Most of us will agree that it’s technically feasible to build homes that consume dramatically less energy than today’s typical home. And in most locations we can build a home that draws net zero energy from the utility. But it’s economics that makes us hesitate. Specifically, it’s the value of those energy savings. Can the additional investment be offset by anticipated reductions in energy costs? It’s the same thing for retrofits of existing homes: Do the lower energy bills justify the costs?

That’s where fracking enters into the equation. With dramatically lower natural-gas prices, some efficiency measures will take longer to pay for themselves in bill savings. Or at least that’s the claim. We aren’t aware of a downturn in those key indicators of efficiency activity—sales of insulation, efficient windows, condensing furnaces, and the like—but reduced demand could easily be camouflaged by the recent upswing in the housing market. And what about the homes that already use natural gas for combinations of space heating, water heating, cooking, clothes drying, pool heating, and (increasingly) fireplaces? (That’s about half of American homes.) Should they expect a fracking windfall of lower utility bills or increased consumption? I’m going to go out on a limb and guess “Not much.” Why?

First, most of our home energy bill goes to electricity. The average electric bill is about three times higher than the average gas bill. Cheap natural gas is displacing coal in some regions. That coal was already relatively cheap, so instead of getting cheaper energy, we are mostly getting cleaner energy. Also, the price of natural gas doesn’t affect the other costs that determine electricity rates—that is, the costs of building and operating the power plants and transmission lines. Utilities may invest some of the savings they may realize from fracking to update the embarrassingly obsolete—and sometimes dangerous—infrastructure. That might be a good thing.
U.S. Price of Natural Gas Delivered to Residential Consumers
Figure 1. Will cheap gas from fracking spell doom for energy efficiency in the United States? The answer lies in how we define “cheap.”

How will fracking affect the price of natural gas paid by residential customers? That’s not altogether clear. The Energy Information Administration (EIA) data shown in Figure 1 capture the price trends from 1980 into 2012. Prices have fallen in recent years, but only to 2004 levels. (They seemed high then!) Further price reductions are likely, though.

The EIA data also tell us that seasonal fluctuations in residential gas prices can be almost as large as the fracking dividend. It will take attentive consumers to tease out the actual cost reductions amid these fluctuations.

The last reason that fracking will depress natural-gas prices less than some had hoped is that new, large gas customers are lining up. Increased demand by power plants is already taking up some of the surplus. Industry is also retooling to find new uses for the gas, and some companies are moving their energy-intensive operations back to the United States. Remember those expensive facilities we built to import liquefied natural gas from elsewhere? Well, now the oil companies are repurposing the terminals to export American natural gas!

No doubt about it—low energy prices are bad for the energy efficiency business—so there’s some sour grapes here. But that sour taste isn’t likely to be that sour, or to last that long.

- Alan Meier is senior executive editor of Home Energy.

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Comment by Pat Dundon on March 17, 2013 at 10:25am

There is a LOT of frozen Methane in the worlds oceans.  it has been thought to be improosible to access and use it though.  Aparently the Japanese are closest to making that happen right now. 

http://www.reuters.com/article/2013/03/12/us-methane-hydrates-japan... 

If that comes to the market as a common practice, how ridiculous will those states that allowed fracking and now have polluted ground water look? 

I get real irritated when I hear the fracking crowd say it is a 'managable risk'.  Look a John Stossel's column in the 3/17 paper.  In it, he says well contamination is manageable, and of little consequence.  That is true, if it happens rarely and when it does happen it does not affect you.  But if it only happened once and it happened to you, it would not be so manageable or rare, would it? 

I still think that it is not reasonable to assume that a crew of overworked men can drill a hole 7000 ft deep, line it with concentric rings of, uniform thickness and density cement, and pipe, then push a chemical mix that is 'propriatary' under high pressure through that pipe.  This mix is designed to fracture stone that is under 7000 ft of the earths pressure, so it is reasonably compacted.  My questiosn is how does the mix know it is not to blow out the pipe, it is only supposed to go all the way to the end then penetrate the hardest material it has been exposed to? 

Oh Yeah, New York State has already indicated IF they do allow Fracking, it will not be allowed in the Syracuse or New York City watersheads.  Why is a Manhattanites water more valuable than mine? 

 

Folks in this business will continue to do what they can to reduce load.  There is no downside to that. 

Comment by Ron Jones on March 7, 2013 at 10:44am

This is yet another example of why we're doomed as an industry if we continue to focus only on the benefits of reducing energy consumption through our work. It's rare for any of us in any part of the country to be able to make a convincing case for "payback" in our client's lifetimes, with current and historical energy costs as yardsticks, and future pricing as conjecture. If we don't convince homeowners of the true benefits of our systems approach, that is health, safety, durability, comfort, AND resource efficiency, we'll never come close to fixing all those homes we're so ready, willing, and able to do.

Comment by Nate Adams on March 6, 2013 at 1:27pm

I agree with Alan, and Scott and Dale as well. 

Energy prices, over the long term, aren't going down. China and India are industrializing with upwards of 2 billion people to the paltry 300 million in the US. We're about to start exporting natural gas, which will drive our prices up closer to world prices. I wrote a blog on it last summer. Plus, fracking scares the hell out of me. I have groundwater and live a little over a mile from a well, it's pictured in the blog. 

Energy Smart Blog: Why Your Natural Gas Bill Will Triple In 3 Years

Comment by Dale Sherman on March 4, 2013 at 2:11pm

Some homeowners in upstate NY are changing their homes to all electric because of their opposition to fracking.  They are also switching their electrical supplier to all renewable which often adds 1-2 cents per kWh. These folks are prime candidates for efficiency and conservation retrofit measures.  

With fuel prices relatively low compared to periods with a stronger economy, now is the best time to invest in energy conservation and energy efficiency; before prices go up.  If a homeowner is planning on being in their home for decades, then payback should be based on the life of the measure.  Measures such as air sealing and insulation should outlast the mortgage payments in a house that is well maintained.

I suspect the drop in retail natural gas prices is more likely due to the Great Recession than to an increase in drilling and fracking.  

Comment by scottscontracting on March 4, 2013 at 8:59am

Truly Conscientiousness Builders will build homes that utilize "Green and Sustainable" Products that utilize Natural Energy Sources in Building the Future of the USA.

  1. What will you drink, cook, or clean with:  when "Fracking has polluted all the ground water?"
  2. Nat Gas seems cheap now, when demand is increased the Prices will go up.
  3. As with Coal and Tar Sands- the gas companies are planning on exporting the gas overseas. refer to #2 above.

Haven't we learned that Fossil Fuels are not the Answer?

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