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Page added on February 11, 2014
Electric companies relying too much on natural gas
There’s something to the old saying about not putting all your eggs in one basket, yet that’s what we are doing in the case of electricity generation. Nearly all new electricity generation projects are using natural gas. This lack of diversification increases risks for the future.
Why is this happening? There are two reasons. The first is that companies and policymakers are making long-term decisions based on short-term considerations. Natural gas prices fell in 2012 to historical lows. It is foolish to expect that natural gas prices will remain at this level for the 40-year-or-longer life of a new electricity plant, yet that is basically what people are assuming when they commit to gas-fired generation plants based on this price.
The foolishness of this is already evident. The price of natural gas rose more than 25 percent last year and has increased over 40 percent from its 2012 low, already calling into question the wisdom of some of these decisions. We can certainly anticipate that natural gas prices will increase to historical levels relative to the price of oil, which in spite of increased production in the U.S. is still priced at nearly $100 per barrel. The low natural gas prices we are seeing today, even after substantial recent increases, are unlikely to persist into the future.
The second reason that we are overly dependent on natural gas to generate electricity is environmental. While generating electricity from natural gas releases half the carbon of coal, it still accounts for a quarter of the greenhouse emissions from electricity production, and those emissions will grow as more gas is burned. Alternative sources of electricity, such as wind and solar, are only viable with substantial subsidies and come with environmental problems of their own, including visual and noise pollution and their effects on the ground as well as on birds and animals.
The rush to natural gas and the subsidies for so-called clean energy mean that nuclear power, which is perhaps the most environmentally friendly way to generate electricity given that it releases no carbon or other pollutants into the atmosphere, is not playing the major role that it should. This is the case both for traditional base load nuclear plants, of the type we have in Missouri and Illinois, and the new small modular reactors that should also play a role in electricity generation.
Why is this? Much of the electricity in the country is sold to power pools by generators and bought from the power pools by electricity distribution or marketing companies. The pricing that these pools are constrained to use, usually through regulation or legislation, does not place a value on environment harm or on carbon emissions. The carbon emitted by natural gas plants is not included as a cost of generating electricity, and there is no credit for the zero emissions from nuclear plants.
Furthermore, wind and solar power, for example, are heavily subsidized and still are generally not price competitive. But these subsidies further disadvantage nuclear power.
Exelon and Ameren in our region both have expertise and excellent track records operating nuclear power plants. Yet the pricing policies in effect and the environmental policies in place are favoring natural gas and heavily subsidized alternative energy while effectively penalizing nuclear power. This prevents our region from taking advantage of the expertise of our local utilities and is likely to mean that in the future our region is saddled with high-cost natural gas and alternative energy electricity generation and will not have the benefit and insurance that comes from diversified sources of electricity generation.
What needs to be done? Removing subsidies for various types of generation would go a long way toward making the market more efficient. This would permit each type of electricity generation to compete on its merits. It is also necessary to include the cost of environmental harm, including especially carbon emissions, in the cost of electricity generation. Both of these changes would result in an electricity generation mix that was least costly, environmentally sound and efficiently diversified.
Even failing those reforms, however, we must ensure that our electricity generation is not overly dependent on one fuel. Diversification will provide insurance that the region is protected against price increases for one fuel in the future. Nuclear generation has an important role to play in the future if misguided policies and short-term decisions do not prevent it from doing so. Putting all one’s eggs in one basket is never a good idea.
18 Comments on "Electric companies relying too much on natural gas"
rockman on Tue, 11th Feb 2014 4:11 pm
“The rush to natural gas”. A “rush” to NG??? The US has been the premier producer and consumer of NG from the very beginning of the fossil fuel age. It’s been only in the last few decades that Russia has caught up to us. US industries and many consumers have depended on NG for more than half a century. Thus it’s a tad late to be warning about dependency on this fuel. As soon as anyone can come up with a better fuel I have no doubt we’ll begin making the switch. So far, for a variety of economic and social reasons, the nuclear option is not being pursued to any significant level. And I doubt the “what if we run out of cheap NG” is going to make anyone start building nukes.
Davy, Hermann, MO on Tue, 11th Feb 2014 4:42 pm
True, Rock!
I would like to mention the rush to mothball coal and nuke thermo power for a variety of reasons is going to bite us in the ass someday. We will need to keep an orderly market meaning market distortion for profit and greed are dangerous and not rational. If we wake up to an unstable grid we are much closer to the endgame. We may harp about peak oil but without stable electricity we are done at this point. There is no plan B. only plan BAU. So we need 1000 sources of energy both niche, mainline, and future unknown inventions. I am only saying this to soften the decent down the energy gradient or softening the degree and duration of the worst part of the collapse. We have to keep a handle on the 1000’s of nuke warheads and hundreds of spent fuel ponds as a quick example of the need for some kind of stability!
J-Gav on Tue, 11th Feb 2014 4:48 pm
Well, NG has taken a significant share of electricity production from coal over the last few years but the real question is “Is that going to last long enough to justify continuing massive build-out of natgas electric plants?” A mix is clearly advisable on a resilience and precautionary basis even though, no matter what the mix, emissions aren’t going to be plunging any time soon. That spells trouble, right here in River City.
shortonoil on Tue, 11th Feb 2014 4:53 pm
“The rush to natural gas and the subsidies for so-called clean energy mean that nuclear power, which is perhaps the most environmentally friendly way to generate electricity given that it releases no carbon or other pollutants into the atmosphere,”
Guess the author missed Three Mile Island, Chernobyl, and Fukushima. Five to ten million additional cancer cases is now defined as “environmentally friendly”! The evidence in front of us demonstrates unequivocally that BWR’s are not safe. Someone should sit down and figure out how many of these things would have to melt down to eradicate higher life forms on the plant. We’ve got 340 of them, so there should be enough. Guess they’re not sure, this bird wants to build more them!
rollin on Tue, 11th Feb 2014 4:53 pm
Sources of methane are all the rage now, even attempts to tap ocean methane.
However, we don’t have any real respect for natural gas. Huge losses occur through the whole process and large amounts never make it away from a drilling site except as a burning torch.
From the numbers I have seen there is greater than a 10 percent loss from wellhead to consumer. That does not include oil well flaring or unaccounted for leaks. Basically enough to run a small country.
Kenz300 on Tue, 11th Feb 2014 4:59 pm
Nuclear industry infomercial…………….
Nuclear energy is too dangerous and too costly.
The disasters at Fukishima and Chernobyl continue today with no end in sight.
How much will it cost to store nuclear waste FOREVER?
bryan on Tue, 11th Feb 2014 6:05 pm
Kenz300
It doesn’t matter how much it will it cost to store nuclear waste FOREVER?
I only have to store it until the end of my term as politician or CEO.
shortonoil on Tue, 11th Feb 2014 6:24 pm
Vermont Yankee has 40,000 spent fuel rods soaking in its cooling pools. Vermont Yankee is less than 90 miles from one of the most densely populated cities on earth. What happens when they can no longer keep those pumps working. Not only have we burned up most of the petroleum running Soccer Moms around in their SUV’s (safety for the kids’ sake), we are threatening to leave those same kids a nuclear waste pile of gigantic proportions. Our progeny will certainly have a few things to remember about Grandpaw (if they survive)!
PapaSmurf on Tue, 11th Feb 2014 6:30 pm
The first paragraph from the article is wrong.
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“Nearly all new electricity generation projects are using natural gas. This lack of diversification increases risks for the future.”
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Wind took a temporary drop in 2013. It is on pace for 2014 to be the #1 source of new capacity. Probably about 50% higher than natural gas.
Also, the solar numbers only include large systems (166 projects). They are not counting the massive amount being installed on homeowners roofs.
Wind energy projects for 2014 likely exceed 10 GW. Natural gas was around 7 GW for 2013.
Silly article that is not pointing out that new wind and solar capacity (combined) are likely going to be double the natural gas new capacity.
PapaSmurf on Tue, 11th Feb 2014 6:39 pm
As just an example, Solar City does not do large scale solar farm systems. Solar City does mostly just homes. They are on pace for 500 MW in 2014. And they are only active in a few states.
That is up 80% over their 2013 numbers.
If you add up all of the home solar in the USA, it is likely over 2,000 MW for 2014. Wind projects currently under construction at the end of 2013 adds up to 12,000 MW. Large solar farm projects are probably another 2,000 MW.
Kenz300 on Tue, 11th Feb 2014 7:38 pm
Wind and solar energy generation is accelerating while oil, coal and nuclear generation in declining.
GregT on Tue, 11th Feb 2014 8:59 pm
We survived on this planet for tens of thousands of years without electricity. We will not survive for another hundred years if we continue to pursue ways to generate it.
We find ourselves at a major crossroads, face a dire reality, or face global mass extinction. It most certainly appears that we are going to cause the latter. The most destructive species ever to walk the face of this planet. The ultimate in stupidity.
Hatiier on Tue, 11th Feb 2014 11:42 pm
Kenz and PapaSmurf.It never ceases to amaze me how our beliefs and desires corrupt ones reasoning. The very fact you are here shows something in the dark pit of your mind pulling at your most inner thoughts. You advocate Renewables without understanding how they are created. You espouse exposition based on subjectivism. Your logic is a fallacy based on prior assumptions.
Yet here you are visiting PEAK OIL NEWS. One who truly had 100% faith in such renewables would not visit such a site as this. But I know. I once thought the same, renewables will “SAVE” us, etc….
Its difficult to look into the reason, put our hopes and dreams aside, our bias and miss-information.
What you are left with is truth…. the hardest thing in the world. Unassailable to oneself in a pit of poetic despair.
Ignorance is bliss, a storm is coming. So, un till it hits, I hope you remain in your ignorance your false Gods and patronage.
The price of truth is often a release, to understand we are free.
Fuck it 😛 Your fools who are going to be siting at home in the dark wondering how the fuck collapse occurred. Your False Gods will not save you. But you will think in the dying light. Fuck it…… I was wrong. You people cheer me to no end, just knowing you will not survive when you could have is hilarious. So fuck it Papasmurf and Kenz Fuck It Fuck it Fuck it.
Hatiier on Tue, 11th Feb 2014 11:45 pm
Fuck it… So am i
Makati1 on Wed, 12th Feb 2014 1:26 am
Amen, GregT.
Keith_McClary on Wed, 12th Feb 2014 3:05 am
“What needs to be done? Removing subsidies for various types of generation would go a long way toward making the market more efficient. This would permit each type of electricity generation to compete on its merits. It is also necessary to include the cost of environmental harm, including especially carbon emissions, in the cost of electricity generation.”
Nobody will build a nuke plant unless they are exempted from liability in case of disaster. This amounts to free (=100% subsidised) liability insurance. And who pays the cost of nuke waste disposal and decommissioning reactors at the end of their life? I think the companies will distribute profits to shareholders and have no assets left when it comes time to pay these costs.
ted on Wed, 12th Feb 2014 1:55 pm
Obama said in his state of the Union speech we have over 100 years of natural gas….that was true if….you don’t use much of it!!!! Some Ivy graduate who writes his speeches put that in to make the “masses” feel good…people running this and other country are elites and have no idea what is coming because they have been spoon fed for so long.
Northwest Resident on Wed, 12th Feb 2014 4:13 pm
ted — I personally believe that we have many thousands of years of natural gas and conventional oil remaining BECAUSE there won’t be very many people using it. At the rate we are burning fossil fuels today, we could be burning up a thousand year’s worth of supply each and every day — at a rate that a post-industrial collapse society would use it, that is…