In a message dated 10/31/2013 12:01:49 A.M. Eastern Daylight Time,
deborah...@sbcglobal.net writes:
_Energy Policy Forum_ (http://energypolicyforum.org/)
____________________________________
_Coal Displacing Nat Gas…Already_
(http://energypolicyforum.org/2013/10/30/coal-displacing-nat-gas-already/)
Posted: 30 Oct 2013 10:28 AM PDT
By Deborah Lawrence Rogers
In January, 2012, the price of nat gas plunged to below $2/mcf due to
overproduction by shale operators. Such low prices did, indeed, prompt
utilities to switch from coal fired generation to natural gas fired generation
if
they had the capacity. Industry crowed that this was the shape of things to
come with electricity costs plummeting for consumers and heralding the end
of “King Coal”.
Unfortunately, as with most aspects of unconventional shale production,
this proved short lived and oversold. Glaring numbers show another picture
altogether.
Electricity generation from natural gas began to fade only months after it
had gained ground in much the same way that shale gas wells fade only
months after initial production. As gas prices moved up to trade between
$3.50-4/mcf, utilities promptly began switching back to using coal for
generation.
According to EIA (Energy Information Administration):
“During the first half of 2013…the price of natural gas delivered to
electric generators averaged $4.46 per MMBtu, 44 percent higher than the same
period last year.”
EIA continued with:
“Electric generators have been running their existing coal capacity at
higher rates so far this year in response to the increasing cost of natural
gas relative to coal.”
This is of note for several reasons.
Firstly, industry and its proponents including such entities as the Wall
Street Journal, have made fantastical comments about nat gas providing “
benefits to the poor” which will be long lived particularly with respect to
lower electricity costs for the consumer. Such benefits are already
evaporating. We do not live in Camelot regardless of industry and media hype.
Secondly, but most importantly, we can now safely assume that nat gas is
priced out of the market for electricity generation somewhere between
$3.50-4/mcf. That produces an enormous difficulty for natural gas producers in
that the break-even costs of unconventional shale wells is considerably
higher with the average probably falling around $6/mcf. Exportation of shale
gas
will drive these prices higher still creating an unfavorable climate for
natural gas as a primary source of electricity generation. That means all
those purported “benefits to the poor” are non-existent over the long term.
It also means that producers cannot keep this game going forever without
incurring significant and further losses which are already quite
considerable. Or exporting enough to make up the difference in domestic use.
But this
of course means that the U.S. will be exporting a natural resource rather
than converting those resources into finished product to be exported which
historically would provide greater economic benefit. In other words,
everything about this picture is essentially based on knee jerk corporate and
governmental policy decisions. Always a bad plan.
Utility use of nat gas ramped up in 2012 but as quickly as March, 2013,
Reuters reported:
“U.S. utilities will use more coal and less natural gas to generate power
as coal becomes cheaper and gas more expensive, electricity traders said on
Friday.”
A few months later in June 2013, a further statement by World Resources
Institute confirmed this:
“Electricity markets are very dynamic, and while there’s been a lot of
press about the success story of the benefits of natural gas, it’s important
to realize that that’s temporary and it depends on gas prices staying
really low, and we’re starting to see there are these thresholds where
utilities
will switch back to higher-carbon fuel, like coal.”
Interestingly, however, industry continued to tell a different story. In
September 2013, Lynn Lachenmyer, a senior vice president at Exxon Mobil,
told attendees in her keynote address at the Petrochemical Maritime Outlook
conference:
“[Natural gas] is penetrating into the power sector, which has been
predominantly coal in the past. We see it making tremendous inroads there.”
All present tense but in direct contrast with the actual use figures which
had swung back toward coal. In other words, increased nat gas use was
already past tense. Further, Ms. Lachenmeyer stated:
[By 2040] wind will make up just 7 percent of the world’s stockpile of
energy… and solar will make up just 2 percent. Meanwhile, oil and natural gas
will make up 60 percent of the world’s energy supply in 30 years, up from
55 percent today.”
Visions of Camelot once again.
And yet only one month prior to Ms. Lachenmeyer’s comments, the IEA
(International Energy Agency) stated in its second annual Medium-Term
Renewable
Energy Market Report:
“Power generation from hydro, wind, solar and other renewable sources
worldwide will exceed that from gas and be twice that from nuclear by 2016.”
This is an enormous discrepancy with ExxonMobil’s prognostications. In
fact, someone’s prognostications are hinting at delusions. Given that IEA’s
figures state that renewables will overtake gas in a mere three years and
thus are much closer in terms of the future, it stands to reason that the
IEA figures are probably more valid than ExxonMobil forecasts for 2040.
Even more damning are the IEA forecasts which extrapolated from the
impressive growth rate seen in 2012 within the renewable sector. For instance,
global renewable generating capacity grew more than 8% in spite of extreme
lobbying by the fossil fuel industry in countries like the U.S. which caused
a challenging investment and policy climate for the renewable industry to
say the least.
Nevertheless, according to Fuel Fix:
“In absolute terms, global renewable generation in 2012 – at 4 860 TWh –
exceeded the total estimated electricity consumption of China.”
That is an astonishing growth pattern.
But perhaps the answer to Exxon’s discrepancy lies in the comments of IEA
Executive Director Maria van der Hoeven as she presented at the Renewable
Energy Finance Forum in New York. Ms. van der Hoeven stated:
“As [renewable] costs continue to fall, renewable power sources are
increasingly standing on their own merits versus new fossil-fuel generation.”
There is no doubt that gets the attention of executive management teams in
the fossil fuel industry. Ms. van der Hoeven went on to state:
“Many renewables no longer require high economic incentives. But they do
still need long-term policies that provide a predictable and reliable market
and regulatory framework compatible with societal goals. And worldwide
subsidies for fossil fuels remain six times higher than economic incentives
for renewables.”
Renewables are, therefore, standing on their own globally in spite of an
extreme bias toward fossil fuel use. Imagine a world where those subsidy
monies were transferred to renewable generation and research and development.
That, no doubt, would be a policy exercise to be fought tooth and nail by
the fossil fuel industry.
In fact, such incredible growth in the renewable sector probably has much
to do with the extreme hyperbole, overestimation of reserves,
underestimation of costs, etc. surrounding unconventional fuels. The fossil
fuel
industry does, indeed, need to convince us that business as usual can be a
maintained. After all, they are losing market share in spite of their glowing
reports.
.
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