By Ronald Fisher 10/26/21
You are likely aware that many goods and services now cost more than prior to the pandemic. You’ve heard about and experienced product scarcity and higher prices due to supply chain delays.
You may also be aware that natural gas prices have doubled since last spring and, according to some projections, might increase even more this winter as we all begin to heat our homes.
As a transparently operated, member-owned cooperative, we want our members and those considering joining our community to understand what impacts these circumstances are having and why.
How do higher natural gas prices impact The Energy Co-op’s renewable energy programs?
As we all know, there is only one set of wires to deliver electricity to consumers—what is commonly called the grid. Regardless of whether electricity is generated by wind turbines, solar panels, natural gas, nuclear, coal, or other sources, it is all delivered over the same grid. The Energy Co-op’s 100% wind and solar renewable electricity is (1) wholesale electricity from that grid bundled with (2) wind and solar renewable electricity certificates—state-law regulated credentials that confirm that your electricity was generated with clean wind and solar resources.
But because all electricity, regardless of source, is delivered on the same grid, there is only one wholesale price for electricity in our region. And that price is tied to the cost of natural gas.
This little-known fact bears repetition—the wholesale price of natural gas-generated electricity determines the wholesale price of wind and solar power in Pennsylvania. And this will continue to be the case until there is more wind and solar power generation in our region. For those who want a rapid transition to clean, renewable resources, this is frustrating and even annoying. Even though the installed cost of wind and solar power facilities is less than that for natural gas plants, and the fuel is free and in infinite supply, if natural gas prices go up, so does the wholesale cost of the wind and solar electricity supplied by The Energy Co-op.
For The Energy Co-op’s renewable natural gas program, The Energy Co-op’s RNG product is (1) natural gas combined with (2) landfill gas renewable electricity certificates. So, the impact of natural gas price increases on our RNG program is even greater.
Why have natural gas prices increased so rapidly?
Since last spring, there has been a significant imbalance between supply and demand. That is, as the U.S. economy started to grow again earlier this year, natural gas producers have been unable to meet U.S. domestic demand. Why?
Reduced U.S. Domestic Production
Some natural gas production had been shut down during 2020 as the economy slowed due to the pandemic. As the economy recovered earlier this year, much of that production could not be put back in service quickly enough to keep up with rapidly increasing demand.
Also, extreme weather events, including Hurricane Ida in Louisiana this fall, damaged infrastructure, delaying production further and, in some cases, temporarily shutting down even more facilities.
Finally, some new production projects that had been under construction in 2020 were put on hold or delayed.
Increased Foreign Export of U.S. Natural Gas
The supply imbalance in Asia and Europe is even worse, resulting in much higher prices there than here—currently five times more than a year ago. The result? U.S. domestic producers this year have greatly increased exports of natural gas to those markets.
All these factors, together with others, have led to what amounts to artificial scarcity in the U.S. There’s no actual lack of natural gas. It’s just not where it needs to be as we head into this winter.
What can The Energy Co-op and its members do?
There is good reason to believe that this natural gas imbalance will resolve itself by next spring. But that still doesn’t change the fact that we’re in for a tough winter. Especially those of us who have committed ourselves to transitioning from fossil fuels to renewable resources. What can we do together?
First, use less energy! If The Energy Co-op supplies you less, it will cost less. How? Do what you can to seal your residence’s envelope—ceilings, walls, windows, and doors. Turn down the thermostat when you’re at home. And when you’re out, turn it down even more.
Second, consider using your utility’s budget billing plan. PECO, PGW, and PPL all offer payment plans that allow you to average out your high winter month bills over several months. We’re all going to pay more for heating this winter than we did last year. But you will be able to better manage your monthly energy budget by enrolling in these plans with your utilities. We encourage you to consider doing so today.
Third, please be patient. The Energy Co-op staff is hard at work every day adapting to these challenging circumstances. The goal of a world powered by infinite supplies of clean energy is within reach. More than 20% of the electricity in the U.S. this year will be generated by renewable resources. The higher that number goes, the sooner the price of wholesale electricity will be set by wind and solar power, not by natural gas. So, we’re asking our members to remain committed to our shared goal even though that commitment will require a greater investment this winter.
Finally, if you have a question or a concern you’d like to discuss, reach out to us by email at email@example.com or telephone at 215-413-2122. For decades, The Energy Co-op has been a cause supported by commerce—initially, affordable home heating oil; today, sustainable renewable energy. We’re here to listen to our members and our community. Together, we can sweep aside these challenges and continue to accelerate our region’s transition to a cleaner, sustainable future.