Friday, July 10, 2009

Better Explanation of Alt Energy/NatGas Relationship

There was a good article in yesterday's Wall Street Journal (web version, print version) about the relationship I discussed Wednesday between the price of natural gas and the viability of alternative energy. The occasion for the article, of course, was news of the postponement of T. Boone Pickens' giant West Texas wind farm.

The article does a good job of setting the scene for what's going on today in alternative energy. Low gas prices, increased gas supply and a terrible financing market are combining to doom most large scale alt energy plants. It also discusses the very important issue of electrical transmission and how most new lines in the planning/execution phase seemed geared to support coal plants. I wonder who thought of that.

The key point that is being skirted in the discussion of the big wind farm and the Pickens Plan is the relationship between gas and wind. The Pickens Plan was designed to use natural gas as a bridge fuel for vehicles and power generation while wind resources are being developed on a large scale. But a very important dynamic that needs to be maintained is the demand for natgas, which supports a relatively high price for natgas, which in turn supports expanded domestic drilling AND does not undercut the development of alternative energy.

This is not an unattainable goal, but until the economy turns around it won't happen.

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