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Why Natural Gas isn’t Likely to be the World’s Energy Savior

We keep hearing about the many benefits of natural gas–how burning it releases less CO2 than oil or coal, and how it burns with few impurities, so does not have the pollution problems of coal. We also hear about the possibilities of releasing huge amounts of new natural gas supplies, through the fracking of shale gas. Reported reserves for natural gas also seem to be quite high, especially in the Middle East and the Former Soviet Union.

But I think that people who are counting on natural gas to solve the world’s energy problems are “counting their chickens before they are hatched”. Natural gas is a fuel that requires a lot of infrastructure in order for anything to “happen”. As a result, it needs a lot of up-front investment, and several years time delay. It also needs changes on the consumption side (requiring further investment) that will allow this natural gas to be used. If the cost is higher than competing fuels, this becomes a problem as well.

In many ways, natural gas consumption is captive to other things that are happening in the economy: an economy that is industrializing rapidly will easily be able to consume more natural gas, but an economy in decline will find it hard to scrape together funds for new ways of doing what was done previously, now with natural gas. Increased use of renewables seems to call for additional use of natural gas for balancing, but even this is not certain, because in many parts of the world, natural gas is a high-priced imported fuel.  Political instability, often linked to high oil and food prices, creates a poor atmosphere for new Liquefied Natural Gas (LNG) facilities, no matter how attractive the pricing may seem to be.

In the US, we have already “hit the wall” on how much natural gas can be absorbed into the system or used to offset imports. US natural gas production has been flat since November 2011, based on EIA data (Figure 1, below).

Figure 1. US Dry Natural Gas Production, based on data of the US Energy Information Administration.

Even with this level of production, and a large shift in electricity production from coal to natural gas,  natural gas is still on the edge of “maxing out” its storage system before winter hits (Figure 2, below).

Figure 2. US natural gas in storage, compared to five-year average. Figure prepared by US Energy Information Administration, Weekly Natural Gas Storage Report as of October 5, 2012.

 

World Natural Gas Production

The past isn’t the future, but it does give a little bit of understanding regarding what the underlying trends are.

Figure 3. World natural gas production, based on BP’s 2012 Statistical Review of World Energy data.

World natural gas production/consumption (Figure 3) has been increasing, recently averaging about 2.7% a year. If we compare natural gas to other energy sources, it has been second to coal in terms of the amount by which it has contributed to the total increase in world energy supplies in the last five years (Figure 4). This comparison is made by converting all amounts to “barrels of oil equivalent”, and computing the increase between 2006 and 2011.

Figure 4. Increase in energy supplied for the year 2011, compared to the year 2006, for various fuels, based on BP’s 2012 Statistical Review of World Energy data.

In order for natural gas to be an energy savior for the world, natural gas consumption would need to increase far more than 2.7% per year, and outdistance the increase in coal consumption each year. While a modest increase from past patterns is quite possible, I don’t expect a miracle from natural gas.

Natural Gas: What Has Changed?

The basic thing that has changed is that fracking now permits extraction of shale gas (in addition to other types of gas), if other conditions are met as well:

  1. Selling price is high enough (probably higher than for other types of natural gas produced)
  2. Water is available for fracking
  3. Governments permit fracking
  4. Infrastructure is available to handle the fracked gas

Even before the discovery of shale gas, reported world natural gas reserves were quite high relative to natural gas production (63.6 times 2011 production, according to BP). Reserves might theoretically be even higher, with additional shale gas discoveries.

In addition, the use of Liquified Natural Gas (LNG) for export is also increasing, making it possible to ship previously “stranded” natural gas, such as that in Alaska. This further increases the amount of natural gas available to world markets.

What Stands in the Way of Greater Natural Gas Usage?

1. Price competition from coal. One major use for natural gas is making electricity. If locally produced coal is available, it likely will produce electricity more cheaply than natural gas. The reason shale gas recently could be sold for electricity production in the United States is because the selling price for natural gas dropped below the equivalent price for coal. The “catch” was that shale gas producers were losing money at this price (and have since dropped back their production). If the natural gas price increases enough for shale gas to be profitable, electricity production will again move back toward coal.

Many other parts of the world also have coal available, acting as a cap on the amount of fracked natural gas likely to be produced. A carbon tax might change this within an individual country, but those without such a tax will continue to prefer the lower-price product.

2. Growing internal natural gas use cuts into exports. This is basically the Exportland model issue, raised by Jeffrey Brown with respect to oil, but for natural gas. If we look at Africa’s natural gas production, consumption, and exports, this is what we see:

Figure 5. Africa natural gas production, consumption, and exports, based on BP’s 2012 Statistical Review of World Energy.

In Africa, (mostly northern Africa, which exports to Europe and Israel), consumption has been rising fast enough that exports have leveled off and show signs of declining.

3. Political instability. Often, countries with large natural gas resources are ones with large oil resources as well. If oil production starts to drop off, and as a result oil export revenue drops off, a country is likely to experience political instability. A good example of this is Egypt.

Figure 6. Egypt’s oil production and consumption, based on BP’s 2012 Statistical Review of World Energy.

No matter how much natural gas Egypt may have, it would not make sense for a company to put in an LNG train or more pipeline export capability, because the political situation is not stable enough. Egypt needs oil exports to fund its social programs. The smaller funding amount available from natural gas exports is not enough to make up that gap, so it is hard to see natural gas making up the gap, even if it were available in significant quantity.

Iran is a country with large natural gas reserves. It is reportedly looking into extracting natural gas for export. Again, we have a political stability issue. Here we have an international sanctions issue as well.

4. “Need the natural gas for myself later” view. A country (such as Egypt or the United States or Britain) that has been “burned” by declining oil production may think twice about exporting natural gas. Even if the country doesn’t need it now, there is a possibility that vehicles using natural gas could be implemented later, in their own country, thus helping to alleviate the oil shortage. Also, there are risks and costs involved with fracking, that they may not choose to incur, if the benefit is to go to exporters.

5. Cost of investment for additional natural gas consumption. In order to use more natural gas, considerable investment is needed. New pipelines likely need to be added. Homeowners and businesses may need to purchase gas-fired furnaces to raise demand. If it is decided to use natural gas vehicles, there is a need for the new vehicles themselves, plus service stations and people trained to fix the new vehicles. Additional natural gas storage may be needed as well. Additional industrial production is difficult to add, unless wages are low enough that the product being sold will be competitive on the world market.

Existing “pushes” toward better insulation have the effect of reducing the amount of natural gas used for heating homes and businesses, so work in the opposite direction. So do new techniques for making nitrogen-based fertilizer using coal, rather than using natural gas.

6. Touchy balance between supply and consumption. If additional production is added, but additional uses are not, we have already seen what happens in the United States. Storage facilities get overly full, the price of natural gas drops to unacceptably low levels, and operators scramble to cut back production.

The required balance between production and consumption is very “touchy”. It can be thrown off by only a few percent change in production or consumption. Thus an unusually warm winter, as the United States experienced last year, played a role in the overly full storage problem. A ramp up of production of only a few percent can also cause an out of balance situation. Unless a developer has multiple buyers for its gas, or a “take or pay” long-term contract, it risks the possibility that the gas that is has developed will not be wanted at an adequate price.

7. Huge upfront investment requirements. There are multiple requirements for investing in new shale gas developments. Each individual well costs literally millions of dollars to drill and frack. The cost will not be paid back for several years (or perhaps ever, if the selling price is not high enough), so debt financing is generally needed. If fracking is done, a good supply of water is needed. This is likely to be a problem in dry countries such as China. There is a need for trained personnel, drilling rigs of the right type, and adequate pipelines to put the new gas into. While these things are available in the United States, it likely will take years to develop adequate supplies of them elsewhere. All of the legislation that regulates drilling and enables pipeline building, needs to be in place as well. Laws need to be friendly to fracking, as well.

Growth in Exports to Date

Exports grew as a percentage of natural gas use through about 2007 or 2008.

Figure 7. World natural gas exports as percentage of total natural gas produced, by year, based on EIA data (older years) and BP’s 2102 Statistical Review of World Energy for 2010 and 2011.

In recent years, natural gas exports have fallen slightly as a percentage of total gas extracted. Thus, if world natural gas supplies have risen by an average of 2.7% per year for the past five years, exports available for import have risen a little less rapidly than the 2.7% per year increase. A major ramp-up in export capability would be needed to change this trend.

While we hear a lot about the rise in exports using LNG, its use does not seem to be adding to the overall percentage of natural gas exported. Instead, there has been a shift in the type of export capacity being added. There are still a few pipelines being added (such as the Nord Stream pipline, from Russia to Germany), but these are increasingly the exception.

The Shale Gas Pricing Debate

Exactly what price is needed for shale gas to be profitable is subject to debate. Shale gas requires the payment of huge up-front costs. Once they are drilled and “fracked,” they will produce for a long period. Company models assume that they will last as long as 40 years, but geologist Arthur Berman of The Oil Drum claims substantial numbers are closed down in as few as six years, because they are not producing enough natural gas to justify their ongoing costs. There is also a question as to whether the best locations are drilled first.

Logically a person would expect shale-gas to be quite a bit more expensive to produce than other natural gas because it is trapped in much smaller pores, and much more force is required to extracted it. In terms of the resource triangle that I sometimes show (Figure 8, below), it epitomizes the low quality, hard to extract resource near the bottom of the triangle that is available in abundance. We usually start at the top of the resource triangle, and extract the easiest and cheapest to extract first.

Figure 8. Author’s illustration of impacts of declining resource quality.

Berman claims that prices $8.68 or higher per million Btu are needed for profitability of Haynesville Shale, and nearly as high prices are needed to justify drilling other US shale plays. The current US price is about $3.50 per million Btu, so to be profitable, the price would need to be more than double the current US price. Prices for natural gas in Europe are much higher, averaging $11.08 per million Btu in September 2012, but shale gas extraction costs may be higher there as well.

The US Energy Information Administration admits it doesn’t know how the economics will work out, and gives a range of projected prices. It is clear from the actions of the natural gas industry that current prices are a problem. According to Baker Hughes, the number of drilling rigs engaged in natural gas drilling has dropped from 936 one year ago to 422, for the week ended October 12, 2012.

Backup for Renewables

One area where natural gas excels is as a back up for intermittent renewable energy, since it can ramp up and down quickly. So this is one area where a person might expect growth. Such a possibility is not certain, though:

1. How much will intermittent renewables continue to ramp up? Governments are getting poorer, and have less funds available to subsidize them. They do not compete well on when they go head to head with fossil fuels, nuclear, and hydroelectric.

2. When intermittent renewables are subsidized with feed in tariffs, and requirements that wind power be given priority over fossil fuels, it can provide such an unlevel playing field that it is difficult for natural gas to be profitable. This is especially the case in locations where natural gas is already higher-priced than coal.

The Societal “Recipe” Problem

Our economy is built of many interdependent parts. Each business is added, taking into account what businesses already are in place, and what laws are in effect. Because of the way the economy currently operates, it uses a certain proportion of oil, a certain proportion of natural gas, and more or less fixed proportions of other types of energy. The number of people employed tends to vary, too, with the size of the economy, with a larger economy demanding more employees.

Proportions of businesses and energy use can of course change over time. In fact, there is some flexibility built in. In particular, in the US, we have a surplus of natural gas electricity generating units, installed in the hope that they would be used more than they really are, and the energy traded long distance. But there is less flexibility elsewhere. The cars most people drive use gasoline, and the only way to cut back is to drive less. Our furnaces use a particular fuel, and apart from adjusting the temperature setting, or adding insulation, it is hard to make a change in this. We only make major changes when it comes time to sell a car, replace a furnace, or add a new factory.

In my view, the major issue the world has been dealing with in recent years is an inadequate supply of cheap oil. High priced oil tends to constrict the economy, because it causes consumers to cut back on discretionary spending. People in discretionary industries are laid off, and they tend to also spend less, and sometimes default on their loans. Governments find themselves in financial difficulty when they collect fewer taxes and need to pay out more in benefits. While this issue is still a problem in the US, the government has been able to cover up this effect up in several ways (ultra low interest rates, a huge amount of deficit spending, and “quantitive easing”). The effect is still there, and pushing us toward the “fiscal cliff.”

The one sure way to ramp up natural gas usage is for the economy as a whole to grow. If this happens, natural gas usage will grow for two reasons: (1) The larger economy will use more gas, and (2) the growth in the economy will add more opportunities for new businesses, and these new businesses will have the opportunity to utilize more natural gas, if the price is competitive.

I have compared the situation with respect to limited oil supply as being similar to that of a baker, who is trying to bake a batch of cookies that calls for two cups of flour, but who has only one cup of flour. The baker is able to make only half a batch. Half of the other ingredients will go unused as well, because the batch is small.

To me, discovering that we have more natural gas than we had before, is analogous to the baker discovering that instead of having a dozen eggs in his refrigerator, there are actually two dozen in his refrigerator. In fact, he finds he can even go and buy more eggs, if he is willing to pay double the price he is accustomed to paying. But the eggs really do not fix the missing cup of flour problem, unless someone can find a way to change eggs into flour very cheaply.

Basic Energy Types

To me, the most basic forms of energy resources are (1) coal and (2) oil. Both can be transported easily, if it is possible to extract them. Natural gas is very much harder to transport and store, so it is in many ways less useful. It can be made work in combination with oil and coal, because the use of coal and oil make it possible to build pipelines and make devices to provide compression to the gas. With coal and oil, it is also possible to make and maintain electric transmission lines to transport electricity made with natural gas.

I sometimes talk about renewable energy being a “fossil fuel extender,” because they hopefully make fossil fuels “go farther”. In some ways, I think natural gas is an extender for oil and coal. It is hard to imagine a society powered only by natural gas, because of the difficulties in using it, and the major changes required to use it exclusively.

In the earliest days, natural gas was simply a “waste product” of oil extraction. It was “flared” to get rid of it. In many parts of the world, natural gas is still flared, because the effort it takes to collect it, transport it, and make it into a useful product is still too high.

The hope that natural gas will be the world’s energy savior depends on our ability to make this former waste product into a product that will replace oil and coal. But unless we can put together an economy that needs and uses it, most of it probably will be left in the ground. The supposedly very high reserves will do us no good.

Discussions

Bob Wallace's picture
Bob Wallace on Oct 19, 2012

"(Renewables) do not compete well on when they go head to head with fossil fuels, nuclear, and hydroelectric."

Wind certainly competes very well with coal, nuclear and hydroelectric if we're talking about new generation.  Solar is likely less expensive than new coal or nuclear or soon will be.  Geothermal is priced between wind and solar.

Renewables may not force old, paid off generation off the grid, but they produce at a lower price than most new traditional generation.  Natural gas excepted.

We need only to look at John Rowe's statement “I’m the nuclear guy,” Rowe said. “And you won’t get better results with nuclear. It just isn’t economic, and it’s not economic within a foreseeable time frame.”


http://www.forbes.com/sites/jeffmcmahon/2012/03/29/exelons-nuclear-guy-no-new-nukes/

Rowe was speaking of competiting with NG.  The median LCOE for wind is a penny less than the median price of NG.

http://en.openei.org/apps/TCDB/






Paul O's picture
Paul O on Oct 21, 2012

I'm just curious whether you're factoring the cost of Gas power for backup of Wind. If we build more wind, we'll need more gas too.

Bob Wallace's picture
Bob Wallace on Oct 21, 2012

The idea that we need to build backup for wind or solar is a flawed idea.  We have adequate dispatchable generation and storage already to allow us to change our grid supply to 25% wind/solar (eastern grid) to 35% wind solar (western grid).  

If the Sun is shining or the wind blowing just turn off some of the currently in use fossil fuel generation, hold back hydro, or pump-up some water to our existing hydrostorage.

Actually those 25% - 35% numbers are too low.  Remember, we have dropped coal from 49% of our grid supply in 2006 to under 40% in 2012 (36% first half of year).  We've replaced a lot of that coal with dispatchable natural gas, from 20.1% in 2006 to over 25% this year.  It's likely we could add at least another 5% to the 25-35%.

We can greatly increase our additon of renewables to the grid for a number of years before we need to consider additional storage or fill-in generation.  

Bob Wallace's picture
Bob Wallace on Oct 21, 2012

Willem - You need to add storage to your analysis.

Take a look at Ambri's (MIT) liquid metal storage battery.  It's working at the prototype level and if it scales up then it will provide very cheap storage.  Let's say less than $0.02/kWh.

If this battery (or one of the other developing technologies) comes on line then the base price of electricity will be set by wind at $0.05/kWh (and expected to fall) and wind stored at  $0.02/kWh.  To play in the electricity market generation will need to be in the $0.06 - 0.07 range.

Solar is now reaching $0.10/kWh and falling rapidly (PG&E recently signed a purchaes agreement at $0.104/kWh).  Geothermal (median price) is $0.09/kWh and expected to fall.

Natural gas (median price) is already $0.06/kWh and expected to rise.  

It's hard to imagine any new nuclear generation of any sort being able to produce electricity at less than $0.12/kWh.  There are no working prototypes of thorium reactors producing affordable electricity.

It looks to me that, if cheap storage does develop, the bulk of our electricity will come from wind and stored wind.  Stored wind meets all the dispatchable needs.  Solar will provide a lot of our midday peak demand.  Geothermal will rumble on in the background.  Natural gas will drop back to a 'deep backup' role, coming on line during prolonged periods of low wind/solar input.

--

My numbers are LCOE from here - http://en.openei.org/apps/TCDB/

And I didn't include tidal which seems to be developing quite nicely and promises electricty at wind prices.  Just think about a lot of turbines parked off the coast of Florida in the Gulf Stream.

 

 

 

 

 

 

Bob Wallace's picture
Bob Wallace on Oct 21, 2012

Paul, the idea that we need to build backup for wind (or solar) is a flawed idea.  At least for many years.

A few years back it was found that the US grids could convert to 25% (eastern grid) to 35% (western grid) wind and solar without adding any fill-in generation or storage.

Since that study was completed we have cut our coal generation from 49% (2006) to under 40% (36% for first half of 2012).  We have replaced a good piece of that 13% total with dispatchable natural gas.  Our generation from NG has risen from 20.1% (2006) to 31% (first half 2012).

That means that we could boost the 25%- 35% by at least another 10%, using the extra NG geneation only when the Sun was not shining and the wind not blowing.

All of the US grids could be more than 1/3rd wind and solar without requiring us to build a single gas plant.

 

 

 

 

Gail Tverberg's picture
Gail Tverberg on Oct 22, 2012

We have not tested this in practice.Germany is now going through the exercise of tyring to add more renewables to its grid. It remains to be seen how sucessful this will be. Curtailment is already an issue in many areas. http://www.renewableenergyworld.com/rea/news/article/2012/03/impact-of-c...

 

Also, I don't think it is fair to compare electric prices for wind to electric prices for natural gas, coal and nuclear. Intermittent power is of inherently less value to the grid, becuase it does need backup. In the US, quite a bit of this is built. These plants also have to be operated inefficiently. Thee is als a need for more long-distance connection. If these additional costs were priced in properly, instead of leaving them for others to pick up, the comparison would not be as advantageiouus. 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

One could make a legitimate argument that in some cases dispatchable generation or generation which happens during peak demand can have more value to the grid.  Solar, for example, could have a higher value than coal or nuclear which might produce unneeded off-peak power.  

It is entirely valid to compare the cost of wind to all other generation methods.  It does no matter if wind or solar are variable.  US grids have sufficient dispatchable generation and storage to permit large amounts of wind and solar.  If wind is cheaper than fueling a fossil fuel plant then wind is cheaper.  The fossil fuel plants can be shut down, saving the utility money. 

In the Pacific Northwest, for example, there is enough hydro and wind to totally power the grid allowing coal plants to be shut down, saving the utility fuel costs for months.

The US  'Total LCOE' for wind and other generation technologies includes transmission costs.  For onshore wind the current median price per kWh increases from $0.05/kWh to $0.058/kWh, a 16% increase.  All generation technology has transmission costs.

Germany will need less curtailment as more of Europe is connected so that excess German wind can be sold over the borders.  As well Germany is beginning to build storage.

 

 

 

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

"Wind and solar energy is of a lower quality, because it is variable and intermittent. Such energy is not equivalent to coal, gas, hydro and nuclear energy, as it has zero "On Demand/Dispatch" value to a grid operator."

Coal and nuclear are not dispatchable.  

A grid that has ample off-peak generation will find addtional coal or nuclear to have zero value during those hours.  At the same time it can find solar to be very valuable as it provides peak hour power, off-setting expensive peaking generation.  Additonally solar production highly coorrelates to increased demand from air conditioning.

Offshore wind will be more expensive at first while we shake out the inefficiencies.  Luckily for us Europe has alread done the heavy lifting.  The EIA is projecting a median LCOE for off-shore wind at $0.08/kWh by 2018.  Transmission will add about 2 cents.

The EIA expects offshore wind to be $0.05/kWh by 2030.

Note that off-shore wind will have value higher than its total LCOE because off-shore production during peak hours is generally high and dependable.  

 

 

 

 

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Willem - Germany is in the process of a major overhaul of its energy system.  They are shutting down their nuclear and reducing the amount of coal they use with the longer term goal of eliminating all fossil fuel.

Rough spots will occur.  Germans are very capable and they will solve their problems.

"At present Germany has been sending some of its wind energy to the Netherlands which resulted in nearly brand new, 60+% efficient CCGTs in the Netherlands being idled, because wind energy has "priority"; this is beyond rational."

Whether this is or is not rational depends on your value system.  If you care nothing for the world that we leave those who follow us and for those of us who are already dying because of climate change then I can see you thinking curtailing CCGTs when there is CO2-free wind available to power Netherland's grid.

Personally I applaud whoever made the decision that we should stop buring fossil fuels when wind or solar is available.  To do otherwise would be beyond rational to me.  IMO it is criminal to unnecessarily burn fossil fuels.

 

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

I can't give you an factual answer, Willem.  But I would guess that VT has set their FiT high in order to ramp up solar installation quickly.

Japan has also set a high FiT.  Japan wants to get a lot of solar on line in a hurry in order to close their nuclear plants as quickly as possible.

Sometimes money is spent to arrive at a solution faster than normal market forces would create.

 

Paul O's picture
Paul O on Oct 22, 2012

BOB,

Germany is enguaged in what I call  The Great German Experiment. My advice to other countries is for them to wait until the results are in.  Nobody knows how much this will cost, including how much NG generation (and/or storage)  would be needed when it's all completed and fully operational. I certainly hope we (US) adopt a hard nosed wait and see attitude/show me the proof attitude.


Hmm! Yes Germany is shutting down nuclear plants, but are you not allarmed that the void created by shutting them down is currently being filled with Coal?

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Thankfully many other countries are also conducting their versions of the "Great German Experiment".   They're likely to enjoy what Germany is enjoying, lower priced electricity when the Sun shines.  German electricity prices on sunny days are dropping to the level of late night electricity.  Merit order pricing is forcing the most expensive generation off the German grid.

--

Germany’s new coal burning plants are replacing (not adding to) the older plants that either have been or will soon be decommissioned. Moreover, by 2020 18.5 gigawatts of coal power capacity will be decommissioned, while only 11.3 gigawatts will be newly installed. That's a net loss of coal generation of 7.2 gigawatts over the next seven years.

Furthermore those plants will be more efficient, releasing less CO2 per unit electricity produced than are the ones they are replacing. Even though German coal use went up 4.9% last year their CO2 levels fell 2.2%.

 


Paul O's picture
Paul O on Oct 22, 2012

I noticed the "when the sun shines" qualifier you used.

1) But seriously, are you claiming that Germans are paying lower prices for their electricity?

Please Google "german electricity prices". Here is the link:  https://www.google.com/#q=german+electricity+prices&hl=en&safe=off&prmd=...

2) No other country is doing what Germany is, so your comment:

"Thankfully many other countries are also conducting their versions of the "Great German Experiment"."

adds very little to the conversation.

3) As someone who is concerned about GW gases, you should be alarmed that Zero emissions Nuclear is In Effect being replaced by Lower carbon Coal. Carbon is still Carbon.

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Yes, I said that when the Sun shines the cost of electricity on the German grid plummets.

I did not say that moving to renewable energy was bringing down the cost of electricity 24/365.  Germans will pay a small premium to convert from a nuclear/coal grid to a renewable grid.  It's an investment in a cleaner, safer, less expensive grid in their near future.

If I lived close to a nuclear plants as Germans do, I would be glad to pay the approximate $0.22 cents per day premium to get nuclear plants shut down.  

In fact, I'd be glad to pay 22 cents a day to get US plants closed.  Japan's Fukushima meltdown is estimated to cost $250 billion, a couple thousand dollars per person.  And we know how initial estimates are generally low balled.

The citizens of Germany have decided that they would like to get the danger of nuclear energy behind them as quickly as feasible even if it means slowing their cuts in emissions of greenhouse gases.  I respect their decision.  And at the same time we should recognize that the EU27 peaked around 1990.  The US ddin't get there until 2005.  Before we give Europe a hard time over not cutting GHGs faster we need to catch up with them.

 

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No other country is doing what Germany is doing?

Switzerland and Belgium have decided to close their nuclear plants. 

Many countries are installing large amounts of wind and solar generation.  China, for example, just increased their 'five year plan' from 5GW of solar to 21GW of solar by 2015.  Even Saudi Arabia is moving to renewables.

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Storage is much more of an option than thorium reactors.  We already have pump-up hydro, CAES, and battery storage in operation.  There are no functioning thorium reactors, there are unsolved technal problems.

You can create pump-up anywhere you can drill down into the earth and build a lower reservoir and site one on the surface.  Or you can put one up on higher ground and one on lower.  

The 21st Century grid is in its infancy.  It's not possible to determine what form of storage and dispatchable fill-in we'll settle on.  We do know that we have solutions but we don't know what better solutions will emerge.

If Ambri's liquid metal battery scales up then the issue is settled.  And their battery is performing great at the prototype level.  

As we move from a fossil fuel grid to a renewable energy grid we will call on fossil fuels at time.  For example, Southern Australia has closed some of its coal plants but put one in mothballs for use during times of the year when demand is the highest.  Gas plants will likely see some service for decades, first as everyday fill-in and later as 'last player' reserve.

 

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Willem, I have no energy for reading your very long cut and pastes.  And I'm running out of energy for arguing with you.  I've laid out the facts as I see them.  You are entitled to your own opinion.

I'll try to briefly address your points if I can see them without reading tomes. 

No utilitiy company would ever view coal or nuclear as dispatchable.  Some of each can be dialed back as demand drops, but neither can be controlled quickly enough to fulfill the role of dispatchable generation.

Dispatchable is, in order of response time, batteries, hydro, and gas turbines.

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Spreadsheets are limited to only the numbers included on the spreadsheets.

One can make a spreadsheet that shows coal to be a cheap source of electricity.  If they leave off the significant dollars paid in taxes and health insurance premiums to deal with the health and enviornmental costs caused by coal emissions.

Natural gas can look attractive on a spreadsheet if one fails to include the cost of climate change.

You will find that utility companies and financial analyists rarely include those costs in their work.

 

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Willem - I'm uninterested in getting into a game of comparing man-parts with you.

I have laid out facts and my opinion.  In my opinion you are discounting storage while putting hope in things yet to be invented such as efficient, working thorium reactors.  

And you are also discounting things which aren't commonly seen on utility company spreadsheets, such as citizen opionions and external costs.  

The citizens of German (71% of them) are willing to pay a bit extra for their electricity over a few years in order to get nuclear and coal plants shut down.

The citizens of Japan are willing to pay a bit extra for their electricity and to suffer through hot summers without AC in order to keep most of their nuclear plants shut down.

The citizens of the United States are so unwilling to allow new reactors, of any sort, into most of their neighborhoods that there not enough suitable sites for the US to do any signficant nuclear building if it made financial sense.  (Which is doesn't.)

The unrecovered costs of burning coal in the US makes the real cost of coal-electricity more like $0.20/kWh than the $0.05/kWh that friends of fossil fuels wish to claim.

Over 70% of Americans now hold that climate change is happening and pressure is mounting to do something to minimize the effects.  A couple more very hot summers, some more mega- floods, snowfalls and droughts and pressure is going to soar.  We'll likely see the Arctic Ocean melt out in the next 2-3 years which is likely to have big effects on our weather and public opinion.  Pressure will be intense to close coal plants and to limit NG use.

Until you do a full accounting all the spreadsheets you create and all the arguments you make will be flawed.

--

BTW, your solar prices are out of date.

"... as just detailed in GTM Research's U.S. Solar Market Insight -- the U.S. average system price was $4.44 per watt in the first quarter of 2011.  

Residential system prices fell by 4.8 percent from Q4 2011 to Q1 2012, with the national average installed price falling from $6.18 per watt to $5.89 per watt. Non-residential system prices fell by 6 percent quarter to quarter, from $4.92 per watt to $4.63 per watt. Utility system prices declined for the eighth consecutive quarter in a row, dropping from $3.20 per watt in Q4 2011 to $2.90 per watt in Q1 2012."  

http://www.greentechmedia.com/articles/read/German-Solar-Installations-Coming-in-at-2.24-Per-Watt-Installed-U.S-at-4

Residential, without subsidies, have a LCOE of 31 cents using a 4.5 avg solar day.  Including the federal subsidy brings the price to 21.8 cents.  Additionally we're seeing reports of residentail rooftop installations around $3/watt which gets owners to retail grid parity.

---

New England residential electricity costs are $0.1589/kWh.

Vermont residential electricity cost is $0.1626/kWh.

http://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf

There's no 5 cent electricity in New England according to the EIA.  The annual average for residential, commercial and industrial electricity is 13.06 cents. No one is paying less than 7.7 cents.

http://www.maine.gov/tools/whatsnew/index.php?topic=puc-faq&id=192153&v=article

 

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Gail, you've given an interesting and informative analysis of natural gas.  I suspect there's more to be said in terms of how many years we can depend on having NG to burn.

You might want to read this article that deals with that question.  It states that in the US we have 11 years of proven supply, 21  years of proven and probable and up to 95 years if we add in a lot of speculative supply.

http://www.slate.com/articles/health_and_science/future_tense/2011/12/is_there_really_100_years_worth_of_natural_gas_beneath_the_united_states_.single.html

Those time lines are based on 2010 burn rates.  If we create more uses for NG then we run out sooner, at least out of reasonably recovered supply.  In  2009 we generated 987,697,000 MWhs of electricity with NG.  If we take the first half 2012 use and double it for a 2012 estimate we will generate 1,469,946,000.  That's a 49% increase in gas used for electricity.  About a third of our NG goes to electicity generation.  We've got about 100 coal plants scheduled to close and a large portion of their generation will be replaced with gas plants.  We could easily double the amount of NG used for electricity over then next few years.

If we look at the movement to convert some of our vehicles to NG and to export to other markets then we continue to build on that 2010 burn rate.

If we take a modestly conservative number of 21 years and if we're increasing our burn rate then natural gas is not a long term energy source.  At best it's a bridge to get us from where we are to a grid supplied by renewable energy and buffered with storage.

 

 

Bob Wallace's picture
Bob Wallace on Oct 22, 2012

Willem - I think you've worn me out.  I'm getting nothing from my exchange with you.

If utility installed solar is $2.90 per watt  then LCOE cannot be "27 c/kWh".  You are apparently using old numbers that are double today's.

I'm going to turn this discussion off now.  I don't want to spend my time having a discussion with someone who presents unrealistic arguments. 

If you don't see the utility in spending some money now in order to move us to a clean grid that doesn't ruin our health and change our climate into something that will cause human suffering, misery and millions of unnecessary deaths then we will never come to an agreement.

I fully understand that the cheapest way to make electricity is to keep on burning coal in existing plants. But that math only works on Ebenezer Scrooge's ledger books prior to his visits by the Christmas spirits who showed him the value of humanity.

Have a nice day....


 



 

George Stevens's picture
George Stevens on Jul 15, 2013

Way to avoid answering Willem’s question about your qualifications.

Your commentary makes it obvious that you have little or no industry experience.

Storage at $0.02/kWh could hypothetically be possible if we account for the cost of the batteries alone, but there in such a storage system there is a need for quite a bit of ancillary equipment to regulate charge and discharge, house batteries, and communicate with the grid and power plant. Then there is the fact of batter-storage losses. Its all too convenient for you to simply ignore.

 

Gail Tverberg's picture

Thank Gail for the Post!

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