Jim Walker remembers when nuclear-energy-generated electricity was going to be too cheap to meter and when a law prevented the use of U.S. natural gas supplies for electricity generation.
There is a place for nuclear but not coal, according to Walker. “You’d want to keep the nukes,” he said, “but you’re going to have a hard time keeping the nuke output where it is. Coal is going to be gradually phased out. I don’t see the breakthroughs coming in CCS (carbon sequestration) that you see in gas and wind and solar.”
Walker said wind and natural gas will lead because they are economically competitive. But with Congress denying the domestic wind industry an extension of its vital production tax credit (PTC), much new wind development will go abroad in the near term.
Withholding the PTC, Walker said, is a mistake, because “it’s a perfect example of a federal policy that you know works. You turn the switch on, as Congress did in 2001, 2003 and 2005, [and] you go to a three-billion-dollar wind industry. You turn the switch off, as Congress did in 2002 and 2004, you get a half-billion-dollar or less industry. You don’t have that in drug policy, in foreign policy. It absolutely works.”
Without the PTC, the U.S. wind industry will see “a major collapse” in 2013. “The sad part of it is, this is after four or five years of pretty steady growth in which we have attracted investments in the manufacturing sector.” Companies that “get burned” will say, “‘Listen, we better not go back into that U.S. market.’”
Modern wind technology “is good enough and universally available enough so that there is going to be a series of countries that open up,” according to Walker, who pioneered development in Turkey, Greece and Mexico. “You have to have all the pieces in place to attract international capital.” Turkey, Brazil and South Africa, he said, are ready to “take off.”
“Every utility has resistance to a supply they don’t control,” he said. “And you can’t control wind. They go through certain stages of denial,” he recalled, until “they gradually learn” that, with planning and upgraded systems, “integrating two or three percent wind is easy, 10 percent is quite doable, and you can get up to 20 percent or 30 percent.”
When grid operators get used to wind’s “zero fuel cost,” it becomes the first energy supply they load in, Walker said. “It’s not baseload in fact, but it’s your base load.”
In the U.S., natural gas has become too cheap to resist as the result of its decoupling from the price of oil.
“That’s a very significant development in the last couple of years. For a very long time, there was a close correlation in price,” he recalled. Now, “you have oil going from $147 down to $30 and back up to $120 and gas prices are flat.”
The emerging consensus, Walker said, is that “technological breakthroughs in methods of getting natural gas out of shale deposits make it look like there will be a very low long-term price for natural gas in North America.” This, he pointed out, will give the U.S. “an international competitive advantage because China does not have a source of domestic natural gas.”
Natural gas does have challenges. “The environmental consequences will increasingly be taken seriously,” Walker said. Hydrofracking must be done better. “The other problem with natural gas is that it’s twice as clean as coal at the burner tip, but methane is 25 times as potent a greenhouse gas as carbon dioxide,” so “gas might be dirtier than coal.”
But, Walker said, “natural gas, at $2.50 per MMBTU, is probably four cents a kilowatt-hour” and “it is something utilities love. They can turn it off and on and it appears to be greener than coal, certainly to the utility. And it doesn’t have the criteria pollutants and the mercury and all the stuff that coal plants do have.”
“The one public number,” Walker said, “is that Xcel Energy signed a power contract with NextEra Energy for 2.7 cents per kilowatt-hour plus some escalation that would bring the levelized cost to ratepayers to maybe 3.3 cents per kilowatt-hour. If you levelize the 2.2 cents per kilowatt-hour PTC over twenty years, it is about 1.7 cents per kilowatt-hour, so that’s about five cents per kilowatt-hour unsubsidized."
“The portfolio of the future,” Walker concluded, “is efficiency, gas, wind and solar. All of which we can scale. If somebody was the master resource planner for the country, that would be the plan.”