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Aug 22, 2012

Good Natural Gas News Today, But What About Tomorrow?


Nat Gas BlogContent for this post was contributed by Alexis Karolides, Lena Hansen, Dan Seif, and Lisa Huber.

Recent articles have posited that natural gas is so cheap and plentiful that it not only challenges coal as our dominant source of electricity in the short term, but will also threaten the development of renewables in the long-term.

Have we really shifted to a “new normal” of low, stable gas prices? It seems bit naïve to think so. Natural gas promises an immediate economic boost, and is a near-term solution to reduction carbon emissions compared to coal.

To be sure, there are positive near-term wins, as evidenced by the recent report from the U.S. Energy Information Agency that U.S. emissions have fallen to the lowest levels in 20 years. Existing natural gas turbines provide 40 percent of U.S. power generation capacity but traditionally have only been utilized to produce 23 percent of power generation because of the lower relative fuel cost of coal. With current low natural gas fuel prices, utilities can maximize their gas-fired generation, reducing emissions compared to coal by at least 35 percent.

But, in spite of these benefits, rushing straight to natural gas as the principal solution to our energy problems over the long-term is imprudent. Here’s why:

1. Natural Gas is Not as “Cheap” as It Seems
Natural gas is one of the riskiest commodities around, historically bearing twice the volatility price risk of oil. While this is common knowledge among industry professionals and commodity traders, the long-term risk often goes ignored, despite previous attempts to put a price tag on volatility. Learn more

2. Renewables ARE Competitive
Even against the current natural gas futures pricing curve—much lower than just a few months ago—utility-scale renewables can compete unsubsidized within a few years. In good wind locations, wind power can already compete unsubsidized with natural gas selling for more than $6 per million BTU. According to Bloomberg New Energy Finance, wind turbine pricing has averaged 14 percent per-year declines since the mid-1980s. If that continues, by 2016 wind power should compete head-on in a growing number of locations with wholesale natural gas, which by then is expected to sell above the mid-$4s per million BTU. Learn more 

3. Natural Gas Offers Flexible Options
Natural gas will be most valuable when recalibrated to serve as a transition fuel and as a source of electricity system flexibility. Experts both inside and outside the industry increasingly agree that energy efficiency has the potential to cost-effectively eliminate growth in electricity demand. Extensive modeling suggests that we can capture and integrate the renewable energy needed to meet 80 percent or more of our electricity demand by 2050, after efficiency. With these strategies in place, the U.S. can transition off oil and coal, all while cutting natural gas consumption by 25 percent. Learn more

4. Natural Gas Cuts Carbon, But Not Enough to Mitigate Climate Change
While gas can dramatically reduce carbon emissions (compared to coal) and help transition the country to an electric system based on renewables, its ability to reduce emissions does not meet the target set by the of International Panel on Climate Change for 80 percent greenhouse gas reduction by 2050. Natural gas is primarily methane, which has a global warming potential up to 18 times more potent than carbon dioxide.

That’s not to say that natural gas doesn’t have a critical role in the transition to a low fossil fuel energy system—it does. But that role is pretty different from making a bet on natural gas being a dominant primary source of energy.

What role do you think natural gas should play in our future electricity system?

Highlighted Resources

Nat Gas

Managing Natural Gas Volatility: The Answer is Blowin’ in the Wind


Natural Gas Boom Won’t Stall U.S. Renewables


Booms and Busts, Tulips and Gas

Nat Gas Consumption
How should the U.S. recalibrate itself to take advantage of natural gas reserves?


Join the Discussion

Showing 1-8 of 8 comments

August 23, 2012

Wind/solar is cleaner than gas, which is cleaner than oil, which is multiple times cleaner than coal. I'm still following thorium nuclear and geothermal as potential alternatives. The bottom line is everything is cleaner and cheaper than coal. Remember the price per kwh for coal is just the beginning. We also have hidden charges of externals like waste disposal, global warming, land, water, and air pollution, health care costs for those who get cancer, and babies born with birth defects because of exposure to toxics from extraction, processing, combustion, and coal waste.

To answer the question, yes, natural gas is the only sensible alternative WHILE we TRANSITION to non-fossil alternatives. The first thing to do is get away from coal as soon as possible... end all subsidies, end all exports, and start charging the coal companies, power companies, and ultimately consumers the REAL price of coal.

August 23, 2012

Some of the best sites for solar or wind is not near electrical loads to use the energy. But, some of them are near gas pipelines and cracking water into Hydrogen and Oxygen then selling the hydrogen to the gas distributor makes their wells last longer (at a cost of $4 million per well) and lowers the carbon content of Natural Gas And it becomes renewable not a fossil . Remember the Methane component of natural gas contains carbon. but obviously hydrogen does not.

August 23, 2012

This has alarm bells ringing in my mind, as it seems that you have not done your homework, which is very unusual for RMI.

Firstly, natural gas has a global warming potential 25 times more than CO2, not "up to 18". 18 is an invented figure, because it has NEVER been such. The GWP was 21 back in 2000, and has since been raised to 25 (over 100 years). Over 20 years, methane's GWP is 72.

Why is this important? Because 100% of new natural gas is coming from fracking, and the evidence (Howarth et al) shows that the fugitive methane emissions associated with fracking are such that gas may be worse than coal as a driver of global warming.

The RMI is usually a fabulous source of accurate science and data, so I trust that this slippage is just that, and not a sign that RMI no longer cares about accurate numbers.

We need NOT to join the rush to gas; we need to go straight to efficiency + renewables. Until there is a carbon price, it is also unfairly subsidized against renewables.

August 23, 2012

There have been a couple of high profile studies on the carbon footprint of shale gas. Here is a terrific analysis of the two conflicting studies:

August 23, 2012

Why no mention of fracking, which is an environmental travesty on so many different levels, from intensive (over)use of scarce water resources to pollution of our drinking water?

August 23, 2012

On the issue of fracking specifically, we have relied on the expert analysis by outside organizations to truly quantify the environmental impacts.

Here are resources that RMI would recommend on the topic of fracking's impacts:

* NRDC: http://switchboard.nrdc.org/hydrofracking.php
* MIT: The Future of Natural Gas: http://web.mit.edu/mitei/research/studies/natural-gas-2011.shtml

In addition, if you have a copy of Reinventing Fire, an excerpt on fracking can be found on page 233. Here are some of the key points from Amory and the RMI team:

* If badly done, returned water can contaminate groundwaters or surface waters. Wells must also be carefully completed so methane doesn't leak. Some operators have conspicuously misbehaved and some regulators have fallen short, making fracking controversial even in traditionally drilling-friendly places like Texas and Western-Colorado.
* Besides cleaning up its act, the U.S. industry must also confirm that adequate gas output can be economically sustained after the often-sharp initial falloff, and it must show that fracking won't trigger small earthquakes.
* It will likely take a decade to resolve fracking controversies, reform bad operators, and build a stable regulatory regime that earns public confidence. It is essential that both large and small companies follow industry best practice, that water supply and disposal are coordinated on a regional basis, and that improved methods are developed for recycling of returned fracture fluids.
* We can take comfort in the fact that efficiency and renewables can gradually abate natural gas needs. The energy transition described in Reinventing Fire can thus take advantage of successful shale-gas development without depending on it.

August 24, 2012

There is a lot less natural gas in the earth's crust than oil so it is silly to think that it can be a long term energy solution. Gas can also be extracted from oil but the price of this gas goes up directly proportional to the price of oil. Coal is our most abundant resource so clean coal with new generating plants being built to replace the old very polluting types is the best cost effective short term solution to powering plug in electric vehicles. Plants need carbon dioxide to grow well and I am not convinced the CO2 production is really that hazardous to our health. Climate change is mostly due to changes in sun cycles and not CO2 accumulation in the atmosphere.

September 2, 2012

Thanks for the article, Kelley. A couple thoughts:

1) I've seen pieces claiming that the only reason gas is so cheap is because there is a glut, that the price where they can make a profit is more like $6/mcf. The glut exists due to drillers taking action rather than letting their leases expire, but I would expect prices to settle in a more profitable range as the mania subsides, making wind and solar reasonable options quite soon (5-10 years).

2) A contrarian view on apcc & methane releases would say that since there is a large and financially-committed opposition to recognizing the reality of apcc, no action will be taken until it is undeniable. I would prefer the warming effect of methane (10 years of high effect, followed by hundreds of years at a single percent of that intensity) rather than CO2 (where we are stuck with the warming gas for hundreds of years). At least we can turn down the gas when we realize the pot is getting too hot.
Optimally, of course, we would use wisdom instead of needing to deal with denial, but we are working with humans here.