| When the Public Utility Commission of Texas (PUCT) | | | | tax exemptions for the equipment that captures, |
| helped set up the rules for Texas electricity | | | | transports, and stores their carbon dioxide. It also |
| deregulation, they noted that ”...the market prices | | | | gives local taxing authorities the option to defer |
| of generation will likely be set by gas-fired | | | | taxes in the early years of a project’s |
| generation, and as such, it is appropriate to apply the | | | | development. The first three projects that can |
| changes in the market price of natural gas to the | | | | achieve a 70% carbon capture rate will qualify for an |
| entire fuel factor in order to maintain the level of | | | | additional bonus – a $100 million per project |
| headroom in the price to beat. | | | | franchise tax credit. Of course, these conditions |
| This acknowledges that natural gas is used by more | | | | require generators to meet stringent air emission |
| than half of power generating plants in Texas. This is | | | | standards for nitrogen oxides, sulfur dioxide, |
| followed by coal fired plants, nuclear, and wind. Texas | | | | particulate matter, and mercury. |
| produces 25% of the nation’s natural gas and is | | | | However, over the past year, the price of natural |
| the largest producer; it also stores and supplies | | | | gas delivered to electric generators has fallen |
| natural gas via pipeline for all regions of the country. | | | | dramatically. In fact, some US Department of Energy |
| Yet while Texas has large reserves of low grade coal | | | | (DOE) analysts believe current natural gas prices now |
| (lignite), most of what is burned in its coal-fired plants | | | | add an incentive for electricity generation companies |
| is brought in via train from Wyoming and Montana. | | | | to retire their coal-fired systems with newer |
| Texas produces and consumes more electricity than | | | | natural-gas-fired generation. This is especially true due |
| any other state. However, according to the US Dept. | | | | to the advent of combined cycle natural-gas-fired |
| of Energy, “Despite large net interstate electricity | | | | electricity generators. |
| imports in some areas, the Texas Interconnect | | | | Combined cycle generators use a gas turbine (similar |
| power grid is largely isolated from the integrated | | | | to a jet engine) to spin and generate electricity. The |
| power systems serving the eastern and western | | | | waste heat from the turbine is used to heat water |
| United States, and most areas of Texas have little | | | | and create steam. The steam is then used to spin a |
| ability to export or import electricity to and from | | | | steam turbine, thus generating even more electricity. |
| other states.” | | | | These systems function more efficiently than typical |
| So, it makes sense for Texas electric power | | | | coal-fired units, consuming fewer BTU of fuel per |
| generators to rely more on the supply of natural gas | | | | kWh of electricity generated. |
| in our backyard rather than waiting for the next | | | | Back in July, 2008, gasoline spiked to over $4.00 per |
| 1,000 tons of coal to roll in from Wyoming. Natural | | | | gallon. Natural gas prices spiked as well and so did |
| gas is also cleaner burning than coal and does not | | | | electricity. Consumers cut back on their travel and |
| leave behind large amounts of cinder and ash that | | | | have continued to do so since. This helped drive |
| require proper disposal. | | | | down the price of oil, gasoline, and natural gas. In |
| Natural gas is a valuable and relatively rare fuel | | | | some parts of the country facing tough times, |
| commodity and is frequently uncovered when drilling | | | | businesses have laid off workers or shut down and |
| for oil. So, its price is bound to a commodity in a very | | | | are no longer using natural gas to heat their buildings |
| volatile market where prices are often shaped by | | | | or need electricity to power their machinery. |
| world events. For this reason, it costs more to buy | | | | Now, there is a huge surplus of natural gas. The |
| than coal, nuclear, and wind. Since electricity is not | | | | DOE’s EIA also reported in its weekly natural gas |
| separated in the wires according to how it was | | | | storage report that: |
| generated, the price per kilowatt hour (kWh) is set | | | | “Working gas in storage was 3,204 Billion cubic |
| to the price of the most expensive fuel used to | | | | feet (Bcf) as of Friday, August 14, 2009, according |
| generate it: natural gas. This is known as “the | | | | to EIA estimates Stocks were 562 Bcf higher than |
| price to beat”. | | | | last year at this time and 513 Bcf above the 5-year |
| Critics of the Texas electricity deregulation system | | | | average of 2,691 Bcf.” |
| have argued that the key to cheaper electricity is to | | | | That’s an awful lot of natural gas. And what |
| build more coal-fired generation plants. Recent state | | | | most consumers will want to know, a high supply |
| legislation seeks to clean up Texas’ coal-fired | | | | means natural gas prices and Texas electricity |
| generation. The combination of Texas House Bill 469 | | | | rates—will be low. |
| and key elements of Texas Senate Bill 2111 | | | | In fact, since January 2009, Bounce Energy has cut |
| establishes a two-tiered incentive package for clean | | | | its prices 7 times. |
| coal projects in Texas. | | | | And possibly, because of this ballooning 5 year |
| Coal-fired generation projects capturing at least 50% | | | | storage level high, prices may continue declining |
| of their carbon dioxide emissions are eligible for sales | | | | through fall. |