Environmental pressures have forced us to generate more of our power from natural gas, and this focus on gas has caused power prices to increase ... right?
Wrong, conventional wisdom notwithstanding. And the lessons from the last 15 years indicate the importance of considering how markets will respond when mandating new technologies and fuels.
Consider: In 1990, the U.S. had 184 GW of natural-gas fired generation, from which we produced 373 million MWh of electricity. Electric load grows reliably at 1 to 2 percent per year, mandating consistent increases in generation investment, and environmental considerations have made it virtually impossible to site anything other than gas-fired generators. (When I say anything, scale is implicit. Yes, you can site solar and wind, but -- recent growth notwithstanding -- these are still impractical for the many GW of load growth we need to add on an annual basis. Yes, they're part of the mix, but they're not yet significant enough to offset the big four of coal, nuclear, gas, and hydro.)
Fast forward to 2005 (the most recent year for which the Department of Energy has complete data together), and the gas fleet had more than doubled, to 437 GW, while total generation from gas had increased to 758 million MWh.
But look at those numbers more closely. The installed base increased by a factor of 2.4, but the generation increased only by a factor of 2.0. In other words, the gas plants we built are running for ever smaller portions of the year.
This, in a nutshell explains why Calpine went bankrupt -- their investors certainly never thought that those plants were going to run so infrequently. Why didn't we run those gas plants more? Did the industry overbuild the capacity?
The answer lies in coal and nuclear power. During the same time period, we effectively haven't built any new capacity in either, with the combined total coal and nuke capacity staying effectively constant at 440 GW. But the generation from coal and nuclear capacity increase from 1990 to 2005 from 2,148 million MWh to 2,795 million MWh.
Let's consider what this means. As environmental pressure compelled new gas plant construction, demand for natural gas drove up the price. As price went up, power prices started to rise, at which point the coal and nuke plant owners realized they were sitting on gold mines. By simply running their plants longer, they could mint money, selling a relatively cheap-to-produce commodity into a market that was increasingly set by gas. So we ran those plants harder. In effect, we became more dependent on coal and nuclear derived power as an indirect result of trying to get away from same!
In other words, we separate environmental intent from economic consequences at our peril. Simplistically, but not entirely inaccurately, one can conclude that the pressure to reduce NOx, SOx, mercury, particulate emissions, and radioactive waste made it very profitable to be in the coal and nuclear business. Weird, huh?
What's interesting is what will come next. You cannot increase plant capacity factor indefinitely, for the simple reason that there is a finite number of hours in a year. ("Capacity factor" is simply the total MWh of generation, divided by rated power output in MW times 8,760, the total number of hours in a year. So capacity factors must always be less than 100 percent). From 1990 to 2005, the nuclear plant capacity factor increased from 61 percent to 85 percent -- which is about as high as it can go, once you factor in the need for periodic maintenance shut downs. Coal during the same period increased from 54 percent to 68 percent, suggesting it still has more to give, but this is a bit deceptive, since there are still hours in the year when the total load exceeds the nuke plus hydro capacity (the cheapest stuff to run), and therefore the coal dials back. So the coal CF will grow, but only as the baseload demand increases. Which means that we will very shortly face serious price increases, as we lose the ability to hedge away gas price increases with greater coal and nuclear use.
This will be particularly interesting politically, as the coal and nuclear fleet tends to be concentrated in the states that have the loosest environmental standards. To date, those states have been largely insulated from the big price spikes seen in more environmentally-conscious areas in the Northeast and California. But those same states are now starting to grapple with really hard choices: do they allow huge spikes in power costs so that they can build new coal plants, or do they allow huge spikes in power costs by allowing their gas plants to run harder?
In other words, this is the time to start approaching those regulators with a better path, focused on energy efficiency and cleaner power. But you better factor economics into those conversations. Telling them they must invest in technology X which happens to be expensive (but also happens to be clean) isn't a politically palatable option to a typical state regulatory commissioner, especially one of the "fool me twice, shame on me" ilk. On the other hand, telling them that they have a choice to lower costs and clean up the environment with technology Y is.
Not all green jobs are created equal
Mountaintop removal defenders disrupt July 4th music festival in West Virginia
Comments View as Flat
Jon Rynn Posted 7:56 am
02 Jul 2007
Some more questions...
It's all your fault, you have a tendency to actually answer questions...
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Sean Casten Posted 8:06 am
02 Jul 2007
Some answers
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eutopianow Posted 11:15 am
02 Jul 2007
Running Coal Plants Harder
Interesting analysis. I add a smidgen more information into the hopper.
The Supreme Court's decision in:
Environmental Defense v. Duke Energy Corp., Decided April 2, 2007
may make conventional coal plant upticks more expensive. Bottom line: for coal fired generating units, a change in operating hours brought about by a physical change to the unit or by a change in the method of firing allows the EPA to enforce a PSD review and permitting procedure for those units, as was the case here.
For concise and cross-cutting environmental science, policy, research, and law see Eutopia Monthly at www.eutopianow.org
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Sean Casten Posted 12:30 pm
02 Jul 2007
Coal plants and Duke
You're right, but be aware that the Duke decision has the effect of making it more likely that existing, grandfathered coal plants will have to come into compliance with the Clean Air Act. Any new plant, by definition has to comply. In other words, the new coal plants will all be much more expensive once you factor in all the environmental controls.
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Colin Wright Posted 3:35 pm
02 Jul 2007
How sustainable is natural gas?
Sean,
You write "We have loads of gas". How much is "loads"? I presume you mean more than enough to fry the planet? Or do you not agree that we will be importing LNG soon?
According to this guy from the Geological Service of Canada:
He uses EIA data, showing a 1.5% decline in lower 48 production through this time period. Imported LNG, mostly from the Middle East, is expected to make up the shortfall. But world natural gas (including nonconventional) is predicted to peak in 2045 by Colin Campbell. And of course, we need something like an 80% carbon reduction by then anyway.
I'm not against using natural gas in place of coal to cut down on carbon emissions (or to keep the economy afloat). And I know efficiencies and conservation can save us gobs. But I would prefer us to move away from non-renewable carbon sources asap by initiating a parallel track of government-sponsored wind/solar/geothermal development.
In other words, why focus solely on natural gas (and improved efficiencies) when we have to phase it out by 2050 anyway? And why not start down the renewable path in haste, particularly given the uncertainties of nonlinear feedback on global warming and the unstable geopolitical climate?
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JMG Posted 6:45 pm
02 Jul 2007
No time for tinkering with fossil fuels
http://www.monbiot.com/archives/2007/07/03/a-sudden-chang ...
Save the world: Reduce greenhouse gas emissions 5% annually.
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GreenEngineer Posted 3:19 am
03 Jul 2007
Natural gas abundance
I second Colin's question: It is my understanding that the general consensus is that North American natural gas production has peaked, but it's not a subject that I have personally researched.
And I concur that it is an important question. We will need fossil fuels through the transition, and we're going to be much better off with gas than with coal. If Monbiot is right, and we have to stop using fossil fuels NOW to survive... Well, then we might as well all party, because we're toast.
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WWAGD?! Posted 3:53 am
03 Jul 2007
Americans Moving To Apartments
Housing prices and sales keep falling.
Meanwhile apartment vacancies are at an all time low.
Couple that with people purchasing smaller and smaller cars, and the Volt and Prius plugins coming on line in the next 3 years, and America may soon suffer and energy glut!
I'm calling for ppb at $35 by eoy.
John Bailo
You Read It Here First
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Sam Wells Posted 8:03 am
03 Jul 2007
Natural Gas
Some states such as Texas peg the allowable electricity price in kW-hrs to fuel surcharges for natural gas. All the big monopolies do it even if they burn coal or nuke. The exception is wind power, which obtained an "safe harbor clause" so it could charge more reasonable (and lower) rates. In fact, some wind power companies charge 2-5 cents per kW-hr less and have NO fuel surcharge. Nice - we need more of that. Note that if you signed up five years ago like with Green Mountain you'd be really hitting low payment by now, since lock-in rates are at or near current power charges from the big monopolies. That's one way how they make their profit.
The supply of natural gas in the US is fairly dependable if not for events such as Hurricane Katrina, and more is being found every day. The US is currently on a natural gas binge by drilling all over the place, including downtown Fort Worth. There is plenty but the "tipping point theory" seems so convincing that many companies have diversified into imported LNG via overseas ships. This is known as a major business gamble and not some fact one can determine from DOE statistics.
A gamble? Yes, the natural gas market like all hydrocarbons (except price-supported coal) is highly volatile even if US prices are set at the Henry Hub in Louisiana. So if you send an LNG ship to the US you could make a million bucks or you could lose that much just as well.
The reason for most of the volatility in the natural gas market is completely divorced from the realities of supply and demand in most cases - barring those severe hurricane and winter storms. Nope, it is the future, commodities, and hedge funds that trade it by five-second intervals between other indicators such as volatility in the bond, stock, derivative, and currency indexes. Yep, they're playing the game of "funds of funds" and "indexes of indexes" that have absolutely nothing to do with the realities of the natural gas market.
/sammie
Onward through the fog
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Colin Wright Posted 9:13 am
04 Jul 2007
Are we sitting at the edge of a natural gas cliff?
Sam, you write:
According to this article in the Oil Drum, North American discoveries peaked 23 years ago. When you extrapolate those discoveries to today you find out we are sitting on the edge of a natural gas cliff. Here's what the author says, referring to Jean Laherrère's recent data :
If you look at the figure in the article you can see how current production matches the discovery curve with a 23 year lag. And that unconventional gas never rises above 9 Tcf/a by 2025. I think the companies that have bought into the "tipping point theory" are on to something.
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SustainableGreen Posted 1:53 pm
04 Jul 2007
Yes, A Cliff but by a Different Name
Hey, all:
We sure are rushing blindly toward a cliff, but its name is "Non-sustainable expensive commodity energy with no installed alternatives and a lifestyle propelling the societal vehicle at top speed". (No, not exactly bumper sticker material.)
We all talk about fossil fuels (and nukes), ignoring that they are unsustainable in all aspects and inevitably rising in cost, but most importantly that they cause environmental destruction and wars. We have slavishly accepted the mentality as electricity as a commodity, for some to monopolize and others to pay for. We have done nothing to systematically address the crisis of overconsumption, and instead wring our hands over emerging economies wanting to capture and mimic our Western wasteful egocentric lifestyle.
Regarding precipices, Amory Lovins wrote "Soft Energy Paths" in 1977, in which he states:
As beautifully and as passionately as Lovins writes, one would think we would have gotten the message, but we are still waiting and wasting time--30 years and counting.
David
Sustainability For Life
Messages done with sustainable energy, with Wind and Sun!
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Nucbuddy Posted 3:30 pm
04 Jul 2007
Some nuclear-facts are open to question
SustainableGreen wrote: nukes [...] are unsustainable in all aspects and inevitably rising in cost, but most importantly [...] they cause environmental destruction and wars.
Please show how you established those facts.
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Nickz Posted 4:51 am
05 Jul 2007
Reversing Cause and Effect
"In effect, we became more dependent on coal and nuclear derived power as an indirect result of trying to get away from same!"
This appears backward. We tried to diversify to gas, and supplies were inadequate, so we returned to coal & nuclear. Would we have burned less coal if we hadn't tried to turn to gas? Obviously not. Instead, in the absence of gas plants we would have burned even more coal, and now we'd be at the limits of coal plant capacity, and frantically building more coal plants.
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Nickz Posted 4:55 am
05 Jul 2007
New coal really costs 10 cents??
"By the time you factor in modern emissions controls (most current coal plants are pre-Clean Air Act), new coal costs ~10 c/kWh, as opposed to the 3 - 4 current plants run at."
Can you provide some backup, or links, for this? This seems quite high.
If true, than wind is clearly much cheaper than coal in almost all parts of the country....
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