In the next few years the electric power industry is about to find out if natural gas is ready for prime time.
That seemed to be the theme emerging from July 23 presentations at the National Association of Regulatory Utility Commissioners (NARUC) conference in Portland, Ore.
On one side are those who warn that we could see another “dash to gas” like the one that ended a few years ago with escalating natural gas prices and the threat of fuel imports. On the other side are those who say that horizontal drilling and hydraulic fracturing, or “fracking,” have ensured affordable U.S. gas long-term and forever changed the coal versus natural gas dynamic.
At one point during his debate with Environmental Defense Fund (EDF) attorney Vickie Patton, Penn State University professor Frank Clemente said the amount of new natural gas power generation being brought online in the near term will easily exceed the total for coal, nuclear and hydroelectric combined.
“We have no plan B,” Clemente said.
Clemente and other speakers throughout the conference said that a combination of tougher new U.S. EPA standards, aging coal plants and cheap natural gas are causing mass retirements of coal-fired capacity and few new units coming online. The Penn State professor said he is worried about the enthusiastic embrace of natural gas power plants only four years since much of the electric power industry was fretting about high gas prices and the threat of having to import liquefied natural gas.
Estimates of coal unit retirements have been placed as high as 70,000 MW, Clemente said.
EDF’s Patton said some of the nation’s oldest and dirtiest coal plants have been shut down and some of the jobs lost have been recouped on projects like installing environmental controls on surviving plants. The environmental lawyer said some coal power officials have acknowledged that carbon capture and storage (CCS) is unlikely to become commercial until there is some type of government regulation of carbon.
Only a few years ago coal still provided about half of the electricity generated in the United States. This spring, however, U.S. Energy Information Administration (EIA) figures indicated that natural gas caught up with coal – with each generating about a third of the nation’s power.
Gas growth hinges on new pipelines, long-term contracts
For natural gas to truly replace coal as the backbone of the American power market it will have to address a number of issues, officials said.
New pipeline capacity must be built to transport gas extracted from shale gas plays to the dozens of new natural gas power plants. Utilities must be able to negotiate contracts to ensure affordable supplies of gas long-term and natural gas producers must be able to address public fears about fracking, speakers said.
To illustrate the gas pipes situation, Midwest ISO officials told reporters that three-quarters of the big gas pipelines serving their region are fully subscribed at a time when the region expects perhaps 12,000 MW of coal capacity to retire by late 2015 – and much of that must be replaced with natural gas.
Preston Troutman, business developer for Kinder Morgan’s Tennessee Gas Pipeline Co., said his industry is eager to develop new pipeline capacity “for a fee.” Troutman said it usually takes less time to build a gas pipeline than it does to construct a gas-fueled power plant. Typically, it takes two or three years to get a new pipeline approved by FERC, Troutman added. The pipeline builders will need suitable advance notice get these projects done, Troutman said.
Lack of available long-term contracts has been another concern that has retarded the growth of natural gas generation in the past. However, American Clean Skies Energy Policy Advisor Patrick Bean believes he has come up with a “no regrets” plan for long-term gas contracts that emphasizes risk-sharing among the parties.
Many players in the natural gas and power industries would like to see state public utility commissions take a more active role in helping bring about long-term contracts between gas providers and electric utilities, said Ken Costello, a principal with the National Regulatory Research Institute.
The gas industry must also overcome public fears about fracking. Deputy Assistant Secretary of Energy for Oil and Natural Gas Christopher Smith said fracking’s image suffered early on with the gold rush mentality of some early adherents of the technology in the East who did not take the time to develop community ties.
Various industry officials said companies involved in natural gas production have become much more transparent in recent years in disclosing substances being injected underground in connection with fracking.
That’s important, said American Water President and CEO Jeff Sterba, who warned that a lack of transparency only breeds public suspicion. Sterba also cautioned that natural gas price projections have been notoriously wrong in the past. Sterba is a veteran of the water and power business, having previously served as CEO of electric utility holding company PNM Resources.
While most speakers seemed to expect natural gas prices to stay affordable for years, several expressed misgivings that domestic gas could suddenly be in greater demand for everything from home heating to power generation to transportation fuel.
Natural gas production continues to grow thanks to advent of the new technology, officials said, noting that gas is now produced in 32 of the 50 states.
Michelle Bloodworth of America’s Natural Gas Alliance (ANGA) said that much has been written about the amount of water used in fracking. A fracking drill uses the same amount of water in three to five days as a 1,000 MW coal plant uses in a half-day, she said.