Natural Gas for Power May Mean Sharp Hikes in Utility Bills

High Bridge Plant under ConstructionThe move away from coal-fired power generation in favor of wind and solar power is already impacting energy costs. Xcel Energy estimates Minnesota’s renewable energy mandates will lead to an average household electric bill increase of $300 to $400 per year.

Adding to the cost problem is an increasing reliance on natural gas for electric generation because of its perceived environmental benefits. Natural gas use for Minnesota power plants has increased nearly 7 fold since 1997. Xcel Energy’s two new gas-fired power plants will increase natural gas consumption even more dramatically in the next year. The two new plants, which will generate about 1,000 megawatts between them, will consume more natural gas than is now used to heat every home in Minneapolis and St. Paul.

Increased demand means increased price, especially in the volatile natural gas market.

The trends in natural gas price increases have had an impact on Minnesota families and businesses. Center Point Energy reported 208,000 gas bill delinquencies in 2007 and Minnesota’s Home Energy Assistance expenditures rose 33% between 2005 and 2007.

As we narrow our energy production methods, we run the risk of ever increasing price and scarcity of the fuels we have chosen to use to the exclusion of others.

Even with recent increases in natural gas, US pricing is typically lower than many overseas markets. With the changing global energy market, this suggests that prices still have much further to rise.

Surge in Natural Gas Stoked by New Global Trade
(Ann Davis and Russell Gold - Wall Street Journal)

Americans feeling the pain of record gasoline prices now face the likelihood of another fuel shock, from natural gas.

Prices in the U.S. have risen 93% since late August as power-hungry nations like South Korea and Japan compete in a global natural-gas market that scarcely existed a half-decade ago. Still, U.S. prices are as low as half the level of some overseas markets, suggesting they have much further to rise.

The global appetite for natural gas has profound implications for a U.S. economy already tipping toward recession and struggling against inflation pressures. The fuel heats half of U.S. homes, generates 20% of the country’s electricity and is used to make everything from fertilizer to plastic bags. In March, rising natural-gas prices contributed to a higher than expected 1.1% increase in producer prices, according to the Labor Department.

U.S. natural-gas output has actually been rising in recent months, and not everyone agrees that prices are destined to surge. However, a significant number of financial players are now betting on an increase.

On Thursday a report by the Barclays Capital unit of Barclays PLC warned that, partly because of rising natural-gas prices, the U.S. could start to see spikes in electricity costs in as little as a year. “Power is at the cusp of its next boom cycle,” analysts said. “When power markets tighten, prices do not notch up, they skyrocket.”

Read the rest of this article at the Wall Street Journal

MN Natural Gas Fact Sheet

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