Natural gas is frequently cited as the ideal fossil fuel bridge to a low-carbon future energy system. For a long time this looked environmentally attractive, although expensive given the prevailing view that the United States would be a major importer of gas. In the past few years, shale gas has changed all that.
Plentiful supplies hold out the promise of decades of low-cost natural gas for America, along with visions of a painless pathway to a vastly lower carbon footprint. A picture potentially as rosy as this probably deserves to be looked at in slightly more detail.
“Even plentiful shale reserves are not a guarantee of low prices for the long haul”
First, it is useful to remember that “low-carbon” is shorthand for reduced total greenhouse gases, usually measured in the equivalent of carbon dioxide. When natural gas is burned, it produces CO2; when the same amount leaks as methane, its greenhouse gas effect is more than 70 times the CO2 equivalent measured over 20 years and still 25 times over 100 years. Therefore, any discussion about natural gas has to evaluate not only the combustion impacts, but the leakage impacts.
Recent studies indicate that the total leakage rate must be well below 2% for a switch to gas to have a significant impact on the climate. All gas production and transportation systems have some leakage. Traditional wells and pipelines generally have less than shale and coal-bed methane. The degree to which free gas is released in shale production is under growing scrutiny and still something of an unknown quantity.
What this could mean for natural gas pricing depends entirely on the uncertain face of future legislation to reduce greenhouse gas emissions. Clearly, stringent legislation has the potential to make gas substantially more expensive than today’s record low prices, as both combustion and leaks would be regulated. The possibility of stringent legislation cannot be ruled out. Recent weather patterns may be changing public opinion and ultimately increase pressure on the government and regulators to act more swiftly on climate change.
Putting leaks to one side, at first sight using natural gas for generating electricity is a very attractive way to rapidly reduce the carbon footprint of electricity. Electricity generated by gas creates about 380 to 480 kg of CO2 for every megawatt hour of electricity compared to more than 900 kg for coal. As a result of this and other reasons, more of the country’s generation is moving to gas.
|Peter Garforth heads a specialist consultancy based in Toledo, Ohio and Brussels, Belgium. He advises major companies, cities, communities, property developers and policy makers on developing competitive approaches that reduce the economic and environmental impact of energy use. Peter has long been interested in energy productivity as a profitable business opportunity and has a considerable track record establishing successful businesses and programs in the US, Canada, Western and Eastern Europe, Indonesia, India, Brazil and China. Peter is a published author, has been a traveling professor at the University of Indiana at Purdue, and is well connected in the energy productivity business sector and regulatory community around the world. He can be reached at email@example.com.
||Subscribe to the Energy Expert RSS feed
Often overlooked is that both generation approaches are wasting upwards of 60% of the fuel in heat and other losses. This can only be changed by a radical shift in managing heat waste through extensive urban district energy systems or by a complete and rapid shift to distributed combined heat and power, or both. Neither seems very likely at present, so this accelerating, but relatively inefficient use of natural gas is likely to affect long-term pricing, probably upwards.
Along with electricity, transportation is a major part of the country’s carbon footprint, as well as its oil imports. There has been growing interest in looking at compressed natural gas, or CNG, as an alternative to diesel or gasoline, partly to reduce imports and reduce carbon emissions.
A quick look at some numbers for a small sized sedan car immediately highlights the complexity of this. In a gasoline version, CO2 emissions are roughly 160 grams per kilometer; in CNG, about 150; in a diesel, less than 120; in a gasoline hybrid, a little over a 100; and in a diesel hybrid less than 90. These numbers ignore any impacts from leaks in the supply chain of natural gas. Thus a strategy purely aimed at carbon reduction may not necessarily favor CNG for transportation. One aimed at import substitution could rapidly change the market again, putting demand and price pressure on domestic natural gas.
So how will all this affect the industrial user of natural gas? It is worth remembering that industrial use makes more efficient use of gas than either electricity generation or transportation. In any public discussion and comparison, industry should be armed with good data in readily understood form to keep this fact front and center in any policy discussions. The obvious comment is to not become complacent over this; any process can be more efficient.
Even plentiful shale reserves are not a guarantee of low prices for the long haul. Businesses sensitive to natural gas prices should probably hedge their bets against price increases with more aggressive efficiency programs. If the site’s electricity supplies are likely to experience significant fuel switching to gas, understanding the ways this could affect the generator’s greenhouse gas emissions and compliance costs could help shape risk mitigating strategies. This is also time to consider all the various options to generate your own electricity, especially if the site can support effective heat recovery.
Natural gas will be a key game changer over the next decade. Familiarity with the factors driving the gas market will help the energy manager and colleagues avoid potentially expensive risks.