Replies

1. Expert Member
   MALCOLM TAYLOR | Jul 07, 2019 01:17pm | #1

   Unfortunately, you can make all sorts of guesses, some more educated than others, but the only people who know what the cost of energy will be in ten years are wizards.

2. Expert Member
   BILL WICHERS | Jul 07, 2019 01:38pm | #2

   Natural gas prices have dropped in recent years due to the fracking boom. I wouldn’t count on such a drastic price drop happening again the future. At best, expect prices to remain somewhat similar to what they are now. No one can predict what future regulations might do. Supply isn’t expected to be a problem for decades. How do I know this? I read a lot about the industry and the people who play the futures markets who watch this very closely to be able to make predictions. There are some websites out there that focus on the oil and gas industry that you may want to look up too.

   Electricity is different. Electricity is, or at least has been in recent decades, more heavily influenced by regulatory factors than natural gas has been. Rates have generally risen, and are likely to continue to do so. How much will they rise? That’s crystal ball time, especially if you want to look forward 10 years. 3-5 years is about as far or as you can predict with much accuracy and even that is tricky. Everything is educated guesswork.

   You can get an idea of what your local utility expects to happen in the near term (up to maybe a few years out) by getting a copy of their “annual assessment” reports. These consist of predictions for the coming summer and winter and detail the utility’s expected operating issues, and projected rate adjustments they might need to make. That’s about as accurate as you can get.

   My advice is to know that whatever investments you make now to make your home more energy efficient will almost certainly pay off in the future (just don’t go way overboard). If rates go up more than expected, you save more than you thought. If rates stay the same, you save what you expected. I wouldn’t count on rates going down. Don’t forget to allow for inflation as you project costs years into the future. You can get inflation numbers from the department of labor data which is publicly available.

   Bill

1. 
   forcedexposure | Jul 08, 2019 07:40am | #4

   Thanks, Bill.

   I'll go ahead and estimate these future utility costs with only cost of inflation factored in, which puts my 10 year energy cost estimate at $36,769. Damn, that adds up!

1. Expert Member
   Dana Dorsett | Jul 08, 2019 11:43am | #5

   Regarding natural gas pricing, it's been running ahead of inflation when viewed over a longer time frame than just the past 10 years:

   https://www.eia.gov/dnav/ng/hist/n3010us3A.htm

   Pick a year, any year and compare it to current pricing adjusting it for inflation:

   https://www.usinflationcalculator.com/

   Natural gas is cheaper now after inflation than it was in 2005, 1995, or 1985, but still more expensive than it was in 1975, which was after the Arab oil embargo price shock, and pretty close to what it was in 1980 after the second OPEC driven price shock. Gas is only this cheap now as a byproduct of going after tighter harder to retrieve oil. When oil consumption peaks (which may be happening sooner than we think as auto efficiency goes up and /or electrifies in this coming decade), it puts more upward pricing pressure on natural gas.

   Assuming the price deflation of the past 10 years for natural gas would be a mistake, as would using the base rate of inflation. There are many aspects to the gas markets that will make it volatile, but the general forces going forward in the next 10 years would be toward higher, not level (level with inflation) gas pricing in New England. Fracking bans, LNG export, and an expanding global market along with the fact that the cheap & easy gas is a limited resource that is depleting all put a floor under the price.

   The forces at work pushing pricing down is fuel switching away from natural gas (particularly in the electricity generation front), which is really just getting started. But the same fuel switching toward cheaper-than-gas renewables for power generation is having an even greater deflationary pressure on electricity pricing. While that is just getting started, it has a fairly rapid market effect on reducing grid-peak localized marginal pricing, with less than a year's delay for it to show up in electricity rates. Electricity pricing should continue to be flat or falling over the next decade, but gas pricing will continue to be volatile until several years after heat pumps become strongly competitive on operational cost with natural gas for space heating in New England, which might not happen within the 10 year time frame.

1. 
   forcedexposure | Jul 08, 2019 08:44pm | #6

   Thanks, Dana.

   I need to come up with some way to estimate these costs and I don’t mind being too conservative about it. My budgeting theory here is this: if electric and gas would cost $36,000 over the next ten years, then I can budget around $30,00o for ASHPs, removal of my steam radiators and gas furnace, insulation, and air sealing. The missing $6000 goes towards financing this work over ten years. $30,000 seems too slim to do all of this work, but we’ll see what my awesome contractor quotes me, after all the incentives are factored in. I’m really trying to do a switch from gas to PV without making irresponsible financial decisions along the way.

   BTW, I read a fascinating article about NG pricing and availability problems below the fold on the cover of the WSJ today. I’ve attached it here for you.

   Best wishes, Kristin

   
3. Expert Member
   Dana Dorsett | Jul 07, 2019 01:39pm | #3

   Even though natural gas pricing has been mostly falling since the record peak pricing around 2005, natural gas prices are NOT going down over time, despite currently being near record lows. It's actually quite volatile- it goes up and down dramatically in relatively short amounts of time with changes in the market, and more recently with changes in gas extraction technology. In Massachusetts pipeline constraints make it even more volatile. There are lots of moving parts the natural gas markets- export pipelines and liquified natural gas export terminals currently under construction puts upward pressure on the wholesale price of natural gas, which is a major part of the price. Predicting it's price 10 years out will be guaranteed to be wrong, in either direction, though it's more likely to be going up than down.

   Currently in New England about half of all electricity is being generated by natural gas, but that is about to change (permanently) as the offshore wind farms get built, solar (large and small) keeps getting installed, and with the high likelihood of a transmission line connecting Massachusetts to Quebec's hydroelectric resources are all built out in the next 10 years. Electricity pricing may go up a bit in the near term, but long term all of those things put downward pressure on the wholesale price of electricity. The current costs of installing even small scale rooftop solar is substantially below the residential retail price, which also helps establish an upper bound on pricing. In inflation-adjusted dollars electricity is likely continue it's 50 year slow decline in cost:

   https://www.eia.gov/todayinenergy/images/2015.03.16/realnominal.png

   The electricity price volatility in New England has been largely due to the price of natural gas, and the constrained gas supply infrastructure. Removing gas from the electricity generation fleet price makes those influences go away. Massachusetts (and most New England states) are moving strongly away from all fossil fuels in the electricity supply, despite the current over dependence on natural gas.

   If you're on Nat'l Grid or Eversource it's possible to buy 100% renewable electricity from electricity brokers for the supply portion of the bill at or below the standard mix, but buying your own rooftop solar can be a much better deal if you have the right roof real-estate, given the level of subsidy.