Texas: At an Energy Crossroads

April 21, 2011 · Posted in Renewable Energy 

Black Gold

Ever since the first oil well gushed forth in East Texas in 1866, Texas has been renowned for its “black gold.” An oil-related economy developed around subsequent oil discoveries as the state prospered with its flourishing petroleum industry. Throughout most of the first half of the century, oil was plentiful, prices were low and most of the world’s oil was produced and consumed in the U.S. At mid-century, Texas was the dominant producer in the world oil market, producing more oil than the entire output of the Middle East. From its oil and gas revenues, the state has collected billions of dollars in taxes that have built some of the nation’s best roads, schools and infrastructure.

Crossroads

Until 1972 it seemed that Texas oil would never run out, but in that year Texas oil production peaked and began a decline in both reserves and production until, today, Texas has become a net energy importer. With uncanny timing, the OPEC Oil Embarg hit in 1973. Concurrent with the oil decline, Americans were witnessing long lines of cars waiting to fill up at shocking gasoline prices. It was a major turning point in the world oil market — and a wake-up call. Along with the rest of the nation, Texas is taking a hard look at its energy scenario in terms of developing a stable, clean and plentiful energy future. Texas is at a crossroads wherein development of vast in-state renewable energy sources, coupled with energy efficiency measures, offers Texans the chance to redirect their focus in order to regain and maintain their energy independence.

Texas has more renewable energy potential than any other state, ranking first in practically all categories. Already equipped with expertise and resources in the area of energy production, Texas can recapture its former energy independence by shifting focus to renewable energy. Not only would such a move cut down on our growing dependence on oil imports, it would also spur the Texas economy, create jobs, increase our tax base and clean up our air.

Texas has more renewable energy potential than any other state.

Texas has more renewable energy potential than any other state.
Texas is beginning to shift focus to its vast renewable and clean energy resources.

Declining Costs of Renewable Energy

The cost of energy from renewable technologies has steadily declined in the past quarter century. As an example, the cost of wind energy has declined from about 30-45 cents per kilowatt-hour in 1980 to less than 5 cents today. Wind, PV, geothermal, solar thermal, and biomass have all seen significant drops in cost with the improvements in technology.

renewable energy costs are declining
It makes economic sense for Texas to tap into its vast renewable reserves. With declining costs, renewable energy sources are becoming more competitive with fossil fuels.

Cost Curves

This DOE PowerPoint presentation shows historical renewable energy cost trends with projections through 2020.

Texas Fuel Demands

Although home to just eight percent of the U.S. population, Texas uses more electricity, natural gas, coal and oil than any other state; and demand is increasing, particularly for electricity. This fact is significant because new energy facilities, renewable or otherwise, will be constructed most rapidly in the context of a large, growing energy economy. The demand is there, the resources are there, and Texas is proving that it has the motivation and expertise to develop the requisite infrastructure to harvest these natural resources.

Texas fuel demand by sector and type.
Texas Railroad Commission interpretation of U. S. Department of energy data.

Texas Infrastructure — Making the Switch

As one of the major energy production and consumption centers in the world, Texas has extensive energy infrastructure already in place. The early Texas oil fields served as fertile ground for the growth of numerous supports numerous industries from heavy equipment fabricators to oilfield service providers and fire control experts to specialized petroleum landmen and lawyers. In many cases, members of these fledgling groups have come to be recognized as the world’s most knowledgeable and capable experts in their fields.

The Permian Basin, Texas Panhandle and Texas/Louisiana Gulf Coast are among the largest gathering regions and transportation hubs for pipeline gas in North America. Even though competition for access to available energy transportation infrastructure poses a near-term challenge for renewable energy projects, it also represents a considerable long-term opportunity. As it becomes increasingly difficult to construct new energy transmission projects, existing energy infrastructure and transmission right-of-ways may prove to be a strategic asset that benefits Texas renewables. Hydrogen generated by solar plants in the Permian Basin, wind plants in the Panhandle and geopressure facilities along the Gulf Coast, could someday trace the same routes currently used by Texas natural gas to reach markets across North America.

Unique Factors – Unique Opportunity

Texas, perhaps more than any other state, stands to benefit from the rapid development of renewables. Several factors position Texas favorably to pioneer the widespread use of renewable energy resources:

Texas has high total renewable energy resource potential. Texas ranks first nationally in practically all renewable energy resource categories (number one for solar and biomass; number two for wind).

Texas has high current and projected energy needs. Ironically this is a plus for Texas, for although abundant availability of a resource is a prerequisite to widespread use, development of any resource is strictly limited by the demand for it. As demand is growing, so is the scramble to find alternative ways to supply the growing energy needs of Texans.

Texas has considerable existing energy infrastructure. Texas already has an existing energy infrastructure, as discussed in the previous section on Texas Expertise.

Texas is strategically located relative to Latin American markets. Growing demand in Latin America for raw energy, energy technology and services represents opportunity for all Texas energy enterprises. Texas’ physical proximity to and prominence with Mexico, Central America and South America must be considered a strategic advantage for trade with those regions. Furthermore, 60% of the electrical interconnection points and 75% of the major gas pipelines between the U. S. and Mexico meet at the Texas border.

Texas Wildcatters

Texans have a rich and colorful past in mining nature’s energy resources, of seizing the moment when opportunity is promising but uncertain. Wildcatters were after oil, they knew it was there, but where exactly? They risked everything to find a “wildcat,” an oil gusher as yet unexplored and unclaimed. What began with wildcatter foresight ended with the Texas oil boom?

Enlightened by the rich history of the Texas oil industry, Texans now have the opportunity to recapture that “wildcatter” experience and capitalize on the enduring benefits possible from nurturing a vibrant domestic renewable energy industry through the early development of the state’s vast renewable resources.

Although hydropower and biomass have long contributed to our nation’s energy mix, the renewable energy industry is in its early stages of development. Wind and solar technologies, in particular, are seemingly on the verge of capturing a significant share of new energy markets. If renewable energy sources emerge as a dominant contributor to future energy markets, economics benefits will accrue to those regions that pioneer the development of successful renewable energy technologies.

When decision makers contemplate priorities for investing in the development of renewable resources, Texas offers a logical proving ground with superior potential for high return on investment. Texas is well positioned to reap the benefits from the early development of renewable resources and the continued development of the infrastructure to service and market these resources.

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