Harmony Between Renewables and Oil & Gas? Texas Shows the Way
Fri, July 24, 2020
Over the last six months, oil and gas companies have made headlines as they increasingly power their upstream operations with renewable energy, from Reuters to the Financial Times. And last week, IHS Markit pointed out that this trend – an odd couple at first glance - is accelerating, particularly in the Lone Star State.
According to IHS, there are currently 45 announced renewable projects in the United States destined solely to power oil and gas operations, three times more than what was registered in 2000.
Texas oil and gas companies are embracing renewable energy
Transitioning to renewables to power oil and gas companies’ upstream, midstream and downstream operations minimizes emissions while facilitating production of much-needed oil and gas supply that powers the U.S. economy.
The electrification of oil and gas operations reduces emissions that would be produced from diesel generators. Wind- or solar-based electricity also allows oil and gas companies in Texas to profit from lower power costs, improve profit margins, and ultimately, produce more energy.
In fact, the Atlantic Council suggests that this symbiotic relationship between fossil fuels and renewables could pave the way towards a new sustainable production model:
“Companies can… focus on using renewables and new technologies not just as a hedge against demand risk or to decarbonize their production, but to leverage their expertise with supply chains and market development to support low carbon energy deployment in the energy transition on-the-whole.”
This is exactly the case in Texas, where new wind and solar developments are being built near shale basins, or even by the same oil and gas companies, to guarantee power supply.
For instance, Occidental Petroleum, a key player in the Permian basin, is launching its own solar-power plant for its oilfield operations. The company has also signed a long-term power contract with Core Solar to buy 109 megawatts (MW) starting in 2021. ExxonMobil, one of the global oil majors, signed a multi-year power contract with the wind power company Orsted in 2019 to buy 250 MW of capacity. The electricity bought would be used to power pumps and other equipment in the company’s operations in the Permian Basin. Houston-based Apache already powers its gas compressors with renewables instead of diesel and continues developing its shale assets with the assistance of solar power.
Natural gas and renewables are complementary
Seeing oil and gas producers embrace renewable energy in their operations is no surprise; natural gas and renewables are complementary, given the variability and storage constraints of solar and wind power. Renewable energy output is contingent on weather conditions, which means wind and solar can’t yet meet large-scale energy demands without an “always-available” source of power. A flexible and clean fuel like natural gas provides the optimal backup.
Natural gas ensures the energy grid meets peak energy demand when renewables cannot. As the International Gas Union (IGU) states:
“In order to balance the system and address fluctuating output from wind gusts and cloud cover, you need a reliable, flexible and clean fuel, like natural gas”.
The Texas model for energy abundance
The Lone Star state has been praised for its energy abundance, particularly its plentiful oil and gas resources. However, wind and solar also contribute to the state’s rich energy profile.
According to the Energy Information Administration (EIA), wind accounts for “nearly all” the renewable-powered electricity in Texas. The state is the number one wind energy producer in the country, accounting for 30 percent of the total national wind production.
Texas' role in the wind-power bonanza is paramount. It was the first state to build 10,000 megawatts (MW) of installed wind capacity and according to the American Wind Energy Association, “If Texas were a country, it would rank fifth in the world for wind power capacity with nearly 25,000 MW installed”. In addition, more than 6,200 MW of additional wind capacity is expected to come online shortly.
Likewise, solar energy is also a big asset for the state. Photovoltaic (PV) generation requires extensive lands to capture the sun’s power and Texas boasts both acreage and solar power potential. According to the EIA, the state is “the country’s sixth-largest producer of solar power in 2019”, and Texas' installed solar capacity has doubled between 2017 and 2019, reaching over 3,100 MW.
When it comes to supplying reliable and affordable energy, Texas will always bring its “all hands-on deck” mentality. The fact that oil and gas companies in the state are leading this unconventional, yet effective, approach, only proves that Texas is ready to lead our energy future. The energy mix of the future is diverse, with oil, gas and renewable energy working hand and hand to power our communities.