Easy peasy lemon squeezy, to repeat a phrase of one rant fan a while back – that describes carbon slayers’ victory laps in the past couple years. I am talking about the natural gas boom introduced by the development to near perfection of the hydraulic fracturing and horizontal drilling methods used on private land, mostly east of the Mississippi River. Pile on top of this last Monday’s release of the EPA’s carbon goals by 2030, and we have about three or four weeks of blog material. So, let’s get started.
Natural gas is a wonderfully versatile energy source. It doesn’t require expensive refining. It transports easily via huge compressors and a broad distribution system to hundreds of millions of homes and businesses. It can be used to heat water, dry clothes, cook, fuel vehicles, and of course, generate electricity, among probably a few dozen other uses.
In case you live in the remote outback or on an uncharted desert island, in which case you wouldn’t be reading this, the EPA’s regulation is to cut carbon emissions by 30%, with 2005 as the base year, by 2030.
The chart shows allocation of the country’s electric consumption over recent decades and through 2012. There is a little bit of taking credit for the sunrise here as you can see, emissions have already tanked by about 7% since 2005. We have a big head start. The 7% number I derived from coal dropping by about 12% and natural gas increasing by about 10%. Coal, as a fuel, produces about twice as much carbon dioxide as compared to natural gas and therefore, an increase in natural gas allocation of 10% reduces carbon emissions by 5%. The other 2% is made up by non-carbon sources, it appears. Most of that is likely wind power.
Utilities have been flipping from coal to natural gas willy-nilly in recent years. This is probably for two reasons, the first of which is natural gas plants are cleaner and therefore, face far less resistance (yet) than coal plants. The second reason is the fuel price differential has almost disappeared. This is the easy peasy part of the carbon emissions reductions. But doing some simple math, if all coal generation were switched to natural gas, we would only get 16% further down the road, leaving us at, wow, 28%. I’m beginning to see where this 30% number was plucked out of the air… I’ll bet you won’t find this anywhere else on the internet.
But here’s the problem – natural gas is a beautiful fuel, and coal – not so much, but for reasons you are not likely thinking of. Coal is an easy fuel for power plants and not much else. Ships and trains no longer use it for locomotion. Homes don’t use it for heat. As a result of no competition for the fuel, it’s cheap, plentiful, and otherwise a perfect fuel for generating electricity.
Natural gas, on the other hand, is going to bust out and be gobbled up by all sorts of demands, especially for transportation and chemicals. This is going to place huge demand and upward pricing pressure on the fuel and electricity prices – until it comes into historic balances with alternate fuels like petrol. The natural-gas-to-electricity party is going to end with a bad hangover.
Here is a little known reality: at the end of March 2014, The Wall Street Journal reported that natural gas reserves were at a 10 year low. Where’s the glut? My recent natural gas bill featured a fuel cost of $1.24 per therm. The shale-gas boom is being gobbled up and will be completely gobbled up, and then some, very soon.
Natural gas is a great transportation fuel, particularly for local and regional fleet vehicles like taxis, buses, garbage trucks, contractor vehicles, and the like. The fuel cost is roughly 70% less than petrol sources, but once all the road taxes are added in, it is “only” 50% less cost. That is huge, and operators of these types of fleet vehicles are going to catch on. I would.
Additionally, there are stories like this one from The Wall Street Journal that describe mind-blowingly large new consumers of natural gas under construction. South African energy company, Sasol, is building a five-square-mile manufacturing facility to crack natural gas using technologies developed to fuel Nazi tanks and Apartheid-era fuels and plastics for South Africa. This $20 billion plant will generate ethylene, a feedstock for plastics, and jet fuel and diesel fuel. It will peak with 7,000 construction workers. How’s that for economic development?
In total, $90 billion in industrial expansion is in the works for the state of Louisiana, including the Sasol plant. Suddenly, the lemon squeezy is looking like pulp from lemon rind only.
When gas prices level out at usual, or even higher-than-historic-norm prices, utilities are going to take a beating for high electricity prices. I can see it now – the feds who set all this up will be piling on saying the utilities should have seen this coming. It seems now is the time to grab control of the messaging.
BTW, why are electric utilities stuck with the only aggressive carbon control edict from the almighty EPA?
Last week’s post, Energy Program Evaluation, Not Activism, seems to have been misinterpreted by some readers, possibly due to poor choice of words on my part – so I want to clarify some things. I was writing as an evaluator, and the message is, as evaluators, we evaluate programs per program rules, whether we agree with them or not. For instance; the early equipment retirement issue. Some evaluators are adamant that the baseline for any replacement of equipment should be current code-compliant baselines. That’s fine. Others are adamant that the baseline should be whatever the equipment efficiency of the old equipment was. Ok. Still, others advocate a mixed baseline for remaining years of useful life to be one efficiency and code-base for the remaining years of useful life of the new equipment. That’s fine too. However, if the rules are set forth by energy efficiency plans and approved by regulators, an evaluator can’t say “screw that”, my way is the right way, and that’s how I’m going to evaluate it. That is wrong, and that is my point. You can make a case all you want outside program rules – for next time, but if we don’t follow the rules we have a mess. By all means, advocate for whatever policy changes you desire, but we must play by the rules of the day.
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You are dead on with your remarks about natural gas, a hangover will be a huge understatement. When my dad graduated as a petroleum engineer in 1937, his professor was talking about how wonderful the hydrocarbon molecule was, and of the great things are made with gas as a feedstock, paint, drugs, plastics, fertilizer, on and on. His final words were “FOR GODS SAKE LETS NOT BURN IT! We are fast burning through a very finite resource that will be more and more important to future generations.
Nuclear is the only clear choice, and this country is being defeated by the good intentions of people of limited knowledge.
I have enjoyed your blog for almost a year now and really have enjoyed it very much. We are about the same age and I am very concerned that voices of reason are lost in all of the hype and noise, generated by shallow thinkers.
I have something that I would like to share with you, but not necessarily public information. Please provide a direct e-mail if you are so inclined.
Keep up the good work.
Thanks Mac – that is my mission with these things to separate and blow the smoke screen of hype away from the important things and call out the challenges with things – and hopefully in most cases offer alternatives. For example, yesterday I was just talking with a PhD economist in this industry and I said I believe as an engineer with a thorough understanding of the second law of thermodynamics that we cannot claim to cut off a dirt cheap source of fuel (coal) and essentially build two parallel sources of generation, in the case of renewables each with full generating capacity – one in which we can use nearly all renewables during the middle of the day and fall back to conventional at night… and then declare this is good for the economy on a macro level. Good grief. That defies all logic and reason. It’s the broken window theory. I feel another post coming on… Thanks again.