Florida Residents, Businesses Vulnerable to Electricity Price Spikes

New Report Shows The State’s Risky Overreliance On Natural Gas

Published Mar 10, 2015

Tallahassee, Fla. (March 10, 2015)—Florida policymakers are setting up state residents and businesses for electricity price spikes by greatly increasing its dependence on natural gas for electricity generation, according to a report released today by the Union of Concerned Scientists (UCS). Ramping up energy efficiency and renewable energy resources, like solar power, would help insulate consumers against these economic risks, while diversifying the power mix and cutting heat-trapping carbon emissions.  

The report, The Natural Gas Gamble, shows that 62 percent of Florida’s electricity currently comes from natural gas plants—up from 44 percent in 2007. This number could increase to nearly 90 percent if the state replaces aging, inefficient coal plants entirely with natural gas to comply with the Environmental Protection Agency’s Clean Power Plan. Instead, the state should prioritize investments in renewable energy and energy efficiency to meet the plan’s emission reduction requirements.

“Florida has entered the danger zone of relying too much on natural gas,” said Jeff Deyette, senior energy analyst at UCS and report co-author. “There’s a well-documented history of volatility in natural gas prices, including major spikes. In 2012, an increase in the domestic supply of natural gas, combined with the recession and a warm winter, resulted in low natural gas prices around the country. In contrast, we saw prices spike 7-fold in 2005 due to hurricane activity in the Gulf of Mexico. And last winter, when it was bitterly cold in much of the U.S., prices in some regions jumped 10- to 12-times higher than recent lows. These market trends could continue, and consumers in Florida and elsewhere that rely heavily on natural gas will end up paying the price.” 

Businesses and shareholders may also see their bottom lines negatively affected if states like Florida continue to expand natural gas in their electricity mix. The UCS report cites natural gas industry data showing it would cost $313 billion to build the national infrastructure to transport, store, and process the amount of natural gas the U.S. would need overall through 2035 if use continues to grow along the current trajectory. In Florida, for example, the Sabal Trail underground pipeline—a project of Florida Power and Light and Next Era Energy—will cost over $3 billion and run nearly 500 miles through Georgia and Florida to provide more than 1 billion gallons of natural gas to the state daily.

However, as the U.S. strives to significantly cut carbon emissions and limit climate impacts—such as sea level rise—this natural gas infrastructure may eventually need to be abandoned, becoming a “stranded asset.” Given limited financial resources and growing climate risks, prioritizing investments in renewable energy infrastructure over natural gas pipelines would involve less risk for consumers and businesses alike.

While natural gas can be an important fuel source in a diverse electric grid, it is important for states to ensure that the role it plays is more balanced. According to the Southern Alliance for Clean Energy (SACE), in Florida this means ramping up other affordable electricity options, such as energy efficiency and solar, rather than increasing dependence on natural gas.

“Florida is woefully behind on capturing cost effective energy efficiency and renewables like solar,” said Susan Glickman, the Florida director at SACE. “The Sunshine State gets less than one-tenth of 1 percent of its energy from solar despite our strong solar resource and rapidly decreasing prices. Big monopoly utilities continue the rush to factor major gas infrastructure into their rate base for which we will all pay for decades. Instead we could keep energy dollars here at home, save money, and better protect our natural resources.”

The UCS analysis also found that if renewables made up a much greater share of the U.S. electricity mix, consumers would pay less for their energy. With a national limit on carbon emissions and strong renewable energy and energy efficiency policies, by 2040 renewables could make up nearly 40 percent of the electricity mix and consumers would see an annual net savings of $59 billion (in 2013 dollars).

 The UCS report concludes that as the nation moves away from coal, enacting policies to ensure a diverse supply of low-carbon power sources—made up primarily of renewable energy and energy efficiency with a balanced role for natural gas—would protect consumers’ pocketbooks and the environment.