Since 2008, an outstanding achievement in U.S. energy has occurred with barely a whisper from the news media. Electricity prices have plateaued to a very small annual growth rate, while at the same time U.S. CO2 emissions have been on a downward trajectory. What is the reason for this monumental, but un-noticed and un-celebrated change?
Hydraulic fracturing, or fracking, in tandem with horizontal drilling, is perhaps the most important energy discovery in the last half century. This technological breakthrough to access tight oil and gas-bearing rock formations has lowered energy prices, raised domestic energy security, while lowering CO2 emissions.
In this article, we will look at the three key positive impacts from fracking for the U.S.: 1) lower electricity price inflation rates, 2) increased natural gas production and more stable gas pricing, and 3) lower CO2 emissions.
Lower electricity price inflation rates:
From 1990 to 2008, U.S. retail electricity prices increased from 6.57 cents/kWh to 9.74 cents/kWh, or an average annual inflation rate of 2.21%. Conversely, since the advent of horizontal drilling/fracking for natural gas in 2008, U.S. retail electricity prices increased from 9.74 cents/kWh in 2008 to 10.66 cents/kWh in 2020, or an average annual inflation rate of 0.755%.
The annual electricity inflation rate from 2008-2020 is a fraction (34%) of the electricity inflation rate from 1990-2008, or stated another way, since fracking started in 2008, the U.S. retail electricity price annual increases declined by 66% benefitting U.S. electricity consumers. Reviewing Graph 1, we see a marked change in the annual retail electricity price inflation rate, starting to plateau in 2008 due to fracking for natural gas.
Graph 1 – Average retail electricity prices in the U.S. 1990-2020 in cents/kWh
Source: https://www.statista.com/statistics/183700/us-average-retail-electricity-price-since-1990/
Without the advent of fracking, and the lowering of the annual electricity price inflation rate, the U.S. consumer would have paid a total of $479.11 billion more in electricity costs from 2008-2020.
Increased natural gas production and more stable gas pricing:
Graph 2 depicts a decided increase in the amount of natural gas produced in the U.S. since fracking started in 2008.
Graph 2 – U.S. Natural Gas Production, billion cubic feet per day 2010-2020
Coupled with increased, abundant, and relatively-cheap natural gas, the fracking revolution changed the economics for coal-fired vs. gas-fired electricity generation as shown in Graph 3. Follow the change in coal-fired vs. gas-fired as a source for generation starting in 2008. Subsequent to 2008, coal’s share is fairly-consistently in decline, while abundant, cheap natural gas’s share is increasing.
Graph 3 – U.S. power generation by energy source 2005-2019, in billions of kWh
Source: https://rhg.com/research/preliminary-us-emissions-2019/
As the natural gas supply has increased since 2008 due to fracking, we also notice a decided dampening of spot natural gas prices as shown in Graph 4.
Graph 4 – U.S. Natural Gas Price History 2000-2025
Since 2008, spikes in U.S. natural gas prices have been dampened to reflect a more stable and dependable gas pricing mechanism due to fracking. A more stable natural gas price since 2008 has incented the retirement of coal plants, thus reducing CO2 emissions.
Lower CO2 emission levels:
The objective of the Paris Agreement and other prior meetings was to reduce CO2 emissions from all nations in the world. Despite optimistic pronouncements of future performance, we never see an audit of promises vs. performance in CO2 emission reduction by those same countries.
One of the largest impacts from natural gas fracking has been the reduction in energy-related CO2 emissions by the power industry in the U.S. as shown by Graph 5.
Graph 5 – U.S. energy-related CO2 emissions by sector, in million metric tons
Source: https://www.vox.com/2019/1/8/18174082/us-carbon-emissions-2018
Graph 6 depicts that CO2 emissions from energy consumption in the U.S. peaked in 2008, almost simultaneously with the advent of fracking in the U.S.
Graph 6 – U.S. CO2 emissions from energy consumption in the U.S. 1975-2020, million metric tons
Source: https://www.statista.com/statistics/183943/us-carbon-dioxide-emissions-from-1999/
Since 2005, the U.S. has reduced its CO2 emissions by 970 million tons, whereas the world’s leading polluter based on CO2 emissions, China, has increased its emissions by 4,689 million tones over the same period of time as shown in Graph 7.
Graph 7 – U.S. 2005-2020 Change in CO2 emissions, annual million metric tons difference
Summary:
The impact of horizontal drilling and hydraulic fracking has been huge in changing the energy cost, reliability, and emissions in the U.S. Key points are:
1. Electricity consumers in the U.S. have saved ~$479 billion since 2008 due to fracking
2. U.S. CO2 emissions have been reduced by 970 annual million tons from 2005-2020, due to fracking, while during the same time frame, China has added 4,689 annual million tons of CO2
3. Natural gas supply in the U.S. is a stable and reliable source for energy generation, dampening the price spikes of years prior to 2008
4. The combination of horizontal drilling and hydraulic fracking technologies in the U.S. has enabled the U.S. to become the #1 producer of crude oil and natural gas in the world
5. Abundant and cheap natural gas supplies have hastened the decommissioning of coal-fired generation plants, but also allowed increased renewable energy projects to come online as gas peaking units supply energy when intermittent solar and variable wind energy is not available
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