Still chasing down the potential “Natural gas rip-off” – natural gas futures prices fractions of a cent per kWh – US household electricity average charge 15 bucks per kWh
Regular readers will know I have gone down the natural gas rabbit hole in an attempt to reconcile the cost of gas fired electricity generation with the price paid by US households for their electricity supply – also comparing the cost of offshore wind generation and its dozens of square mile “footprint v the half square mile of a couple of gas fired power stations.
To keep you up to date – so far, my requests for help for confirmation of my arithmetic in articles like the one below have not received any feedback.
So, I thought I would go to the “font of all knowledge”.
Here is th text of an email sent to the EIA. Tday:
“I am trying to reconcile the NH futures contract price with electricity prices paid by US households.
I see that US household electricity prices vary widely by State, but average around 16 dollars per kWh.
I see that the specification of an NG futures contract is written as 10,000 mmBTU here: https://www.cmegroup.com/markets/energy/natural-gas/natural-gas.contractSpecs.html?redirect=/trading/energy/nymex-natural-gas-futures.html
Using this converter here: https://www.inchcalculator.com/convert/million-btu-to-kilowatt-hour/ 10,000 mmBTU (10,000 mille mille BTU) = 10 billion BTU = 2,730,711 kWh.3 dollars divided by a million =
Which is around 3 million kWh.
I understand that gas fired power stations operate at around 33% efficiency, implying that just 1 million kWh produces electricity.
Is the apparent "raw material" cost per kWh equal to the futures contract price of around 3 dollars per contract across the strip curve divided by the 1 million kWh produced?
3 dollars divided by a million = 0.0003 cents (not dollars) per kWh,
This compares to electricity charged at 16 dollars per kWh charged to the average US household.
This seems anomalous and can be compared to the recent CFD auction price for offshore wind in the UK of £82 (around $100) per mWh = 10 cents per kWh.
Can you help me with the reconciliation of the arithmetic?”
I got the email contact address from here:
https://www.iea.org/help-centre/contacts#any-generic-questions-not-listed-above
The EIA puts out stuff like this: Weekly Natural Gas Storage Report - EIA
And this:
https://www.eia.gov/energyexplained/natural-gas/prices.php
Which has a map for prices paid per 1,000 cubic feet per State in 2022.
I am sure the residents of California were happy to pay 80% more for their natural gas than residents of Colorado!
Note these are prices for the supply of natural gas to households, not the cost of electricity generated from gas fired power stations.
We can convert the 1,000 cubic feet to kWh easily enough. From Brave browser:
“Based on the provided search results, we can use the conversion factor: 1 cu ft ng = 0.29307107017222 kWh.
To convert 1,000 cubic feet of natural gas to kWh, multiply 1,000 cu ft ng by the conversion factor.
Therefore, 1,000 cubic feet of natural gas is equivalent to approximately 293.0711 kilowatt-hours (kWh).”
So, in 2022, for California, $16.34 per 1,000 cubic feet works out at $16.34/293 kWh = 5.6 cents per kWh.
And for Colorado, $9.10 per 1,000 cubic feet =3.1 cents.
We have a couple of comparisons we can make.
Price charged for electricity in California and Colorado in 2022:
From Brave:
“… a general estimate for 2022, we can look at the average electricity prices reported by the California utilities:
· Average electricity price for single-family detached homes: approximately $0.35/kWh
· Average electricity price for apartments: approximately $0.25/kWh
And for Colorado?
· The average residential price per kWh in Colorado in 2022 is approximately 14.44 cents (based on Public Service Company of Colorado’s rate).
· The average residential monthly electricity bill for Colorado residents in 2022 is around $112.43 (based on United Power’s average bill).
14.44 cents v 35-50 cents for California.
California apartment dwellers pay more than three times the price of Colorado residents for their electricity!!!
Let’s look over the pond to the UK, which will jack up its prices to pay for offshore wind by 14% by January 2025.
Using Brave:
Natural Gas:
· Average price cap/guarantee unit rates for typical usage (2024):
o 6.24p/kWh (variable cost) + 31.66p/day (daily standing charge) (source: {‘title’: ‘Average Cost of Electricity Per kWh in the UK (2024)’, ‘published date’: ‘Monday, September 02, 2024’})
Electricity:
· 28.6p/kWh (source: {‘title’: ‘Average Cost of Electricity Per kWh in the UK 2024’, ‘published date’: ‘Thursday, September 05, 2024’})
The prices shown do not include an extra 5% VAT charged by the UK government – the bigger the bill, the more the VAT.
Sterling has risen to one pound sterling buys 1.33 US dollars, so natural gas costs 8.34 US cents per kWh and electricity costs 38 cents per kWh BEFORE standing charges that add another third and VAT adds another 5% - compared to California costs of 5.6 cents for natural gas and 35-50 cents for electricity.
Compared to around 3 bucks for a million kWh (1,000 mWh) pro rata for 33% efficiency of gas fired power stations) or natural gas contracts on the futures market – and the latest UK CFD auction price of 100 bucks per mWh for offshore wind!
Compared to 3.1 cents for natural gas in Colorado and 14,4 cents for electricity in Colorado.
California is bad but the UK is even worse!
Population of Colorado? Around 6 million (before criminal migrant beggars).
Population of the UK around 68 million, California around 39 million.
So much for economies of scale!
Here’s what Brave AI has to say about the price differential for natural gas between California and Colorado.
“CA Gas Prices vs. CO
California households are paying significantly more for natural gas compared to their counterparts in Colorado. The primary reasons for this disparity are:
· Commodity Price Inflation: Natural gas prices have surged in recent years, and California’s gas utility bills have been disproportionately affected. According to reports, SDG&E natural gas bills are expected to double in January 2023, jumping from $105 to around $225 per household. In contrast, Colorado consumers have seen double-digit hikes in their gas utility bills, but the increases have been less extreme.
· Regulatory Framework: The Colorado Public Utilities Commission (CPUC) plays a significant role in setting natural gas rates for utilities in the state. The CPUC approves rates that allow utilities to recover costs associated with energy efficiency programs and operating expenses. In California, the California Public Utilities Commission (CPUC) also regulates natural gas rates, but the state’s unique energy landscape, including stricter emissions standards and higher demand, contributes to higher costs.
· Infrastructure and Operating Expenses: California’s natural gas infrastructure is more complex and extensive due to its larger population and denser urban areas. This increased complexity and scale lead to higher operating expenses for utilities, which are then passed on to consumers. In contrast, Colorado’s natural gas infrastructure is less dense and more spread out, resulting in lower operating costs.
· Demand Side Management: Colorado utilities are required to implement energy efficiency programs, which are funded through Demand Side Management (DSM) charges. While these programs benefit consumers by reducing energy consumption, they also increase costs for utilities and, subsequently, for customers. California utilities may have similar DSM programs, but the specific design and funding mechanisms could contribute to higher costs for California households.
These factors combined have resulted in California households paying significantly more for natural gas compared to their counterparts in Colorado.”
Humph!
Onwards!!!
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