Shale Shock: Natural Gas May Edge Out Coal as Nation’s Primary Power Source

This is fourth in a series on how electricity is generated. The others covered clean-coal technology, nuclear and wind power. Watch future issues for stories about renewables and other fuel sources.

Over the past decade, the North American natural gas industry has experienced a dramatic renaissance due to a combination of horizontal drilling and a shale fracturing technique called “hydraulic fracking.” With this technology, previously unrecoverable gas reserves located in shale formations deep underground are now flooding the market and it’s expected to continue for several decades.

This “shale gas revolution” promises to have a major impact on our nation’s energy future, particularly in shifting reliance from burning coal for power generation. The U.S. will overtake Russia as the world’s largest gas producer by 2015, according to International Energy Agency Chief Economist Faith Birol. She notes the resulting cheap domestic supply should lead electric utilities toward a heavier reliance on natural gas for generating power.

Given the fact that consumption of natural gas for producing electricity has increased every year since 2009, Birol’s predictions appear to be under way. The U.S. Energy Information Administration (EIA) reports that the natural gas share of U.S. electric power generation will increase from 25 percent today to 28 percent by 2035, with renewable energy’s share growing from 10 to 15 percent, and coal falling from 48 to 38 percent. However, early 2012 numbers indicated that pace may be accelerating.

When it comes to electricity, natural gas is most commonly used to fuel peaking plants—power stations that operate for brief periods during times of high electricity demand—and intermediate plants—those whose output changes daily in response to changes in electricity demand. Today, gas accounts for about 15 percent of the power produced by generation and transmission co-ops and 16 percent of all electric co-op power requirements nationwide.

Over the past two years, the relatively low price of gas combined with increasing federal and state regulation of power plant emissions have led to natural gas-fired plants being run for longer periods, while many older coal-fired baseload power plants—those providing dependable electric power year-round at a low cost—are being shut down or converted to gas operations. In fact, the U.S. Environmental Protection Agency (EPA) has proposed a New Source Performance Standards (NSPS) rule that aims to curb the release of carbon dioxide and six other greenhouse gases blamed for contributing to climate change from new fossil fuel-fired power plants. The rule could also be expanded at some point to cover existing generation. The EPA is proposing an emissions cap of 1,000 pounds of carbon dioxide per megawatt-hour—a nearly impossible standard for coal-fired power plants, which average over 1,800 pounds of carbon dioxide emissions per megawatt-hour, to achieve.

“The only way to meet it is with carbon capture and storage [CCS] technology, which is prohibitively expensive and years away from being commercially viable,” David Hudgins, member and external relations director at Old Dominion Electric Cooperative (ODEC), a generation and transmission co-op based in Glen Allen, VA, told the U.S. House Subcommittee on Energy and Environment in June 2012. “No company will take the risk to invest billions of dollars in a power plant in the hopes that CCS will be developed.”

The new standards, as outlined, will push power plants away from coal and toward natural gas baseload generation because most newer combined-cycle gas facilities produce emissions within range of the new limit. But natural gas prices are more volatile than coal, making the fuel a dicey option.

“Historically, natural gas prices have varied widely, making reliance on gas as the sole fuel to provide affordable future baseload power risky at best,” says Rae Cronmiller, environmental counsel for the National Rural Electric Cooperative Association, the trade organization representing over 900 electric co-ops in the U.S. “These risks are significantly enhanced because the cost of electricity derived from natural gas is largely driven by cost of the fuel itself. This differs from coal power, which is driven by capital costs. Also, natural gas in quantities necessary to provide year-round baseload generation is unavailable in some geographic areas.”

Despite this, utility experts believe that natural gas production will continue to increase and that the “blue flame” will surpass coal as the nation’s leading source of electric energy.

Keeping it in perspective…

Many shale formations are so large that only a limited portion has been extensively tested for its natural gas potential. The availability of large quantities of shale gas should enable the United States to produce more natural gas than it consumes for decades to come.

• According to Penn State University, Marcellus Shale—a shelf of black porous rock stretching from southwestern New York across northern and western Pennsylvania into eastern Ohio and down through West Virginia—could become the second largest natural gas field in the world, with a potential of over 500 trillion cubic feet of natural gas.
• Barnett Shale covers at least 24 counties in north Texas. It is one of the most active shale plays in the U.S., and estimated to contain nearly 26 trillion cubic feet of natural gas.
• Primarily in Louisiana and Texas, Haynesville Shale could contain as much as 251 trillion cubic feet of recoverable resources.
• Antrim Shale covering much of Michigan and Eagle Ford Shale in Texas are the latest examples of the still-emerging wealth of North American natural gas supplies.

– Angela Perez

Source – U.S. Energy Information Administration