The case for gas and wind being perfect together is growing. It has been long understood that gas turbines provide spinning reserves to all grids, able to quickly produce power to replace unexpected losses of generation from a nuclear plant shutting down or wind dropping. This ability of gas to back up grids is especially important for wind, since wind's success means it already provides 10% of all electricity in 7 states.
And now Lisa Huber has a must read analysis that shows how wind can address the volatility of gas pricing, gas's single greatest weakness as a fuel to make electricity. Huber's analysis is available through this link:
"Ben Franklin said there are two certainties in life: death and taxes. To that, I would add the price volatility of natural gas," so said Jim Rogers, the CEO of Duke Energy and quoted by Huber.
Jim Rogers is far from alone among power company chieftains in expressing concern, even fear of the volatility of gas pricing. For example, Southern Company's CEO also has expressed repeatedly this year grave concerns about the current dash to gas because of the volatility of natural gas prices.
Indeed, many power companies that consume large amounts of gas pay to hedge the risks of gas pricing, though the hedges almost never go beyond 10 years. Entitled "Utility-Scale Wind and Natural Gas Volatility: Uncovering the Hedge Value of Wind for Utilities and their Customers," Huber's full paper documents how regulated utilities who purchase huge volumes of gas have paid 91 cents per thousand cubic feet to more than $2 per thousand cubic feet to hedge the volatility risk of natural gas. These hedging charges are passed through to gas consumers in regulated bills.
The paper also describes how wind (no fuel price risk and zero price volatility) can hedge the volatility risks of using gas. Huber demonstrates how an accuarate calculation of the economics of wind and gas generation must include the gas hedging costs paid by large users of gas. With hedging costs for gas purchases included, wind and gas are often equally economic choices, according to Huber's paper.
None of this means that gas is a bad energy option but makes the point that both gas and wind have strengths. The US should use more of both. Indeed, using both in tandem produces real synergies, making them better together than apart.