The Cure for Fracking Gas in Western NY is Wind Turbines

The picture (from http://www.ci.lackawanna.ny.us/windfarm.html), is used by permission of Lackawanna Mayor Norm Polanski; much thanks!

Note: This was written to be a feature article, but so far it has not made it that far. So, here goes....

Whether or not the Marcellus and Utica tight shale gas gets tapped in NY State is really a choice of how we want to generate electricity. For all practical purposes, methane (natural gas, alias Ngas) in our state is used primarily for space heating. And space heating is a stable to shrinking market in NY State. This is a consequence of a stable population, less industry, better insulation in homes and businesses, more efficient operations, lower temperature set-points in home and commercial settings. The direct use of methane as a fuel for transportation is very small and will likely remain negligible. Any increase in energy usage for transportation purposes probably will come from increased usage of electricity to charge electric vehicles. In general, any growth in Ngas consumption in NY (and also much of this country) is only likely through its use to make electricity (see http://www.eia.gov/dnav/ng/hist/n3045ny2a.htm for reference data).

Fracking sourced gas is more expensive than “conventional” natural gas. The price needed to cover all production and waste disposal costs plus provide the profits needed for such investments is now far greater than the is the current Henry Hub spot market price, as well as the listed NYMEX “futures prices” for the next 5 years. Investors in such wells/projects would lose massive quantities of money and wealth at present natural gas prices. However, those supplying the tools of the trade (drilling rigs, pumps, trucks, drilling muds, diesel oil for diesel gen-sets, fracking chemicals, etc.) will do just fine, once the problem of the massive losses by the gas field developers and Ngas producers is overcome. If by some chance the price for this fracked methane hits the targets recommended by bankers who finance such efforts (such as Credit Suisse), then another squeeze will occur. At such Ngas prices, it is becomes less expensive to produce electricity using commercial scale wind turbines that are “tuned” for NY State winds, even if there are NO or minimal Federal wind energy subsidies involved.

Because of the way that electricity is priced in NY State, the “extra” profits (and sometimes the “regular” profits) of companies using old nukes and old coal burners to generate electricity are dependent on having at least some natural gas sourced generation “in the mix”. Even at the present highly depressed Ngas prices with very efficient combined cycle generation systems, Ngas is the more expensive option to make electricity, with a production cost almost twice that for large coal burners or any of NY’s six nukes (and all of these pollution based approaches – coal, Ngas, nukes - have huge subsidies associated with them, notably no CO₂ pollution cost or the Price-Anderson Act that limits liability in the event of a nuclear accident). When no Ngas sourced electricity is “in the mix”, electricity prices tend to fall to “minimal profit” status, which is a bad state of affairs to their corporate owners (they are in it for the money, after all). When wind turbine sourced electricity is added to our regional grid, Ngas sourced electricity is displaced first (as it is the more expensive electricity bid in for a given hour), and this drops the electricity spot market price. In Europe, electricity prices can go negative during major wind events, where pollution sourced electricity producers temporarily actually have to pay someone to take their electricity. This process is known as the Merit Order Effect.

So, if you want your natural gas based heating costs to remain low, use less Ngas. Less Ngas consumption also leads to lower Ngas prices, because the price for Ngas is very sensitive to the supply-demand balance. Nationwide wellhead prices in 2009 were less than half of those in 2008, yet demand in 2009 was not quite 2% less than in 2008 – that should give you an idea how “touchy” Ngas prices can be. Longer term, the best solution is to get rid of the Ngas based heat, using solar hot water, passive solar, active solar thermal and/or electricity (resistance or heat pump) systems. This will keep the demand for Ngas dropping over time, which also could match or exceed the decline in our North American methane reserves. And the other way to keep Ngas prices low is to use less of it to make electricity. This strategy is working, too, at least in WNY. Last year, Ngas only provided 2.6% of the electricity that was sold in NYISO Zone A, while wind turbines provided 4.8% of our electricity. A couple more wind farms in our part of NY will mean that Ngas no longer will be required to make electricity in NYISO Zone A, and at that point, any additional electricity from wind turbines will start to displace coal sourced electricity.

This is not to advocate for the use of coal or nukes to make electricity. In NY State, wind can be the prime energy source needed to replace such pollution based approaches at a reasonable price. The by-product of such an approach would be a massive increase in real wealth creating manufacturing jobs, as well as the required installation jobs and associated support/service jobs. And who would argue against the equivalent of another auto and steel industry (circa 1970) in our neck of the woods? The intermittency issue (of wind, resulting in a temporary mis-match of the variable supply and variable demand of electricity) is easily dealt with via pumped hydroelectric storage, stored biomass fuels plus interconnections with Quebec, Ontario and New England. Installation of more pumped storage systems (there are three of them within 100 miles of Buffalo) is also a great Keynesian stimulus, too; these provide a significant increase grid stability and dependability, at a minimal price.

Let’s use the medical analogy for a bit, where fracking for Ngas and associated hydrocarbons (natural gas liquids, gas condensates, crude oil) is considered an addiction. Fracking involves going after the dregs of hydrocarbon supplies – you only do this when the easy to get, formerly more plentiful “conventional” supplies of buried methane (natural gas) are used up or in the process of being used up. Far from tapping the “mother lode”, this fracking is an admission that you are going after the tail end of supplies. After all, what existed before 1800, when we began tapping them in earnest, was finite, not infinite, even though it appeared to be infinite back then. As far as oil goes, by 2006 we had burned through over half of the “conventional” supplies. Ditto for conventional methane supplies in North America, although that peak happened around 2000.

Making methane at current usage rates requires a lot of effort and our homemade “fracked” stuff is not cheap to make..., but it is cheaper than hydrogenating CO2, or converting cellulose and lignin into methane via "bio-syngas" approaches...

Clearly this is not a sustainable path; instead, it is a downward spiral. But life as we know it in NY State is one based on energy, and of three major forms, too – for transportation (oil), heat (mostly natural gas) and electricity. The electricity portion can be made at reasonable cost in NY in only a few ways – hydroelectrically, with nukes, burning coal or Ngas, burning biomass and biogas, wind turbines or near Long Island, via tidal and ocean wave energy. These forms of energy are somewhat interchangeable – for example, electricity can provide some transportation energy and all heat, but that heat tends to be pricier than when the heat is sourced from natural gas. As for 5 or 10 years from now, who knows what the price of natural gas might be – or exactly what the damage to our planet’s climate control system will bring out with weather disasters for that year.

Here’s the bottom line. Electricity is the only domestic growth market for Ngas in NY, but any new electricity demand can easily be displaced by a combination of wind turbines and pumped hydroelectric energy storage. Next, any “old” demand for electricity made by gas can also be replaced by wind turbines and pumped hydro, as can coal and nuke sourced electricity. And finally, the use of Ngas for space heating can also be replaced via existing, known means. All these alternatives to burning natural gas create a huge demand for new products and labor, something that is vitally important these days. Our hydrocarbon reserves will not last forever.

Fracking is a route to a very insecure and financially disastrous future. After all, spikes in Ngas prices can be quite ruinous for most, while benefiting only a few. But if you want such a future, with a few years of cheap Ngas prices achieved through socially and environmentally short-sighted policies, use more Ngas to make electricity now. If you want to destroy the motivation to frack in NY State, use less Ngas, and keep shrinking the quantity used in NY’s electrical mix. Since fracking will require higher prices for the methane than we are presently paying, and the only way to keep Ngas prices low is to use less Ngas, use less Ngas! And don’t buy the line about Ngas replacing coal or nukes for electricity production. Nobody will build new nukes or new coal burners – electricity prices north of 15c/kw-hr (coal) to 20 c/kw-hr (nukes) will be needed, and that assumes existing subsidies for these polluting approaches are continued.

Yeah, wind energy has a big drawback – you can see how your electricity is made. And to do wind on a large scale in the most cost-efficient way, we will need to use either a Ontario-like (Feed-In Law) and/or Quebec style (where NYPA signs up lots of long term Power Purchase Agreements) renewable energy pricing systems. The existing renewable energy pricing system in NY is obsolete, and continued adherence to it will maximize the probably we get fracked big time. And for good measure, a large scale renewable effort also will create a lot of manufacturing jobs in NY.

Oh well, I could live with seeing how my electricity gets made, and seeing my neighbors actually able to get viably employed. How about you?

Dave Bradley and (awesome editing by) Derek Bateman