GHG and NG
E Source reported last week that green house gas (GHG) emissions are falling fast in this country, as shown in the chart nearby. Emissions tanked with the economy in 2009, and as I recall, the summer of 2009 was also cool, resulting in lower electricity sales. Even so, when adjusted for economic output, GHGs are falling fast.
The reason for this is rather obvious if one follows the electricity market. It is much easier to get a natural gas power plant approved for construction as compared to a coal-fired plant. I have not done the analysis myself, but it is reported that natural gas has results in half the GHG emissions compared to coal. This is first because natural gas is primarily methane combustion, which produces one molecule of CO2 and two molecules of water. Coal has a higher ratio of carbon to hydrogen, and I’m just going to leave the stoichiometry at that. The second reason natural gas produces less GHG emissions is because base-load plants are combined cycle (story for another day) with nearly double the thermal efficiency of a coal plant’s Rankine cycle.
A local example of a coal-to-natural-gas switcheroo is at Marshalltown, Iowa, where Alliant Energy proposed a coal-fired plant several years ago. That was shot down and instead plans for a combined-cycle natural gas fired plant were recently announced. You can bet this has happened in dozens of other instances throughout the country.
Generation from natural gas pulled even with generation from coal this year for the first time. This second plot was provided with the same E Source piece. E Source asks, “Where is the hullabaloo? Where is the celebration?” From the utility perspective, I don’t know. Probably because no one utility can claim huge credit?? Maybe customers don’t care?? Again, everyone is for reduced emissions, until they have to pay for it. Natural gas plants aren’t free, and so that may be a reason for keeping quiet from the utility perspective.
What about the activist attack dog groups? They caught the car, now what? Pee on the tires, of course. Like politics for many people, it is no longer about the issues, it is us versus them and beating the tar out of the other side. Like sports for many people, it’s as much fun to see the bitter enemy lose as it is to see the home team win, but only if the bitter enemy is good. If the bitter enemy is lousy, who cares? Then they are not bitter enemies. People need bitter enemies, and this is why attack dog silence is deafening.
Another reason utilities may not be crowing is because they know they are doing what they have to do in the short term – which is add more capacity or replace old generation that has reached the end of its useful life. Natural gas is the easy way to go and no one objects, much.
The other obvious factor feeding this is hydraulic fracturing and the resultant glut of natural gas coming onto the market. At one time, petroleum and natural gas were alternatives to one another, and at times, fuel oil was even less expensive than natural gas for certain end uses like those for manufacturing, water, and space heating. This is no longer the case. The ratio of petroleum prices to natural gas prices has blown off the chart. You can see in the nearby chart that on a Btu basis, natural gas and petroleum prices, as well as liquefied natural gas and European natural gas prices, tracked one another very closely as recently as the middle of last decade.
A six-fold differential in the cost of natural gas and petroleum is not going to stand. At somewhere in the $1.50 per gallon equivalent, natural gas will not be ignored as a serious transportation fuel. Truckers are paying something in the neighborhood of 70 cents per mile for diesel fuel. How would their margins look if they chopped this to about a quarter dollar per mile? Huge, but of course those margins won’t hold up. Competition among companies will bring those margins back down at the expense of much higher natural gas costs.
According to a Wall Street Journal interview with Tom Fanning, Southern Company’s CEO, coal plants accounted for 6% of the new generating capacity since 1990, while natural gas has taken 77% of new capacity over the same period. Southern Company’s coal fired generation plummeted from 70% to 35% in just the past five years. Meanwhile, coal exports to energy-starved China and India have doubled.
The valleys (market demand) will be filled and the gaps (prices) will be shrunk. That’s what markets do. That’s all I’m saying here.
Natural gas is a fantastic fuel. Extract it, compress it, pipe it somewhere and burn it in everything from a stove in your kitchen to a steel plant. It doesn’t need refining. It doesn’t need train tracks. Using it as a fuel for power generation seems great now, but it is a very highly valuable fuel because it is so flexible. The price is depressed at this moment because the supply is huge while demand hasn’t caught up – but it will.
A few years down the line people will be asking, “Whose in the hell idea was it to convert all of our generation to natural gas?” The dogs will have their cars to chase and everything will be normal again. It would also follow that the Minnesota Vikings will be a threat to the Green Bay Packers at about the same time. Write it down. You saw it here first.