Back in 2019 when the highly contentious SB-181 – a complete overhaul of Colorado’s oil and natural gas regulations – was signed into law, Gov. Jared Polis declared it symbolized an end to “the oil and gas wars that have enveloped our state.” But now, just shy of four years later, it’s become clear he’s simply moving the target from the well head to Coloradans’ kitchens.
Earlier this month, Gov. Polis announced his intent to end the state’s “reliance on costly fossil fuels that also make us vulnerable to price increases when they cost a lot more,” later saying in a Denver Post op ed:
“But the only real, long-term solution to preventing these price swings and saving Coloradans money is the full transition to reliable, low-cost renewable energy that does not change in price with international events. We simply must end our reliance on costly fossil fuels and improve our energy security.”
Blaming natural gas for high consumer prices, the Governor’s call to action is being backed by the state’s Senate President Steve Fenberg who recently announced the formation of a new special committee to investigate skyrocketing energy prices. Like Polis, Fenberg – a sponsor of SB-181 who assured the public the legislation would not lead to bans – appears to be foregoing a production ban for one closer to home: gas stoves.
Let’s take a look at a few of the myths being perpetuated by the Governor’s office:
Myth: Natural gas is unreliable.
FACT: Numerous experts agree that natural gas will still be needed for grid reliability even in a renewable-dominant scenario.
The ability to ramp up natural gas quickly makes natural gas a “critical reliability tool” to make up for the intermittency of wind and solar, which are reliant on weather conditions to generate power, according to the North American Electric Reliability Corp (NERC).
In fact, during storms, natural gas outperforms electricity in most instances when it comes to reliability. During a recent winter storm in Colorado, several utilities reported that natural gas covered upwards of 90 percent of energy load where renewables only provided 10 percent or less. This despite energy demands hitting an all-time winter peak.
As the American Petroleum Institute’s Lynn Granger and Colorado Oil and Gas Association’s Dan Haley recently penned in a Colorado Politics op ed:
“A strong energy source for our electrical grid, natural gas can also complement variable renewable options like wind and solar by balancing electricity generation and ensuring the grid operates predictably. Severe weather events have exposed the grid’s vulnerability with rolling blackouts during peak demand. Policies that shift us away from natural gas will only put more strain on our fragile power grid.”
In its October 2022 study, “Examining Supply-Side Options to Achieve 100% Clean Electricity by 2035,” the National Renewable Energy Laboratory, which is located in Colorado, found that in every scenario studied, in order to achieve a 100 percent clean energy grid, that has to include offsets i.e. fossil fuels using technologies like carbon capture or hydrogen.
In fact, in NREL’s “least-cost electricity mix” scenario, the 60-80 percent of generation from wind and solar will need to be supplemented with natural gas utilizing carbon capture technology in order to achieve reliable net-zero emissions energy by 2035.
Source: National Renewable Energy Laboratory, 2022
The Grattan Institute reached similar conclusions:
“Gas generation with offsets looks to be the lowest-cost ‘backstop’ solution until zero-emissions alternatives– such as hydrogen-fired generation or near-perfect carbon capture and storage– are economically competitive. Gas is likely to play a critical, but not expanded, role.”
As former Federal Energy Regulatory Commission Commissioner Neil Chatterjee recently explained:
“It’s crucial that we don’t put ourselves in a position where we are accidentally driving out competitive resources that are needed to maintain reliability. But I fear that’s the direction we are heading.”
It is governmental policies like those proposed by Gov. Polis, as well as increased use of non-dispatchable energy sources that have led to U.S. electrical grids’ increased struggle with reliability.
Myth: Domestic natural gas production does not impact Colorado’s prices.
FACT: Colorado’s high natural gas production has helped keep its prices below the national average.
While Gov. Polis dismissed his state’s production as having in an impact during his press conference, he acknowledged:
“Colorado from the last reporting period still has a lower-than-average natural gas cost. There were 30 states who had more expensive natural gas. We have lower than average electricity cost…”
Colorado is the fifth largest producer of natural gas in the country, which has had a direct impact on helping keep the state’s costs “lower-than-average.” That’s because, unlike oil, natural gas prices are set domestically instead of on the global market.
If Colorado didn’t have a domestic industry, the price of residential natural gas would be higher due to additional costs like those incurred from importing natural gas into the state.
However, this doesn’t mean the industry is immune to inflation pressures that Americans are also dealing with. And industry leaders are expressing concerns about the uncertainty of the future of oil and gas precisely because of the policies Gov. Polis and others state leaders are making.
Colorado only has to look at California to see the impacts of a rushed transition would have on residents and the economy. The Golden state is known for its fair weather and ample solar capability, but in rushing to close natural gas power plants and add more demand to the grid, the state has seen rolling blackouts, flex alerts for energy conservation, and postponements of its plan to retire in-state natural gas generation. The result has been a steady increase in California’s energy prices.
Source: U.S. Energy Information Administration
Myth: Natural gas is not an affordable energy option.
FACT: Natural gas continues to be one of the most affordable energy options in Colorado.
Direct natural gas consumption is still far cheaper on a Btu basis than electricity, according to the Dept. of Energy.
The forecast shows that natural gas costs less than 30 percent of what electricity does per million Btu. It also notes that the national average cost of electricity is 3.4 times than that of natural gas, a factor that needs to be considered by policymakers pushing for electrification.
And natural gas prices aren’t all that high by historic standards when inflation is included in the calculation, according to University of California Berkley Professor Lucas Davis. His research shows that current prices are actually lower than average real price over the period 2000-2020.
Further, recent decisions by the Polis Administration has hampered Colorado’s energy industry and policy and directly increased overall energy costs in the state. Three years ago, Polis opted not to apply for a background ozone waiver as his predecessor, fellow Democrat Gov. John Hickenlooper had done before. The waiver gives states like Colorado, who faces unique challenges with ozone due to weather patterns and topography, a break with federal ozone level requirements.
Because Colorado is now considered to be in “non-attainment,” nine counties in the Front Range will need to switch to more expensive reformulated gasoline this summer. AAA estimates this will increase prices at the pump by 20 to 30 cents per gallon.
Bottom Line: Reducing emissions while simultaneously ensuring a reliable, flexible grid and that costs remain affordable for consumers is a complex discussion. But one thing is clear: natural gas needs to be a part of the solution.
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