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A new dash for gas? Really?

by Jerome a Paris Sat Mar 19th, 2011 at 10:33:52 AM EST

The final outcome and cost of the nuclear accident at Fukushima are yet to be determined but the obituary of the nuclear industry has already been written, and one competing source of power has already been declared the absolute winner by the Serious People: natural gas.

To fill the gap, renewables are likely to receive a boost. But there will also be a need for a reliable power generation that works even when the sun does not shine and the wind does not blow. Gas-fired power plants are quick and cheap to build, and natural gas is plentiful in the US. It could also be abundant in Europe and China if American production techniques can be imported. (FT)
Despite a push to increase power generated from renewable sources such as solar and wind power, the wind doesn't blow all the time even in Northern Europe, and the sun is notoriously elusive. Renewables aren't cheap either, in part because they need other methods of power generation to back them up because they generate intermittently. Despite improved technologies, coal is still a relatively dirty fuel, while switching to oil in a $100-a-barrel world doesn't seem appealing either. But there is a fuel that's plentiful, and becoming more so, emits significantly less carbon dioxide per kilowatt-hour generated than coal, and where power stations can be built and online in a relatively short time: natural gas.(WSJ)

The theme is eerily similar: renewables are nice, but unSerious (not "reliable," too expensive) so we need to rely on the big boys. Coal is a bit too dirty to be pushed openly, so gas is it. Cheap, abundant, clean and quick to be ramped up. Case closed.

Or is it? Let's take all of these arguments in turn.

Added to my Wind Power series

Gas is "clean?"

This one is actually simple: gas is clean only when compared to coal.

Burning gas means fewer particles and other nasty by-products than what you get from burning coal. Producing and transporting gas is also generally less dirty than producing and transporting coal. And burning gas means emissions of carbon dioxide which are roughly half that of coal for the same production of electricity.

Source: Externe project

But it still produces a lot of carbon emissions - a lot more than other alternatives - and natural gas itself, is methane, is a much more potent hothouse gas than carbon dioxide, so any losses during production and transport need to be added there with a high contributing factor.

Gas is "abundant?"

This is a perception which has taken hold in the past 2 years, as demand in the US fell (due to the crisis) while production actually increased, thanks to new developments and the emergence of shale gas as a significant contributor to the country's production. This in turn has significantly lowered US imports of LNG, releasing these volumes for Europe and Asia and creating an impression of glut over there as well.

The articles above flag this new source of gas, and suggest that similar developments could happen in Europe, where shale gas deposits do exist and could provide a domestic source of gas. But this overlooks a number of things:

  • shale gas is generally more expensive to produce than current prices suggest. This FT article notes that shale gas costs are probably double current gas prices, and Arthur Berman over at the Oil Drum has some extensive writing (see the most recent one) on this;
  • shale gas creates serious environmental problems as it uses production techniques ("fracking") which, while well known to the industry, create issues of water use (large volumes) and water pollution which are much more sensitive in the inhabited areas where shale gas tends to be found than in more traditional out-of-the-way areas of gas production;
  • most importantly, shale gas volumes are not that significant in the long run, even in the US. A lot has been made out of the most recent prospective study by the US DoE, which sees shale gas providing almost half of US gas within 25 years, but as the graph below shows, this mostly compensates the decline in traditional production and does not even allow the country to eliminate its need for imports from Canada. (And of course, this assumes a "business as usual" scenario, with no significant switch from nuclear towards gas-fired electricity generation beyond current trends):

While shale gas has indeed changed the dynamics of the gas markets, and has allowed a new source of gas to contribute to the overall supply, the fact remains that 50% of world reserves are controlled by Russia and Iran, and most of the rest from the same countries which control the oil supply, so "abundance," in addition to being a temporary situation, is still a concept largely subject to political risk. This is seen as a small risk today (because of that short term "abundance") but go back just 4-5 years to see how our leadership can quickly become hysterical about this...

Gas is "cheap?"

Current gas prices are lowish:

Source: FreeCharts.com

If anything, that graph demonstrates that natural gas prices are highly volatile. So electricity prices for gas-fired plants are highly dependent on what assumptions one makes about future prices - for the next 25 years! Most price scenarios, and in particular the most widely quoted one from the IEA (see here) tend to see slow increases over time, with no volatility and no expectation of geopolitical or geophysical disruption.

Additionally, as I've noted before in various articles (see here for instance), gas-fired electricity is currently advantaged cost-wise by the political choice made in the past 2 decades that power sector investment should be made by the private sector rather than the public sector - that means that the discount rate, ie the cost of money, for investment in the sector is higher today than it has ever been. Gas-fired plants are the cheapest to build per MW, and most of the cost of electricity in their case comes from the cost of fuel - so using a higher discount rate increases the overall cost per kWh less than for other technologies, thus giving gas a very real relative advantage. Again, this is a political choice and absolutely not an objective fact.

Despite all this, estimates of the long term cost of gas-fired power do not show any meaningful advantage for gas:

Source: ExxonMobil's "Energy Outlook: A view to 2030"

Which takes us to the arguments that we'll do gas because the alternatives, ie wind or solar, besides being more expensive, are simply not reliable or scale-able enough.

Renewables are too expensive?

As the graph above shows, onshore wind is fully cost competitive, in the long run, with other traditional sources (coal, gas, nuclear), even when one accepts a whole set of highly loaded assumptions (no payment of externalities by the various sectors beyond a largely symbolic price for carbon, continued expectation that the private-sector cost of capital is the relevant metric, no price for security of supply).

But as I've noted repeatedly (for instance in The cost of wind, the price of wind, the value of wind, or in Wind's latest problem: it ... makes power too cheap or in Wind Lowers Prices: New Scientist), wind, as a zero-marginal cost of production source, has an additional effect on market prices, bringing them down for consumers.

Source: Economics of wind (pdf) by the European Wind Energy Association

So, either we are in a market situation, and that effect should be taken into account, or we are not, in which case the cost of capital variable should be brought back into the equation in wind's favor when calculating its long term average cost.

Renewables are not reliable?

The next argument is (as noted in the footnote of ExxonMobil's graph) that renewable energy sources are intermittent and unreliable as providers of firm production capacity. The intermittency of wind and solar is very real and obvious (although they should not be overstated - both offshore wind and solar production patterns happen to follow intra-day variations of demand quite closely; with offshore wind's capacity factor around 50% or more in the North Sea, intermittency is not an issue most of the time), but it is also something that (i) current systems know how to deal with at almost no cost, (ii) could become a problem only at very high penetrations, and (iii) will remain a problem only if our grid stays as it is and does not adapt over the next few decades as renewables increase their share of generation.

As DoDo noted in the The 3-part view of power generation, the intermittency of renewables is largely predictable, and thus no harder to deal with than the daily variations of demand - which current systems deal with, as it were, on a daily basis...thus the argument that the "cost of backup" for wind or solar is largely insignificant (adding, at most, a few % to the cost of wind)

DoDo pointed here to an interesting table:

Source: the Oil Drum

That table indicates the compatibility of different technologies with each other. Basically, gas and hydro are compatible with everything else, and can be used for peak load or balancing; most other technologies are less flexible and thus largely incompatible with each other - except, interestingly, wind with solar. What this means is that wind or solar are no harder to incorporate in a power generation system than nukes or coal, provided that you have sufficient flexible capacity in the form of hydro or gas. While this does suggest a long future for gas in the power sector (as a provider of peaking plants and daily balancing capacity) where hydro is not available, it certainly does not mean that baseload needs to be done by gas.

And what the Japanese crisis demonstrates as well is that large power plants have "intermittency" problems of their own: when they are offline, which does not require event as rare as 9.0 earthquakes (a technical problem on a power line can have the same consequence), the system may not have enough spare capacity to deal with their sudden large-scale disappearance, or have to deal with blackouts. Dispersed generation sources like renewables do not present this risk.

Renewables are too small?

The last argument is that renewables are simply not up to the task because they are too small to matter. But this is silly. That renewables were small does not mean that it will remain this way. There are no practical obstacles to building up capacity - and it has indeed happened when policies made it possible. Denmark went to 20% of its generation from wind in less than a decade in the 90s, using what was then less mature technology; Germany has gone from less than 10% of its capacity to close to 40% being renewables in less than 10 years...

The reality is that gas-fired power is the default solution for a number of bad reasons: it's a price-maker and thus a smaller financial risk, it's more profitable for private sector investors than for public sector utilities, and it's backed by large and powerful incumbent industrial companies. But inertia is not a policy.

From the second Telegraph "Windfarms kill Wales" article in two days

Wind farms kill whales: blubber on the green movement's hands - Telegraph Blogs

And, no, he doesn't think much of wind farms either:

"How can windmills be green when they require five times as much steel and concrete per unit of power produced compared to nuclear plants and when they occupy vast areas of land?"

They must be worried.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Sat Mar 19th, 2011 at 11:09:42 AM EST
Very nice article. Saved in my links -hopefully people serving me those arguments will agree to read it.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sat Mar 19th, 2011 at 11:25:00 AM EST
I guess as a related point to cost. I'd note that natural gas is a vital component in fertilizer production, plastics, and many other industrial operations.

The point being that an increase in gas prices from use for electric generation: 1) drives up the cost of fertilizer, feeding into food price hikes, 2) these food price hikes create massive social instability in lower income countries, 3) closer to home, increase in gas prices translate through to heating costs, 4) at least in North America lower income housing is often energy inefficient, so these increases have a disproportionate impact on those who have the least.

So switching electric production to gas will leave poor folks cold and hungry. Of course this is just the market driving out consumption, so when this leads to human hardship it's basically the condemnation of "nature" that these folks were not fit to live. Brilliant!

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Mar 19th, 2011 at 11:26:27 AM EST
And gasoline/petrol.
by asdf on Sat Mar 19th, 2011 at 12:03:28 PM EST
[ Parent ]

We've (OECD countries) have been through this before.  Back in the 1950s-70s, the push was to switch from coal to fuel oil/petrol.

What's not to love?  Much higher energy density, so lower transport costs. Much cheap to extract.  And remember it's supposed to be plentiful.  So everybody starts using it.

You can really see this in Spain.

Long story made short(er).  

Spain has little coal.  So the initial construction of thermal plants fired by coal made electricity expensive at the turn of the 20th century.  So the Basque industrial banks invest heavily in hydro.  Hidroelectrica Iberica and Saltos de Duero are founded, along with Hidroelectria Espanola.  In 1944 the first two merge to form Iberduero, which in turn is integrated with the latter in 1991 to form Iberdrola.  

So the explosion of hydro power in Spain means that there is little need for coal fired plants.  This covers demand into the late 1950s.  Rapid industrialization drives demand rapidly higher throughout the 1960s and 1970s. Hydro is insufficient to cover demand.  So, the new low cost clean energy source, oil, is turned to.  

Needless to say, the oil shocks played hell with prices here.  So Spain has to find something new. From the 1980s through the 1990s, there's a turn to natural gas. Cheap LNG imported from Algeria fuels this.  Gas is less fungible (LNG imports require specialized equipment, so the trade relationship is pretty fixed) so things look good.  Then in the late 1990s, there's this ongoing rise in the price of natural gas because of increasing use. (See a theme here about the long term prospects of "cheap" non-renewables?)

It's only in the late 1990s, turn of the 2000s, that Spain starts a massive windpark expansion. Wind has zero marginal costs, and drives out expensive gas and petrol fired electric production. The economics are different in Spain because of both the paucity of native coal and the production supports (no withdrawn under EU pressure) offered it.

Ok, that was relatively brief.  The lesson being that when you turn to a new "cheap" alternative that has a fixed supply, you drive up demand.  So that makes it more expensive.  Wind is different because there isn't a limited supply of wind.  High quality sites, yes. But at least were aren't facing downward production trends as consumption increases, which is the problem with using petrol or natgas for electric.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Mar 19th, 2011 at 12:42:18 PM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Sat Mar 19th, 2011 at 12:16:26 PM EST
Since they launched dK4, not a single one of my diaries has made it to the reclist...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sat Mar 19th, 2011 at 12:33:32 PM EST
[ Parent ]

Via this US DoE pdf graph

So the "plentiful"  shale gas has allowed to reduce imports by half at a time of unprecedented fall in energy demand. This is a game changer! Not...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 19th, 2011 at 12:19:51 PM EST
It's interesting that the summer trough relative to the winter peak (heating) is 60%.  Which means that there's a large underlying component of demand that can't be for heating.  I wonder if there's longer term data for this.

My suspicion is that if you luck back to the 1980s, before all the natgas fired plants got built, that the summer trough as a % of the winter peak was much lower.  The fact that so many peaking plants are natgas fired only exarcerbates this. Peak electric demand comes with AC in the summers, which means that natgas that could be stockpiled for the winter, reducing home heating prices, is burned in the summer. Dirty game here.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Mar 19th, 2011 at 12:48:27 PM EST
[ Parent ]
On the other hand, gas storage is difficult and expensive. In the UK, there was much more seasonality in production (ie production was much lower in the summer, and storage was down "in the reservoirs"), but that does not seem to be the case in the US.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sat Mar 19th, 2011 at 01:02:58 PM EST
[ Parent ]
True.  I suppose that at some lever having production capacity far above consumption is a type of storage, because the "spigot" can be turned on to affect spot prices.

Looking at the EIA data.

Residential consumption has been steady. Full sector numbers are only available since 1997, but they still tell a story.

Hmm.  I wonder what's driving up consumption and costs.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Mar 19th, 2011 at 01:27:37 PM EST
[ Parent ]
Is methane harder or easier to store than ammonia?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Mar 19th, 2011 at 05:07:08 PM EST
[ Parent ]
I was going to say "domestic hot water," but my bill says that in January we use about 350 cubic feet per day, and in July about 60. That's with gas heat, gas hot water, and a gas stove.
by asdf on Sat Mar 19th, 2011 at 01:38:29 PM EST
[ Parent ]

is probably not included in the price of gas-fired power...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 19th, 2011 at 12:22:02 PM EST
How much combined cycle natgas plant has been built recently, and how much planned? What's the capital outlay picture on this, compared to other sources? Is it as cheap to build as gas-fired peaker plant?

Wikipedia seems to have faith in gas:

Combined cycle - Wikipedia, the free encyclopedia

The turbines used in Combined Cycle Plants are commonly fuelled with natural gas , which is found in abundant reserves on every continent.[citation needed] Natural gas is becoming the fuel of choice for private investors and consumers because it is more versatile than coal or oil and can be used in 90% of energy applications.


by afew (afew(a in a circle)eurotrib_dot_com) on Sat Mar 19th, 2011 at 12:44:08 PM EST
was in the 90s:

(that's for the US)

In Europe, there's been a constant flow of new plants, with 5-10GW installed per year, and a peak last year:

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 19th, 2011 at 01:18:56 PM EST
[ Parent ]
I wasn't very clear. If natgas proponents want to replace nukes, they can't do it by rolling out just peaker plants. They need plant that can do baseload.

Is there a significant difference in capital costs between gasfired baseload and gasfired peaker? How much of the increase in gasfired that we see above is peaker?

In other words, how capable is natgas of replacing nuclear, and at what capital cost? And what are (more detailed) current trends in gasfired construction?

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Mar 20th, 2011 at 04:34:45 AM EST
[ Parent ]
the capital costs are not that different, and the costs quoted in studies like the ExxonMobil one are costs for baseload plants - ie the lowest possible for a gas-fored plant. Even if capital costs are low, it's still cheaper to allocate them on more kWh...

Gas is capable of providing full baseload, and even these plants have quite a bit of flexibility. In Europe, quite a few baseload plants have been built.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Mar 20th, 2011 at 05:55:08 AM EST
[ Parent ]
OK, so there's not much anti-gas argument to be got from that.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Mar 20th, 2011 at 06:31:01 AM EST
[ Parent ]
baseload plants need a reliable supply of gas - long term, permanent
peaker plants produce more expensive electricity

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Mar 20th, 2011 at 07:08:31 AM EST
[ Parent ]
Yes. But I was wondering if capital costs for baseload gas might be significantly higher, thus making it a less attractive proposition for quick-buck investors.

That not being the case, there are the other arguments you cite, concerning fuel supply. Baseload needs reliable, stable, long-term supply, which may not be easy to get in the volumes needed. Peaker picks up the going market price (unless too high for a profit margin to be made), which makes it expensive.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Mar 20th, 2011 at 07:19:57 AM EST
[ Parent ]
Given the low capital cost of the wind turbine upstream in the combined cycle plant, I wonder whether the design envelope lines up for the second stage to be the primary power recovery from a thermal solar system.

That seems like a strategy to reduce capital cost to be recovered from the thermal solar plant while stretching  natural gas supplies in the event that the "lets pretend that the conventional natural gas supplies are not dwindling nor in politically volatile regions" strategy does not pan out as the natural gas enthusiasts hope.

Indeed, if the capital cost of the gas turbine stage can be recuperated during the transitional period, it could be replaced by some more renewable thermal power source ~ biogas, biocoal, etc.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Mar 19th, 2011 at 05:06:01 PM EST
[ Parent ]
I do not know whether these are paid online propagandists or those who have been suckered by paid propagandists, but this is the company line via dKos:
if you want to live in a modern society then you will have to accept that we will have to do some sort of pollution to get energy.. and when it's all added up it will be a lot of pollution

coal, gas, oil and other fossil fuels are easy to figure out how they pollute.

nuclear - radioactive materials have to be stores somewhere for a few thousand years.

hydro - cannot be placed just anywhere.

solar - require the creation of solar cells that require alot of energy and pollution to create. they can also be broken easily in bad weather. On top of all of it they require batteries that are full of toxic chemicals. Requires huge tracks of land and dozens or hundreds of units to provide for a community, likely taking away from farmland or animal habitat

wind - the wind doesn't always blow. also requires huge tracks of land and dozens if not hundreds of units to provide for a community, likely taking away from farmland or animal habitat

so take your pick. if you like your modern lifestyle then stop whining about hurting the environment. if you don't care about living modern you can get a log cabin in the woods and hide from the world.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Mar 19th, 2011 at 04:55:31 PM EST
Dumb and written in poor English. But these are indeed rightwing talking points, and we will hear more of them - I predict, more and more tea-baggish. There's a very basic Invading Enemy frame there in which Greens/DFHs want to fuck up my lifestyle, and it will be from my cold, dead hand etc (we know the music). Add to it that we are still in a period of prolonged backlash from the DFH days that so deeply questioned traditional mores.

In this exchange, Migeru asked what was wrong with rightwingers, that they had to deny everything. My response was because it works. A significant constituency, especially in America but not only, is just begging to go into major denial and be fed an enemy as an excuse. Of course, behind this, there are incumbent industries that want to hold on to comfortable revenue streams as long as they can (the next thirty years would be cool), and are funding the propagandists that roll out the talking points we see repeated here.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Mar 20th, 2011 at 04:22:24 AM EST
[ Parent ]

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