Game, Set, Match: It’s Natural Gas By Default

Natural GasBy Terrence Thorn

If the last decade of the 20th century saw a “dash to gas,” then the first decade of this century is seeing the U.S. gas industry “power walk” in the same direction. Fueled by cheap prices, lower investment costs, and the fuel’s lower emissions, the late 1990s saw a surge in the construction of natural gas fired power plants. Almost 90 percent of the U.S. power generation capacity that has been added since 1998 is natural gasfired. Already, some areas use natural gas to generate a large portion of their electricity – nearly 50 percent of the power in California and Texas, and 40 percent in Florida. Natural gas also is becoming a much larger part of U.S. electricity generation, rising 34 percent between 2002 and 2007. Today, a second natural gas renaissance is being predicted. And unlike the 90s, this expansion will occur in an era of sustained high natural gas prices.

High Prices Despite Record Production

The price of natural gas in the U.S. has roughly doubled in less than a year. A hot summer that increases demand for air conditioning and draws down storage levels, or an active hurricane season, will lead to further spikes in natural gas prices.

Even with normal summer conditions, during a normal winter some analysts expect the delivered price of natural gas to spike to $15 per thousand cubic feet – over a 50 percent increase over last year. Distracted by $100 fillups and high oil prices, American consumers are largely unaware of the gas price shock awaiting them when they fire up their furnaces this winter. Consumers should brace themselves for some of the largest natural gas rate increases in memory.

These price increases have occurred despite the fact that U.S. natural gas production increased 6 percent from the first half of 2007 to the first half of 2008. Almost all of the increase came from shalegas plays in the Arkoma, Anadarko, Fort Worth, and Permian basins of the MidContinent Area. Yet despite the supply success, the U.S. natural gas balance is tightening. Demand for natural gas in North America is increasing at about 3 percent per year. U.S. industrial gas demand is up as manufacturers become more competitive due to a weak dollar. Robust fertilizer production and the surge in ethanol production have also contributed to increased demand. Also supporting the high price environment is the fact that North America is receiving fewer shipments of liquefied natural gas as supplies head toward markets like Spain and Japan, where they can attract a much better price. LNG imports were a key factor in building U.S. gas inventories to alltime highs before last winter, but imports have languished so far this year.

Why Gas Is the Only Game in Town

Roadblocks to building new coal and nuclear plants in the U.S. are fueling expectations for a natural gas boom. Dozens of proposals for new coal and nuclear plants have been shelved, cancelled, or delayed because of rocketing construction costs, financing risk, regulatory uncertainty, and public concern over global warming and toxic pollution.

Opposition is also rising to new coalfired power plants built without the capacity to capture greenhouse gas emissions. Citigroup Inc., JP Morgan Chase & Co., and Morgan Stanley have said they are uncomfortable financing new coalfired electricity plant construction because of the growing concern over emissions and potential carbon controls. Nuclear power projects are also losing steam, despite generous new federal incentives. By the end of 2009 the U.S. Nuclear Regulatory Commission expects to receive 21 applications to build 32 new reactors. So far it has received only four applications to build seven reactors. As states reject coal and nuclear plants, the power market will increasingly turn to natural gas. Ironically, the expansion of wind energy has provided a boost for natural gasfired generation as a backup resource when the wind fails.

The final push towards gas will come from programs to regulate carbon emissions. The U.S. Natural Gas Council predicts that a carboncapping system, such as the one Congress considered this year, could lead to a 20 percent increase in gas consumption over the next decade – an increase of almost 3 trillion cubic feet per year.

Read the rest of this story at Energy Tribune.

  • Rob N. Hood

    Those darn eggheads keep spoutin’ off! To wit…

    Besides being a puzzling detective story, the Permian-Triassic extinction is also a cautionary tale for our time.

    “The end-Permian catastrophe is an extreme version of the consequences of global warming,” said Lee Kump, a geoscientist at Pennsylvania State University. “It reminds us that there are unexpected consequences of CO2 buildup, and these can be quite dire, indeed.”

    The lessons of the Permian-Triassic massacre are “directly applicable to the present,” said John Isbell, a geoscientist at the University of Wisconsin in Milwaukee. He said the world today is in danger of exceeding a CO2 “threshold” that could set off an environmental upheaval as great as the one 251 million years ago.

    Isbell said CO2 levels in the atmosphere at the time of the Permian-Triassic catastrophe reached 1,000 to 1,500 parts per million, far higher than today’s level of 385 ppm. That means there are 385 carbon dioxide molecules for every 1 million total molecules in the atmosphere.

    CO2 levels are now rising by 2 ppm a year, and that’s expected to accelerate to 3 ppm a year. If carbon emissions aren’t reduced, some researchers fear that by the end of the next century, the CO2 level could approach what it was during the Permian-Triassic period…

    “In the late Permian, Earth itself was the villain, but today we’ve stepped in as the villain,” Kump said.

  • How many SUVs and coal-fired power plants were in operation 250 million years ago? What should creatures of that era have done to prevent increasing atmospheric concentrations of carbon dioxide?

  • Rob N. Hood

    Dead is dead, either way you look at it, Dan.

    Coal fired power plants in the U.S. alone move a billion tons of carbon out of the ground and put it in the air every year.

    Let’s do a thought experiment: let’s move the carbon out of the air, and put it back into the ground instead.

    Biomass takes CO2 out of the air, and converts it to hydrocarbons in biomass. These hydrocarbons can be carbonized to carbon, and that carbon (charcoal) burned in coal fired power plants. That charcoal can be burned in oxygen, rather than air, with recycled CO2 acting as a diluent to keep temperatures from going too high and melting the furnace. The resulting pure stream of CO2 can be injected into saline aquifers deep in the earth, and sequestered there for very long periods of time – depending on the aquifer, perhaps millions of years. See the above links to verify all of this.

    Nothing else on the planet has the ability to move carbon from one location to another that the coal fired power plants do. We just need to change where we get the carbon, and where we put it. We need to take it out of the biosphere and put it back deep in the earth.

    Natural gas and oil-fired power plants could also be converted to oxy-fuel combustion and deep injection. This would give us time to replace them with renewable energy plants, like wind and solar.

    Human caused CO2 emissions are about 6 billion tons of carbon per year. Coal fired power, worldwide, is something like three or four billion tons of carbon per year. By reversing the carbon sources and sinks, and putting that three or four billion tons of carbon back underground, we could bring human contributions of CO2 to zero, I think.

    We could minimize methane emissions from cattle by eating less meat and digesting manure into combustible gas, which could also be burned in oxygen and the CO2 from this injected. We could cover landfills, burn the evolved gas in oxygen, and deep inject the CO2 from this too.

    The forests could be more intensively managed, and undergrowth harvested to be burned in the coal fired power plants, fireproofing them against the heat and dryness of the summer.

    We need to do this quickly. Industrialized countries would have to import charcoal, probably. The U.S. has at least a billion tons of available biomass, with heating value equal to maybe half a billion tons of coal. So, we might have to import a billion tons of Canadian biomass – much of which is going to burn anyway, as the Canadian forests burn. We would have to harvest biomass at high elevations, convert it locally into charcoal, and ship the charcoal to the coal fired power plants, using gravity to help transport the biomass. But it could all be done; it is scientifically and economically possible.

    An activist approach would be necessary. We couldn’t stand for any delays whatsoever. We would have to seize the coal-fired power plants and convert them to biomass/sequestration on an emergency basis and push other countries worldwide to do the same.

    So, we’re not dead yet. The earth is very large, the oceans are large, the Antarctic and Greenland ice sheets are large and it will take a lot of heat to melt them. Wildfires in the western U.S. and Siberia may be partially compensated for by increased growth of forests in the subtropical zones due to CO2 fertilization.

    We may or may not be able to stop it. But we can certainly try – there are plenty of things we can try.

    We just need to get off our asses and do it.

  • “Nothing else on the planet has the ability to move carbon from one location to another that the coal fired power plants do.”

    Really? So wildfires and volcanos are imaginary?

    Man-made CO2 is a tiny fraction of overall atmospheric CO2. You propose radically altering our energy and lifestyle structures based on a shaky theory to reduce CO2 by like 2%. Such a change would likely have no impact on global temperature.

    Let me know when you figure out a scientific and economic way to control the rate of nuclear fusion and solar flares on the sun. That could have a big impact on global temperature.

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