.5% Source: Information Administration Solar

Consumption Texas ranks fifth in energy consumption per capita. Million Btu 1200 1000 800 600 400 Solar Source of data: US DOE EIA 200 0 Alaska Wyoming Louisiana North Dakota Texas United States State

Trillion BTU Consumption 12,000.0 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0 Exhibit 3 Production Estimates by Source in Texas, 1960-2005 0.0 1970 1974 1978 1982 1986 1990 Year 1994 1998 2002 Source: EIA: http://www.eia.doe.gov/emeu/states/sep_prod/p7/pdf/p7_tx.pdf Coal 1 Natural Gas 2 Crude Oil 3 Nuclear Electric Power 4 Solar

Texas Balance If you count Btus, Texas became a net importer of energy in the 1990s. But if you consider the value of energy imported and exporter, we are still a net exporter of energy resources by a long shot. Solar 18,000.0 16,000.0 Trillion Btu 14,000.0 12,000.0 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0 0.0 Total Production Estimates (Trillion Btu) Total Consumption Estimates (Trillion Btu) 2005 2000 1995 1990 1985 1980 1975 Year

Texas leads the nation in CO2 emissions by a very wide margin. Million Metric Tons in 2005 700 600 500 400 300 200 100 0 625 396 284 274 263 250 238 212 192 186 183 TX CA PA OH FL IL IN NY MI GA LA Solar Source of data: US DOE EIA

Texas CO2 emissions have been trending upward generally. 700.0 650.0 600.0 550.0 500.0 Source of data: US DOE EIA Texas 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Solar

But Texas share of U.S. CO2 emissions has declined slightly. 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% Source of data: US DOE EIA 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Solar

Texas Policies Highly restructured electricity market. Very little federal regulation over electricity matters. Considerable competition in natural gas markets. Laissez faire political attitude. Among policy makers, some skepticism regarding global warming. Solar

Can Texas Change Course? Can Texas change course? Can and help Texas regain it s leadership in? Solar

Solar Source of data: US DOE EIA

Initiatives to develop the state s wind power potential have proven extremely successful: A Portfolio standard (goals for renewable energy) A credit trading program, enabling Retail Electric Providers to obtain their share of the required credits as a reasonable price Yet, some problems have arisen: Inadequate transmission to move wind power from the best sites (mountains in west Texas, the Panhandle, and coast) to population centers. $5 billion investment is needed. Some market gaming by wind generators (although these problems have been largely fixed.) Wind contributes little to summer peak generation requirements in Texas. Inability to predict and control wind power has led to problems in operating the state s power network. In the presence of transmission bottlenecks, wholesale electricity prices can go negative in west Texas. Solar

Solar Source of map: Texas PUC

2005 Legislative Requirements to Remove Transmission Constraints to Development Section 39.904 (g) The (Public Utility) commission, after consultation with each appropriate independent organization, electric reliability council, or regional transmission organization: (1) shall designate competitive renewable energy zones throughout this state in areas in which renewable energy resources and suitable land areas are sufficient to develop generating capacity from renewable energy technologies; (2) shall develop a plan to construct transmission capacity necessary to deliver to electric customers, in a manner that is most beneficial and cost effective to the customers, the electric output from renewable energy technologies in the competitive renewable energy zones

Potential Wind Resource 12000 2700 6900 7900 4600 10600 9600 6000 8300 6200 4700 2900 3000 2200 ERCOT sponsored a study to identify areas with best wind resource potential Identified highest CF 100MW sites and clustered into 25 areas Identified wind capacity potential (in MW) with >35% capacity factor in each area is shown Source: Ercot

Network Upgrades From the perspective of network upgrade needs, there are generally four sets of potential CREZs 1. Coastal (Area 24) 2. Mc Camey Area (Areas 5&6) 3. Abilene Area (Areas 9,10,12 &14) 4. Panhandle (Areas 2 & 4) $5 billion price tag. Source: Ercot

Wind power generation is considerably below the rated capacity of the wind turbines. Solar Source: Ercot

Wind generation in west Texas, investment tax credits, and transmission constraints have combined to create some bizarre pricing patterns in the state s wholesale electricity market. $1,600 $1,400 Balancing Prices in Various Zones on June 3, 2008 Solar Dollars per MWh $1,200 $1,000 $800 $600 $400 $200 $0 15 -$200 145 315 445 615 745 915 1045 1215 1345 1515 15-Minute Interval 1645 1815 1945 2115 2245 Houston North Zone West Zone Source: Ercot

Solar Solar Source: Texas Resource Assessment

Thermal/Photovoltaic Technologies Solar

Animal Wastes Crop Residues Forest Products/Mesquite/ Cedar Grain High Tonnage Sorghums Microalgae Municipal Solid Waste / Urban Waste Oilseed Crops Sugar Cane/ Cane Sweet Sorghum Switch Grass Solar

Texas has the ability to be a U.S. leader in using renewable geothermal resources in a range of applications. Solar

Temperature of Underground Formations Temperature of Formations at 10,000 ft Temperature of Formations at 12,000 ft Solar Source: Texas Resource Assessment

Texas Resource by Category Solar

From Water ENERGY FROM TEXAS WATER RESOURCES HYDROPOWER OCEAN SALINE GRADIENT ExistingSite Undeveloped Hydro Feasible Undeveloped Small Hydro and Low Power Ocean Thermal Gradients Tides Waves Salinity Gradient Solar Pond RED/PRO at freshsaline interface Solar Source: Texas Resource Assessment

Investor-owned electric utilities are required to meet a goal for energy efficiency. The goal is consistently exceeded on a statewide basis, but some individual utilities may fall short. Austin has been a leader in this area. Solar

0 20 40 60 80 100 120 140 160 180 200 2007 2006 2005 2004 2003 Source: http://www.texasefficiency.com/report.html Demand Savings (MW) Goal Achieved Solar

The Challenges Faced as we Move Toward Greater Reliance upon s and Cost of Investments Accommodating Intermittency Transmission of to Markets Valuing Distributed Generation Incorporating Storage Jobs and Economic Development Solar

In theory, Texas has the potential to satisfy all of its demand (11.556 Quadrillion Btus) for energy with renewable energy resources. Solar RESOURCE SOLAR TOTAL PHYSICAL RESOURCE (quads/yr) ACCESIBLE RESOURCE (quads/yr) ENERGY DENSITY: GOOD TEXAS SITE (MJ/m²/yr) 4,300 250 8,000 X X PRIMARY ENERGY USES ELECT. HEAT MECH TRANS. NON ENERGY USES WIND 22 7 500 X X BIOMASS WATER (as electricity) 9 0 500 X X X Food, feed, and fiber 0.10 0.02 10 X X X Water supply: flood control GEOTHERMAL Source: Texas Resource Assessment 400,000 81,000 600 X X

Findings So, is Texas a green state or a brown state? Texas leads in total energy consumption, CO2 emissions, and the use of coal as a generation fuel. The state s conservative leadership has expressed little concern over global warming to date. But, Its wind power industry is the nation s largest and will increase in scale considerably in the coming decades. The state s vast potential for solar power is about to be tapped. resources may also have considerable potential. efficiency efforts have proven efficient and effective. The oil and gas and semiconductor industries which enriched the state in decades past are slowly being replaced with green industries focused on developing wind power, solar power, and batteries. Solar

Findings These new industries are aided by a favorable entrepreneurial and investment climate. To date, this state s policies to develop renewable energy and energy efficiency are off to a good start. Gains in these areas have been made within electricity and natural gas markets which have been restructured to foster competition by setting goals and using market mechanisms to achieve the goals. What happens in Texas is not merely of importance to Texans. The success of any world wide initiatives to reduce greenhouse gas emissions and reduce reliance upon fossil fuels is greatly impacted by what happens in Texas, in light of its contribution to energy consumption and CO2 emissions. Solar

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