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Residents in Texas are reporting enormous electric bills, some as high as $7,000 to $17,000, due to a surge in electricity demand for home heating during last week’s polar vortex. Minnesota was also enveloped in an arctic blast last week, leaving thousands of Minnesota families worried that they will see similar increases.
I spoke with Reg Champan of WCCO last evening about why Minnesotans will see large increases to their natural gas bills and possibly their electric bills, but they won’t be as high as those reported in Texas. The reason Minnesotans will pay $400 more for their energy instead of $4,000 is because we have a diverse fuel supply.
Without this diverse energy supply, Minnesotans are at risk of much bigger swings in energy prices in the future.
Watch the interview!
What Happened with Natural Gas Demand?
Natural gas prices surged last week as temperatures dropped and Americans throughout the country used more natural gas than usual to keep their homes warm. Many Americans also heat their homes with electricity, which caused demand for natural gas to rise because this fuel is increasingly being used to generate power.
As demand for these two competing purposes increased, the supply of natural gas could not keep up, causing prices to skyrocket.
What Happened with Natural Gas Prices?
Early reports indicate that natural gas prices were 50 to 100 times higher than normal during some portions of last week’s cold snap. CenterPoint Energy, the largest natural gas supplier in Minnesota, said extra charges could range from $300 to $400 on average, according to the Star Tribune. Data from NaturalGasIntel.com help illustrate how surging demand affected prices at the Ventura natural gas hub, the primary delivery, and pricing point of gas entering Minnesota.
The price increases were “orders of magnitude greater than anything we have ever seen,” said Adam Heinen, a Commerce Department rates analyst to the Public Utilities Commission (PUC), noted the Star Tribune. The PUC said customers will begin to see higher bills in September of this year to pay for the spike in natural gas prices.
Why Were Gas Supplies Constrained?
Most Minnesotans have used natural gas to heat their homes for a long time, but the rising use of natural gas for electricity generation is a relatively new demand on our gas system. Natural gas is difficult to store on site. Instead, it is delivered via pressurized pipelines at the same time that it is needed.
This “just-in-time” delivery of fuel can lead to bottlenecks in the system as gas is pumped to the homes and power plants that depend upon it, leading to temporary shortages and rising prices. These shortages would have been more severe if not for Minnesota’s diverse fuel supply, which helped reduce the amount of natural gas needed for generating electricity.
Where Our Electricity Came From
The graph below from the U.S. Energy Information Administration shows which resources were providing electricity in the Midwest on an hourly basis from February 5, 2021, through February 23, 2021. It shows coal provided the majority of electricity during the coldest portions of the Polar Vortex, natural gas was the second-largest source, and nuclear power was the third-largest contributor to our electricity supply.
Electricity generation from wind and solar was limited during the coldest parts of the Polar Vortex because wind turbines are shut down at -22 degrees F, and these cold-weather events are often accompanied by low-pressure systems, which greatly reduce wind speeds and electricity generation from wind turbines. Solar production is limited in the winter because of shorter days, and snow can reduce the amount of electricity generated by the panels.
Diversity is Key
Minnesotans facing $400 increases in their heating bills may not feel like they dodged a bullet, but the diverse fuel supply for electricity generation in the Midwest was crucial to keeping natural gas prices from increasing to an even greater extent.
Coal and nuclear power plants offer big advantages for electricity generation compared to natural gas because they don’t rely on just-in-time delivery of fuel from pipelines, which helps them avoid fuel-supply bottlenecks. Coal plants can have weeks or months of supplies on hand, and nuclear generators are stocked with 18-months of supply when they are refueled. This means fuel prices for coal and nuclear remain much more constant throughout the year, protecting Minnesotans from rising natural gas prices.
Potential Diversity Problems Ahead
Minnesota’s diverse fuel supply saved them from the enormous bills people are seeing in Texas, but plans by electric companies in Minnesota like Xcel Energy, Minnesota Power, and Great River Energy will reduce the diversity of their grids by shutting down their coal-fueled power plants years before the end of their useful lifetimes.
These companies plan to replace the coal-plants with a combination of wind, solar, and natural gas power plants, which could result in much bigger increases in heating and electric bills during the next Polar Vortex by putting all of our eggs in one basket.
Minnesota is using increasing numbers of wind turbines and solar panels to generate electricity, but as we saw last week, these electricity generation sources do not always generate electricity because they only work if the wind is blowing or the sun is shining.
Because there is no way to affordably store enough electricity in batteries for later, this would mean Minnesota would rely on natural gas power plants to generate nearly all of our electricity during times of low wind or solar generation. This would greatly increase the demand for natural gas when we need it most, resulting in much higher home heating bills, and higher electric bills as power plants burn natural gas to generate electricity at a time when it is most expensive.
When it comes to Minnesota’s electric grid, the diversity of reliable energy sources is our strength. Coal and nuclear plants are able to generate reliable, low-cost electricity regardless of weather conditions because they store weeks or months of fuel on-site. This protects Minnesotans from rising heating and electric bills and makes sure we have enough electricity supply to prevent the types of blackouts experienced in Texas.
Natural gas is a great fuel, but that doesn’t mean it’s the right tool for every job. Replacing Minnesota’s coal plants with new nuclear power plants would be a good way to ensure we have a dependable and diverse electricity supply that conserves more natural gas for home heating and keeps prices low.