Texas' Wind Energy Keeps Spinning
Wind energy in Texas has seen exponential growth over the last decade and its contribution within the overall energy complex is likely to evolve over time.
I made a business trip to Snyder, TX a couple of weeks ago and I was fairly shocked by the number of windmills around Sweetwater. It's one thing to read about the growth of wind-generated electricity in Texas and another to encounter a (literally) dizzying array of wind turbines stretched out as far as you can see. I couldn't help but be concerned about how wind power is likely to continue to grow and potentially reduce the demand for hydrocarbons, especially when it occurred to me that they don't decline like oil and gas wells do—they just keep on spinning.
In a recent article in the Houston Chronicle, Chris Tomlinson recounted his own, similar experience when he recently drove through West Texas. The sight of mile after mile of windmills and photovoltaic cells left him pretty down on the future of the oil business in Texas and it got me to wondering if wind was really going to blow it away. Here are a few observations:
Wind Is Big Business in Texas — If Texas were a country, it would rank fifth in the world in installed wind generation capacity. According to the Department of Energy (DOE), Texas will have about 27% of the U.S. generation capacity in 2020 and wind is estimated to provide about 20% of Texas' electricity generation.
Nationwide, Wind Is A Small, But Important Share Of Power Generation — In 2019, wind energy provided about 7% of U.S. electricity demand. All of the growth in wind power has been at the expense of coal's market share, but natural gas has gained an even greater share as coal use declines.
Wind Generation Is Expected To Continue To Increase — The DOE’s Wind Vision Report in 2013 projected that wind would account for 10% of U.S. electricity generation in 2020. Although that level hasn't been achieved, the report also projected about a four-fold increase in installed capacity from 2020-2050.
"Even if wind power grows as predicted, it won't erode demand for natural gas in the electricity mix, especially if coal continues its likely decline and aging nuclear power plants begin to be retired."
Even So, Natural Gas Will Remain An Important Source Of Electricity — Assuming a 1% annual increase in electricity demand yields a 22% total increase in demand over the next 30 years. Even if wind power grows as predicted, it won't erode demand for natural gas in the electricity mix, especially if coal continues its likely decline and aging nuclear power plants begin to be retired.
Wind Isn't A Transportation Fuel — Excluding sailboats and balloons, wind doesn't currently help anyone get anywhere. In a 2019 article, Michael Coren states than only one of 250 cars on the road are battery electric, and electric vehicles are about 2% of total vehicle sales. It's very unclear whether there’ll be significant adoption of electric vehicles over the next couple of decades, so demand for gasoline is likely to continue to be significant. Even if the shift to electric vehicles does occur, much of the electricity to power them will be provided by natural gas.
About the Author:
Steve Hendrickson is the President of Ralph E. Davis Associates, an Opportune LLP company. Steve has over 30 years of professional leadership experience in the energy industry with a proven track record of adding value through acquisitions, development and operations. In addition, Steve possesses extensive knowledge of petroleum economics, energy finance, reserves reporting and data management, and has deep expertise in reservoir engineering, production engineering and technical evaluations. Steve is a licensed professional engineer in the state of Texas and holds an M.S. in Finance from the University of Houston and a B.S. in Chemical Engineering from The University of Texas at Austin. He currently serves as a board member of the Society of Petroleum Evaluation Engineers and is a registered FINRA representative.