Prices of Various Energy Sources

Ed. note: This item originally ran in Robert Rapier”s R-Squared Energy Blog.

As we continue to develop biomass as a renewable source of energy, it is important to keep the cost of energy in mind, because this has a very strong influence on the choices governments and individuals will make. I sometimes hear people ask “Why are we still using dirty coal?” You will see why in this post.

Last year I saw a presentation that projected very strong growth in wood pellet shipments from Canada and the U.S. into Europe. My first thought was “That doesn”t sound very efficient. Why don”t we just use those here in North America?”

It didn”t take very long for me to find out the answer to that. It is because wood pellets are much more expensive than natural gas in North America. On top of that it takes more effort to use wood for energy than it does natural gas. That combination means that wood has a tough time competing with natural gas in North America.

When I was looking into that issue, I compiled a list of the price for various energy types on an energy equivalent basis. The price is as current as possible unless noted. I have converted everything into $/million BTU (MMBTU), and the sources are listed below.

My preference is to use EIA data over NYMEX data because the former is an archived, fixed number. I have included energy for heating and for various transportation options. For comparison I also included the cost of electricity and the cost of the ethanol subsidy/MMBTU of ethanol produced.

Current Energy Prices per Million BTU

Powder River Basin Coal – $0.56
Northern Appalachia Coal – $2.08
Natural gas – $5.67
Ethanol subsidy – $5.92
Petroleum – $13.56
Propane – $13.92
#2 Heating Oil – $15.33
Jet fuel – $16.01
Diesel – $16.21
Gasoline – $18.16
Wood pellets – $18.57
Ethanol – $24.74
Electricity – $34.03

Observations

It isn”t difficult then to see why wood pellets have a difficult market in the U.S. For people with access to natural gas, they are going to prefer the lower price and convenience of natural gas over wood. For Europe, their natural gas supplies aren”t nearly as secure, so they have more incentive to favor wood as an option.

The cost of the ethanol subsidy is interesting. We pay more for the ethanol subsidy than natural gas costs. However, if you consider that we are paying a subsidy on a per gallon basis – and a large fraction of that gallon of ethanol is fossil fuel-derived, the subsidy for the renewable component is really high.

For instance, if we consider a generous energy return on ethanol of 1.5 BTUs out per BTU in, that means the renewable component per gallon is only 1/3rd of a gallon. (An energy return of 1.5 indicates that it took 1 BTU of fossil fuel to produce 1.5 BTU of ethanol; hence the renewable component in that case is 1/3rd). That means that the subsidy on simply the renewable component is actually three times as high – $17.76/MMBTU. Bear in mind that this is only the subsidy; the consumer then has to pay $24.74/MMBTU for the ethanol itself.

Sources for Data

Petroleum – $13.56 (EIA World Average Price for 1/08/2010)

Northern Appalachia Coal – $2.08 (EIA Average Weekly Spot for 1/08/10)

Powder River Basin Coal – $0.56 (EIA Average Weekly Spot for 1/08/10)

Propane – $13.92 (EIA Mont Belvieu, TX Spot Price for 1/12/2010)

Natural gas – $5.67 (NYMEX contract for February 2010)

#2 Heating Oil – $15.33 (EIA New York Harbor Price for 1/12/2010)

Gasoline – $18.16 (EIA New York Harbor Price for 1/12/2010)

Diesel – $16.21 (EIA #2 Low Sulfur New York Harbor for 1/08/2010)

Jet fuel – (EIA New York Harbor for 1/12/2010)

Ethanol – $24.74 (NYMEX Spot for February 2010)

Wood pellets – $18.57 (Typical Wood Pellet Price for 1/12/2010)

Electricity – $34.03 (EIA Average Retail Price to Consumers for 2009)

Conversion factors

Petroleum – 138,000 BTU/gal
Gasoline – 115,000 BTU/gal
Diesel – 131,000 BTU/gal
Ethanol – 76,000 BTU/gal
Heating oil 138,000 BTU/gal
Jet fuel – 135,000 BTU/gal
Propane – 91,500 BTU/gal
Northern Appalachia Coal – 13,000 BTU/lb
Powder River Basin Coal – 8,800 BTU/lb
Wood pellets – 7,000 BTU/lb
Electricity – 3,412 BTU/kWh