Report: Natural Gas Helped Drive Electricity Costs to Record Lows in 2017

The Business Council for Sustainable Energy, in partnership with Bloomberg New Energy Finance, has released its 2018 Sustainable Energy in America Factbook, an annual report aimed at augmenting “existing, reputable sources of information on U.S. energy,” with a focus on natural gas, renewables and energy efficiency.

And for the second year in a row, the report finds “electricity is making up a smaller share of household bills than ever before,” a fact that can be traced directly to the fact that natural gas has retained its position as the No. 1 electricity generation producer in the U.S. in 2017.

The report finds that Americans spent just 1.3 percent of their household incomes on electricity last year and 0.4 percent of their incomes on natural gas, helping drive overall energy expenditures to less than four percent of total household income — right in line with the record lows reported last year.

The report states:

“Consumers devoted a smaller share of their spending towards electricity than at any time ever recorded, while the total share of household expenses dedicated to energy costs also hovered near an all-time low. Power and natural gas prices remain subdued across the country, and contract prices for wind and solar continued to plunge.”

“… Greater energy efficiency and the continued availability of cheap fuels likely contributed to keeping electric costs a modest part of total consumer expenditures. Spending on natural gas also remained muted, as consumers directed just under 0.4% of their outlays to this resource, similar to 2016 levels.”

The report finds that average national retail electricity prices have declined 5.8 percent on average since peaking in 2008. Natural gas’ share of the electricity generation mix increased from 22 percent to 32 percent during that time frame, while record production made possible by shale development has pushed prices down roughly 60 percent.

As the report notes:

Natural gas has become increasingly affordable for consumers. Retail prices for the commercial sector averaged just $88/mmcf in 2017, down 42% over the past decade and near the recent trough observed in 2016. Gas prices for the industrial sector have followed a similar trajectory but continue to undercut commercial rates, averaging just over $44/mmcf in 2017.”

The report also finds that U.S. power sector greenhouse gas (GHG) emissions have fallen to their lowest levels since 1990, including a 4.2 percent drop from 2016 levels in 2017. As the below graphic from the report illustrates, power sector carbon emissions are 28 percent below 2005 levels. In fact, we’re approaching the Obama administration’s Clean Power Plan’s targets (even without the Clean Power Plan!) and are halfway toward our Paris Climate Accord commitments, even though the Trump administrations plans to withdraw from the Paris agreement.

Notably, the U.S. Energy Information Administration has previously reported nearly two-thirds of these reductions are attributable to natural gas.

These GHG emission declines have come at the same time U.S. gross domestic product — no doubt spurred on by the aforementioned record-low energy costs — grew 20.4 percent, an unprecedented decoupling trend.

Interestingly, the report notes progress in needed natural gas infrastructure build-out flagged in last year’s factbook as a key reason for natural gas’ continued popularity. But it also correctly notes that lack of progress on this front in New England continues to be an issue moving forward.

“The pipeline expansions in 2017 included 4.1 Bcfd in takeaway capacity from the Appalachian Basin; however, only 1% of this went towards relieving the natural gas constraints in New England.”

Boston, rather infamously, recently imported Russian liquefied natural gas, due in large part to New England’s refusal to build natural gas infrastructure to facilitate its considerable demand for the fuel and New York’s continued obstruction of needed pipeline projects.

Though much of this report touts the increased use of renewables for electricity generation — noting that renewables’ share of the electricity mix jumped from 15 percent in 2016 to 18 percent in 2017 — it is important to acknowledge natural gas is an essential backup for these intermittent energy sources and has actually accelerated this growth rather than impeded it. A 2016 National Bureau of Economic Research report found “that a one percent increase in the electrical generation share of ‘fast reacting fossil technologies’ (translation: natural gas) is associated with a 0.88 percent increase in renewable generation capacity in the long term.”

Echoing that report’s conclusions, this Business Council for Sustainable Energy report finds that as natural gas’ share of electricity generation increased from 22 percent to 32 percent from 2008 to 2017, the share of renewables in the power sector mix increased from nine percent to 18 percent.

This report is just the latest evidence that by reducing energy costs, lowering emissions and facilitating renewable energy growth, the shale gas revolution continues to benefit Americans on numerous fronts.

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