A lot of environmentalists and their organizations as well as "leading" think tanks/thinkers and the like have pursued a strategy of "bridging" the transition from coal based electricity to renewable based electricity with natural gas (Ngas) based electricity. Some even bought the line about nukes being less environmentally nasty than coal, and this triage mentality thus made room for nukes, or at least resulted in lessened opposition to them. It's a "do a bit less harm but not a lot less harm" concept, and even Jim Hansen bought into it with nukes, at least pre-Fukushima. Unfortunately for many of us, reality has dealt that "do less harm" a nasty punch in the proverbial hurting zone, at least in NY State, especially when coupled to the con-job of the decade (but hey, the decade is still young...), which is tight shale gas from the Marcellus/Utica formations.
And as it turns out, natural gas (Ngas) is now essential.... to the above average profitability of old coal and nuke sourced electricity. Without at least some Ngas in the mix, or with increasing amounts of wind power in the grid mix, prices for coal and nuke based generators stay low, and profitability is merely average or less, which is a heretical concept in corporate circles. Adding in more Ngas usage into NY State's electricity mix increases the price of electricity and especially the profitability of those other pollution sourced electricity producers. More Ngas consumption depletes reserves of Ngas faster, keeps Ngas prices higher, and also increases the prices residential and commercial users of Ngas for heat have to pay for their heating fuel. Plus, once Ngas using generators have been built (especially gas turbines, which cannot use coal or solid biofuels), owners want to keep them operating, especially in profit-making modes, and the coal and nuke based generators MOST CERTAINLY WANT THEM TO STAY OPERATING, if only for a small amount of time.
Maybe it's time to quit kidding around. If eliminating the pollution by-products from electricity is actually the goal, it is time to end the Ngas "bridge" charade, and go for the (mostly) wind-tidal-pumped hydro route in NY State. Besides, due to the high percentage of "fugitive" methane that escapes during the fracking process, there is effectively little to no benefit to using fracking sourced Ngas to make electricity versus coal (close to the same greenhouse gas global warming results, especially in the initial 20 years) with respect to greenhouse gas/climate warming potential. The only way to minimize pollution in NY associated with electricity production (rad waste generation, the occasional (but far too often) Fukushima-like radioisotope belches, CO2 pollution, particulates, CH4 pollution, etc) is to generate electricity via renewables, and as required, use pumped hydro (mostly) as a temporary electric energy storage route. Odds are, that also means changing the pricing system we have for renewables in NY State, but if a basket case (of conventional electricity policy "wisdom") like Japan can change (they introduced a Feed-In Tariff (FIT) system on August 26, 2011), maybe there is hope for NY State, too....
In marginal pricing based electricity systems such as NY State has (also referred to as Locational Based Marginal Pricing, or LBMP), the highest priced generation of the total variously priced "blocks" of electricity needed to satisfy an hourly demand sets the price for all electricity for that hour. For example, even if 95% of the electricity for that hour is priced at 3 c/kw-hr and 5% is priced at 10 c/kw-hr, all electricity is priced at 10 c/kw-hr for that hour. However, if demand was completely covered by the lower cost electricity (in this case, 3c/kw-hr), the price would be 3 c/kw-hr for that hour. The highest priced generation comes from oil, followed by Ngas, wood, trash, coal, nukes and finally hydroelectric sources. In general, very little fuel oil is used these days, as it is much more expensive than Ngas (it helps to use common thermal units, such as dollar per million British Thermal Units, or $/MBtu); in 2009, oil supplied less than 1% of NY State's electricity supply, which in turn was 50% of 2008's fuel oil usage value. These days, oil usage to make electricity is pretty rare, a victim of "demand destruction", due to it's high price relative to everything else. The next highest cost way to make electricity is to use natural gas in an inefficient manner (the more inefficient, the more costly, such as in back-up gen-sets that are about 25% efficient), and the least expensive way to use Ngas is to use it via co-generation, where both steam produced and electricity made can raise the thermal efficiency to nearly 85%. When the by-product steam cannot be sold/used, the most efficient way to make electricity from Ngas is via a combined cycle system (a system composed of a jet engine and exhaust heat recovery unit used to make steam for a steam turbine), which have efficiencies averaging 45% in the Con Ed region/perhaps 50% in colder regions.
In regions such as Western NY, the use of dedicated stand alone combined cycle systems powered by Ngas (NGCC) has largely become irrelevant; in 2010, less than 2.6% of regional electricity was supplied (46.1 MW out of 1762 MW) by Ngas, although some on-site generation was made but not sold into the grid (on-site generation). Thus, of the 566 MW of Ngas generating capacity, only 8.14% of that capacity, on average, was used. This small amount could have easily been displaced from any one of the three major coal burning facilities (Dunkirk, Huntley or Somerset), all of which operated in the 50% to 60% range, on average. However, if the Ngas facilities were shut down and their electricity was replaced by the coal burners, the result would have been LOWER wholesale electricity prices (Ngas is a more expensive way to make electricity, even when Ngas wholesale (hub) prices are quite low by historical standards, near $4/MBtu). With lower prices comes lower profits, and since these are for-profit companies extracting the Ngas from the ground, lower prices would not have allowed for that "Mr. Happy" feeling to be on display..... For WNY, even for those rare "peak times", Ngas usage could have been much less than was actually used, especially when supplemented by the 240 MW Niagara Falls pumped hydro facility (but more pumped hydro would be good to have...). However, by retiring many of the boilers at Huntley (4 of them at 86 MW each, total of 344 MW) and one at Dunkirk (86 MW), as well as by eliminating most co-generation possibilities (in 1998, Niagara Mohawk bought out 44 producers at a cost of nearly $3.4 billion), the probability that some Ngas sourced electricity would be needed on the NYISO spot market has been raised considerably. And this is great for the profits of the NRG (Dunkirk, Huntley) and AES (Somerset) Corporations. Furthermore, while there was a slight reduction is coal usage for WNY when Ngas was used to make 46MW, not much coal usage is avoided. In 2009, coal provided about 1066 MW of our regional (NYISO Zone A) electricity, or about 23 times as much as with Ngas based generators. The increase in particulate, acid gas and heavy metal poison pollution if that Ngas was replaced by coal, as well as CO2 pollution, would be pretty small....
However, that small usage of Ngas raised the price of electricity by close to 0.7 c/kw-hr (let's assume 0.74 c/kw-hr = $7.4/MW-hr). And while that may seem small, that cranked up the price to an average of 3.94 c/kw-hr from close to 3.2 c/kw-hr. That adds up to $114 MILLION last year ($7.4/MW-hr * 8760 hours * 1762 MW). But, at an average Ngas delivered price of around $6/MBtu and an efficiency of about 45%, a bid price of around 7 c/kw-hr (cost is about 6.1 c/kw-hr), the 46.1 MW of Ngas sourced electricity would have required the consumption of close to 3.06 million MBtu's of Ngas, at a purchase price of about $18.4 million. WNY electricity prices were about $114 million higher than they would have been without this "marginal pricing system", assuming that coal based electricity could have sold for 3.2 c/kw-hr at "minimal profit pricing". After all, in 2008, coal retailed for $57.81/ton with an average heat value of 11,248 Btu/lb; the "raw material price" would have been nearly $21.9/MW-hr (or about 2.2 c/kw-hr) for a plant that was 40% thermally efficient. The "cost" of that Ngas based electricity if it was priced at 7 c/kw-hr would have been $28.3 million. Note: all electricity producers also get additional revenue from the NYISO grid, such as "ICAP" and "UCAP", which is basically money paid annually for the ability to produce additional electricity on demand, or to just provide a known quantity over the course of a year. These fees can be considerable, and help offset low LBMP prices. An estimate of their value is around $62,500 per year per MW of generation capacity, although those these are also "bid" and subject to change. For the AES plant in Somerset, these could be worth about $40 million/yr, and for all of the coal burners in NYISO Zone A , this would have been nearly $111 million.
Maybe that's a lot of facts to digest, so let's recap. To make an average of 46.1 MW of electricity, about $18.4 million worth of Ngas had to be purchased at an average delivered price of around $6/MBtu. If this 46.1 MW was made for about 6 c/kw-hr and sold for around 7 c/kw-hr, that would have cost $28.3 million. And yet, electricity prices were yanked upwards by $114 million (from 3.2 c/kw-hr to 3.94 c/kw-hr) just to provide 2.6% of WNY's electricity. The coal burners got an estimated $7.4/MW-hr more for their electricity than would have otherwise been the case (last year the WNY average electricity price was 3.19 c/kw-hr). For them, that is an added $69 million in extra revenues for 2010. As the saying goes, "sweet"....
And now, along comes fracking, since conventional Ngas wells are getting tapped out in the US and Canada, despite the large increase in Ngas made as a by-product of oil production in the Gulf of Mexico (GOMEX). That oil tends to be loaded with methane; the Macondo well (BP blowout in 2010) was about 50 wt% methane. So called "unconventional gas" (tight shale, tight sandstone, coalbed methane, coal derived syngas to methane) is now providing around 50% of the methane used in this country, and that percentage is increasing - see http://www.theoildrum.com/files/Navigant%20NG%20Forecast.png. In some ways, this is a corollary to "Peak Oil", as over 45% more gas wells are needed (2009) to supply essentially the same quantity of Ngas as was made in 2000. This is a classic example of "running harder to stay in place", and an indication that it is time to get off of the treadmill...
Source = http://www.theoildrum.com/node/4436
There are a number of problems associated with fracking, not the least of which is the high cost needed to tap into the rapidly depleting (3 to 4 years maximum) amount of methane obtained from such wells, which translates into a required price now near $10/MBtu (but current Henry Hub spot prices are near $4/MBtu....). Then there is the degradation of infrastucture (notably rural roads), the need to deal with all that water pollution, the needed quantity of pipelines to constantly be added (since fracked wells rapidly deplete, more wells and more "feeder" piping needs to be installed) and associated water pollution/air pollution that goes with the fracking business. And then there is emanated/"escaped" methane... so much methane escapes in the fracking process (about 7% of the total extracted from a given well) that the net greenhouse gas effect for this methane (assuming it is used to make electricity in a combined cycle, non co-gen facility) is worse than burning coal to make electricity in s similar non co-gen facility for the initial 20 years. By year 21, about 75% of the escaped methane gets converted by sunlight and oxygen into CO2 and water, so the intense infared absorbance by methane is not so much a problem.
Since the demand for Ngas for heat is declining in the residential (greater efficiency, lower thermostat settings), commercial (poor economy, greater efficiency) and industrial (fewer factories, greater efficiency, poor economy) heating sectors, the only growth market for now is Ngas for electricity generation. However, Ngas is unlikely to ever be cheaper than coal as long as the coal is burned in an existing, largely or fully paid off facility, especially without significant CO2 pollution fees (upwards of $50/ton of CO2; RGGI "fees" are now less than $1.80/ton these days). And while a new nuke would never be able to compete with a new or existing Ngas facility, fully or mostly paid off nukes produce electricity very cheaply (especially due to enormous subsidies for nukes), so an Ngas sourced electricity producer will never be able to compete directly with an old nuke. However, in markets like NY, Ngas, coal and nukes can act together very synergisticly, maximizing profits for owners while "giving the business" to consumers. Unfortunately for Ngas producers, not too much Ngas is required to maximize coal and nuke sourced electricity generation profits.
In order to boost Ngas prices, the demand and consumption of Ngas has to increase by between 2.5% to 5% from 23.4 trillion cubic feet/yr (tcfy) to upwards of 24.5 tcfy or else the supply has to drop (as in less drilling until excess capacity is used up) by close to 1 tcfy. If such a "Standard Oil rationalization" approach occurs, Ngas prices could rise to near $10/MBtu, and once again "unconventional" Ngas would be profitable. Of course, when this happens, a big chunk of the American economy will take a major hit, as money formerly used for other things will instead be diverted to Ngas producers. Those with low cost (old conventional fields, GOMEX oil producers with significant by-product Ngas production) will obviously make a killing, since that extra price will directly translate into profit (money for nothing, so to speak). The net effect will be a newly imposed sales tax of $138 billion/yr, transferred from most of us to the owners of a tiny fraction of our economy. It will promptly induce a mini-recession, or slow down any existing economic growth, too.
Of course, if Ngas consumption in the electricity producing sector drops, prices for Ngas will stay low and perhaps even drop more, and the rush to do expensive Ngas extraction of "unconventional" gas will slow down significantly. One way to do this is to keep replacing the use of pollution based electricity (Ngas, coal, nukes) with wind based electricity. Usually when new wind capacity is added, the most expensive form of electricity production gets shut down when growth in electricity is essentially stagnant (as is the present situation). Almost invariably, this most expensive stuff is Ngas sourced electricity. Furthermore, even if prices for Ngas miraculously rise (at least to holders of Ngas reserves) to $10/MBtu, in much of the U.S. that will stimulate wind turbine installations. the $10/MBtu is one of those "threshold points" where wind becomes a less expensive way to make electricity, even if all Federal subsidies for wind energy were eliminated.
Of course, why stop at replacing Ngas, and continue on with replacing aging nukes and old coal burners with any combination of biomass, biogas, pumped hydro electrical energy storage, wind, tidal, geothermal and when conditions warrant, with solar. After all, that was the plan in the first place, wasn't it? But at present, the Ngas industry and especially the frackers are desperately trying to convince America not to switch from Ngas to renewables. They want to make that "Ngas bridge" between nukes, coal and other assorted polluting sources of electricity and renewables as long as possible by pushing it far into the future. Even if it trashes our economy and our climate, too.
It turns out that the concept of using the "Ngas bridge" seems to have been a strategic blunder by many well meaning people and well meaning groups. In NY, that blunder also increased Ngas prices for residential heating customers, as well as Ngas heating costs for their commercial and industrial employers, too. And it cranked up the profits that could be obtained from coal and nuke sourced electricity, making it LESS LIKELY that these facilities would be replaced with ANYTHING, let alone renewables. Oh well...
Anyway, more reasons to install a Feed-in Tariff system ASAP, as it would drop prices for electricity (Merit Order Effect) as long as the bulk of the renewable sources were low cost (i.e. not solar) and also drop prices for Ngas based heating, all without the need for subsidies from taxpayers (direct grants and/or tax avoidance opportunities for those who pay a lot of taxes. It also has the capability of stopping the fracking epidemic in its tracks by keeping Ngas prices low for the next several years by suppressing the consumption of Ngas.
Sound like a Plan? What are your thoughts?
http://www.eia.gov/cneaf/electricity/st_profiles/new_york.html for oil, gas, coal prices
http://www.eia.gov/dnav/ng/hist/na1170_nus_8a.htm for Ngas well numbers
Late Night: Hook, Line, and Sinker
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