June 13, 2016

RALEIGH — Natural gas beats solar and wind as a low-cost energy source, with better environmental impacts, more efficiency, and better reliability. Those conclusions stand out in a new John Locke Foundation Spotlight report.

“Keeping consumers’ costs as low as possible is the No. 1 issue in electricity policy in North Carolina,” said report author Jon Sanders, JLF Director of Regulatory Studies. “Natural gas serves as a low-cost source of electricity while also reducing carbon dioxide and other emissions.”

“Natural gas is many times more efficient and reliable than solar and wind plants,” Sanders added. “Gas-fired plants also use considerably less land with much less disruption of natural ecosystems than solar and wind plants.”

When it comes to costs, Sanders explains why policymakers should focus on consumers. “In 2015, electricity costs averaged 9 percent of the after-tax income of the poorest North Carolina households — those earning less than $30,000 per year,” he said. “That is a significant monthly expense.”

It is critical to keep those costs as low as possible, Sanders said. “Electricity is a basic human need, and it has a serious budget impact on low-income households,” he explained. “Yet consumers have no choice in rates or sources of electricity. State officials from the Utilities Commission to the General Assembly to the governor must always bear that responsibility in mind.”

Consumer electricity costs in North Carolina have been lower than the regional and national averages. That includes recent positive changes, Sanders said. “Since 2015 Duke Energy Progress electricity rates have fallen on net,” he said. “A decrease in fuel costs, mostly in natural gas, resulted in a decrease of more than $5.60 in the average customer’s bill.”

But there are troubling trends as well, Sanders added. “That decrease in fuel costs has been offset to some extent by a nearly $2.30 increase in the bill related to North Carolina’s renewable energy mandate,” he said. “Since the state enacted that mandate, North Carolina’s electricity rates have been increasing at a much faster rate than regional and national averages.”

Natural gas does more than reduce consumers’ costs, Sanders said. “Energy-related CO2 emissions are down 12 percent in the United States since 2005,” he said. “The U.S. Energy Information Administration cites as the main reason the changeover to natural gas for electricity production.”

Researchers at the National Oceanic and Atmospheric Administration credit the changeover to natural gas with helping reduce sulfur dioxide and nitrogen oxide emissions as well, Sanders said. “The European Union even classified natural gas as a green, low-carbon energy source in 2012.”

The picture is much different for solar and wind energy, Sanders said. “Solar and wind can produce electricity at peak capacity for only a fraction of the time,” he said. “That means their benefit of reducing CO2 emissions occurs only a fraction of the time. The rest of the time they are imposing huge costs.”

A Brookings Institution study estimated that it would take more than seven solar plants or more than four wind plants to produce the same amount of power with the same reliability as a single coal-fired plant. In contrast, it takes just one nuclear or natural gas plant to replace a coal-fired plant, Sanders said.

“It takes a $29 million investment in solar capacity and $10 million in wind capacity to produce the same amount of electricity with the same reliability as a $1 million investment in natural gas capacity,” he said.

Gas-fired plants also have much smaller impacts on land use, Sanders said. “Gas-fired electricity plants are not very large and can be located close to the populated areas whose electricity they help provide.”

“Wind and solar plants, by contrast, require enormous amounts of land,” Sanders added. “Those plants involve large disruption of natural ecosystems, loss of arable cropland, clear-cutting, and erosion. Since there are limited locations where solar and wind plants can be built, they also require more disruption for transmission lines.”

The implications are clear, Sanders said. “The top issue for electricity policy in North Carolina is keeping consumer costs as low as possible,” he said. “Thanks to technological change in natural gas exploration, falling prices for natural gas have caused actual reductions in consumer electricity rates. Gas-fired power plants are also far more efficient and far less expensive than solar and wind plants, with more impact on reducing the emissions targeted by renewable energy’s supporters.”

Jon Sanders’ Spotlight report, “Natural Gas: Low-cost energy source that curbs emissions and land impacts,” is available at the JLF website. For more information, please contact Sanders at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].