No coal? OK, then what?

Beware the allure of liquefied natural gas

Posted by Kristina & Jason Makansi (Guest Contributor) at 9:38 AM on 09 Nov 2007

Two years ago, one of us (Jason) was at an energy industry conference planning committee and he made the point that whether or not everyone around the table agreed on global warming, the issue was just about to break out and dominate the public conversation on energy. Because of global warming, he went on to say, getting a new coal-fired power station built was just a "prudency review waiting to happen." For those of you that remember, it was, in many ways, the prudency review process that killed the nuclear industry back in the 1980s.

In the past several weeks, several announcements suggest that this situation has indeed come to pass. Here's what's going on: the Kansas Department of Health and Environment turned down a permit for 1400-MW of coal-fired power based on emissions of global warming gases. This is arguably the first time a coal plant has been denied for this reason. Let's repeat the state: Kansas. It's not California, Florida, New York,or Oregon. Kansas has historically been a coal-friendly state.

Another story revealed that even in Montana, a coal-producing state (or at least one with significant coal reserves), coal plant permits are being fought by bipartisan coalitions, and that electric utilities concede that these groups are effective. In other reports that cross our desks regularly, we note that more than 10,000 MW of coal plants recently have been canceled or postponed around the country.

No doubt many are of you are cheering! But there are trade-offs in all things -- especially in energy, environmental, and economic issues. As enthusiasm for coal wanes, it grows for nuclear, even among some that have fought tooth and nail against nuclear in the past. However, there's a problem. The fastest any nuclear plant can come online, given regulatory and financing hurdles, is around 2015. Meanwhile, electricity demand continues to grow. As much as the rewewables camp wants to believe it, solar and wind are not going to supply all or even most of the necessary power anytime soon. (We strongly believe in renewable energy, but also believe that we need energy storage to make it work on a scale that will be able to replace a significant amount of fossil fuels.) So what's going to replace coal as the dominant fuel for electricity production?

First, we believe and hope that we will see a continuing and accelerating push for demand-side management and efficiency (long-overdue, we might add), but in areas where new power plants must be built, they will probably be fired by natural gas. The U.S. is expected to be importing an increasing amount of that natural gas as LNG (liquefied natural gas) from distant countries, many of which aren't exactly our geopolitical best friends. (Countries with large natural gas reserves include Algeria, Australia, Brunei, Indonesia, Libya, Malaysia, Nigeria, Oman, Qatar, and Trinidad and Tobago.) According to the Center for Liquefied Natural Gas, LNG currently contributes about 2.8 percent of U.S. gas consumption, and DOE projections forecast it to jump to about 16 percent by 2030.

Our message here isn't that one power generating option is so much worse than another; they all have serious problems in the context of balancing supply, demand, price, and environmental impact. Rather, the message is that natural gas prices are exorbitant and expected to remain so as long as petroleum inches towards $100/barrel. The message is that electricity rates will continue to go up and the only practical means of containing the impact will be to reduce consumption. The message is that one methane molecule is equal to approximately 20 carbon dioxide molecules, and that industry experts estimate that approximately 2-10 percent of the methane used for electricity is released into the atmosphere between the well and the power plant. Finally, the terror premium inherent in the price of natural gas and petroleum affects electricity prices. When LNG is used for power generation, electricity is held hostage to the same geopolitical vagaries that destabilize petroleum markets.

Here's our humble suggestion: Add that "terror premium" and the costs of defending global shipping lanes to the price of electricity generated with LNG. Defending our shipping lanes should be of increasing concern to us all. In just the past month, there have been several pirate (yes, pirate) attacks, one in which the United States Navy intervened to help North Korean sailors. (See the BBC, Chosun, Wired, and the International Maritime Bureau.) Plus, the highest concentrations of pirate activity are around, you guessed it, some of those same countries listed above -- the ones with large natural gas supplies.

Adding the "terror premium" into the cost of importing LNG is one way that renewables, domestically sourced natural gas, nuclear plants, and even advanced coal plants (there are far better ways to use coal than those proposed by plants that are currently on the drawing board) can compete. If our electricity prices are going to be high, they might as well be high for good reasons -- support for domestic, renewable, and carbon-free sources of electricity.

For story: No coal? OK, then what?
15 Comments | Post a Comment

Not sure I agree

K&J:

I'd take issue with two points, even while agreeing with your larger conclusions.

1) You write that "electricity rates will continue to go up and the only practical means of containing the impact will be to reduce consumption".

Not true. One can also increase generation efficiency to lower carbon and energy prices even at constant consumption. Given as the electric industry today is only half as efficient as it was in 1910, there is a massive opportunity to hedge away the risk of an awful lot of future growth in consumption. Not infinite clearly, but way bigger than it gets credit for.

2) While I am not intimately familiar with the numbers, it bears noting that a strict well-to-wire calculation on LNG can be deceptive. Recall that the push for LNG that began a few decades ago was driven to a substantial degree by the volume of "stranded" gas assets that are too remote to bring to market. In many cases, these are byproducts of petroleum production and are simply flared as they occur. I do not suggest that this is 100% of the LNG supply (nor do I even know what % it is), but as I recall it is not insignificant. And even a horribly inefficient LNG fuel supply chain is better than flaring so long as the output is useful energy. (e.g., a LNG to electric chain that embodies 99% losses from the wellhead to the wire is still 1% better from a carbon perspective than simply flaring it at sea).

All that said, your larger points are well taken about the upward pressure on price and the need to conserve.

by Sean Casten at 9:48 AM on 09 Nov 2007

Yes

A) Negawatts
B) Greenwatts
C) Blackwatts

by GreyFlcn at 10:18 AM on 09 Nov 2007

Then what what?

CH4 is not as durable as as CO2. GHG has a time element. CO2 sucks big time.

I advocate CH4 power to replace coal power. The issue is not solar thermal power storage. The issue is replacing fossil fuels with solar energy. CH4 is used to heat buildings, industry, and power. The most cost effective (including storage) is low grade solar heat replacing CH4. The most cost prohibitive is solar power replacing CH4 power.

by sunflower at 10:30 AM on 09 Nov 2007

Efficiency

Sean, what is the basis for saying generation is only half as efficient today as it was in 1910? In 1910 most of the electricity was generated by low pressure boilers. Today most of the coal plants are superheated, some supercritical with thermal efficiencies well over 40%.

Aside from that, the canceled coal plants will likely be replaced by gas fired. That's about the only source that is available and has a short lead time. We'll pay for it with increased electrical rates, increased home heating costs, increased chemical costs, etc.

by KenG at 10:52 AM on 09 Nov 2007

KenG

Edison's first power plant was 6% efficient in 1880 as compared to today's 33% industry average. But Edison's plant also recovered thermal energy, such that it was 50% overall efficient. That total efficiency # increased up until 1910 when it peaked at 65% and then collapsed to today's 33%. Yes, electric-only efficiencies increased in the interim, but the total fuel burned per MWh has doubled, since we now burn additional fuel in heat-only boilers that used to be recovered from power plants.

There are some (primarily in the electric industry) who claim that this is an apples:oranges comparison, but they're full of s*&t.

Less pejoratively, overall efficiency is the only number that matters, and that's the number that's fallen in half. And as I've posted elsewhere, the fall off started precisely when we established monopoly regulation of utilities, because that was the point in time at which returns were indexed to capital investment (as opposed to lower total costs) and operating savings/overruns were all treated as pass-throughs. Ergo, the industry got a big incentive to build expensive stuff and no incentive to control opex. The collapse in efficiency is the direct result.

by Sean Casten at 12:41 PM on 09 Nov 2007
[ Parent ]

Okay, back up a step.

I advocate CH4 power to replace coal power.

And where is all this Natural Gas going to come from?

by GreyFlcn at 1:28 PM on 09 Nov 2007
[ Parent ]

What About Biomass

Natural gas is far too valuable to be burning for power, so if it is going to be used in this sense it should only be used as peak load contributor. Also NG fields can contain up to 20% CO2 which is often not included in the CO2 intensity figure. A possible contributor to dampen out some of the fluctuations in output of wind and solar is Biomass. Now im not advocating the growing of Biomass in place of food crops, but instead utilising waste from agriculture and perhaps using certain biomass crops to assist in the remediation of damaged land. i.e. the growing of oil mallee in South Western Australia to lower the water table in high salinity areas.
Offcourse as other posters have noted this will only be feasible with improvements in generation side and end use efficiency.

by ThomC at 1:45 PM on 09 Nov 2007

Ready to make nice with CH4?

Iran has a lot of gas.

No, seriously -- as Sean so eloquently points out, cogeneration doubles fuel efficiency. Gas is an excellent industrial-site power generator, very efficient, and at a fraction of the GHG impacts of coal. It is quick and scalable. A smart grid would really help.

Like oil, gas is too valuable to burn as low-grade heat (space heat et al.). Easy, low-cost and low-grade efficiency improvements can save the gas we need for an efficient car/power bridge into the future.

We heat our cities with gas. We need to ask the right questions. How do we intend to heat the cities of the future? Seriously.

by sunflower at 3:14 PM on 09 Nov 2007

Hydrogen brewing

http://technology.newscientist.com/article/dn12909-hydrog ...

A new microbe-powered device can extract up to 99% of the available hydrogen from biological compounds that have stumped previous attempts to ferment fuel from plant waste. The secret is to give the bugs a helping hand with a kick of electric charge.
In tests, the system produced hydrogen that, if fed into a hydrogen fuel cell that was 50% efficient, could generate between 1.2 and 3.4 times as much electricity as was fed into the system. By comparison, hydrogen extracted from water can only pay back about 25 to 30% of the energy used to extract it.

Texeme.Construct(function(x)=Participation(x))

by jabailo at 11:08 AM on 13 Nov 2007

Ah, LNG

Wondered when you'd get around to talking about it. Today there's a slight glut of it in the US and unlike crude oil and it's processed stuff, is lowering in price. Since U.S. benchmark prices are set at the Henry Hub in Louisiana, the LNG market isn't doing very well.

Why? Because LNG requires huge investments in special ships, loads of CO2-emitting ship travel to get it here, and then even more power (or thermal heat) to heat the stuff up for use in a pipeline, sometimes even using boilers.

I don't feel sorry for the LNG industry, although I can see they have high hopes for the future when demand outstrips what can be delivered from Canada and the Gulf of Mexico - which both have loads of natural gas right now. Suffice it to say the LNG market is upside-down for now, and was promoted not for energy diversity but because President Bush thought it was a nifty idea to trump a bunch of environmental and safety regulations.

Yep, he even hired Pat Woods from Texas to be Energy Secretary so he could get 100 LNG projects on the books. Sheesh, nice move, huh?

Need I mention thermal pollution and methane slippage? Methane is 64 times more reactive than CO2. /sammie

Onward through the fog

by Sam Wells at 11:21 AM on 13 Nov 2007

LNG

Yet another reason to be concerned about relying too heavily on LNG shipped in from overseas: http://tinyurl.com/26jtr6

On the other hand, building natural gas infrastructure has the advantage that it can probably be adapted to run on biogas in the future.

by GreenEngineer at 11:50 AM on 13 Nov 2007

LNG continued

Yes, we do agree that there is definitely room for efficiency improvements in electricity generation--even coal-fired generation. Although, we believe that managing demand and efficiency on the user side of the equation is, given the regulatory environment, easier than permitting and building new, more efficient generation capacity. As we said,

Adding the "terror premium" into the cost of importing LNG is one way that renewables, domestically sourced natural gas, nuclear plants, and even advanced coal plants (there are far better ways to use coal than those proposed by plants that are currently on the drawing board) can compete. If our electricity prices are going to be high, they might as well be high for good reasons -- support for domestic, renewable, and carbon-free sources of electricity.

And there definitely is a role for natural gas to play in the fuel mix. However, the larger point is that we should not rely on imported LNG. If our goals are to combat global warming and become more energy independent, then imported LNG is simply not the way to go.

We've now been through the cycle of exhilaration and despair over the potential of alternative energy and energy independence three times since we've been active in the industry--since 1977. Each time the engineering community gears up, the financial community ponies up, and the government looks like its going to truly support new ways of generating electricity, the price of oil goes down. We have to figure out a way to make this round of excitement sustainable--no matter which dirction the price of oil goes. While many are willing to talk about carbon taxes and carbon trading, we need to also talk about pricing in the negative externalities of defending our supply lines on a global scale. Especially as we see that our global supremacy is being challenged, and countries like China, specifically, are ascending.

As GreenEngineer pointed out with his link...

Yet another reason to be concerned about relying too heavily on LNG shipped in from overseas: http://tinyurl.com/26jtr6

...security at sea is a rising concern. For an interesting perspective on this issue, check out the article, America's Elegant Decline in the November issue of The Atlantic Monthly.

Pearl Street::Jason and Kristina Makansi Read Lights Out reviews

by Kristina & Jason Makansi at 1:00 PM on 13 Nov 2007

price of oil

oops...I mean to say:

We have to figure out a way to make this round of excitement sustainable--no matter which direction the price of oil goes.

Pearl Street::Jason and Kristina Makansi Read Lights Out reviews

by Kristina & Jason Makansi at 1:03 PM on 13 Nov 2007

Good points ... but

... I think we're already paying a terrorist tax, pirate tax, or whatever you want to call it. It ends up in the shipping insurance and in the commodities market. Maybe you would like to do more with it, but I think ship cargo insurance rates are at an all-time high. The "terror tax" on crude is probably 20 to 30 dollars a barrel. Interesting concept though. /sam

Onward through the fog

by Sam Wells at 3:26 PM on 13 Nov 2007

but...

...what we're really talking about is something like a Carbon Tax. Call it a Defense Avoidance Tax or a Defense Duty or whatever. By putting a price tag on the cost of defending lengthening supply lines--for both oil and natural gas--we're adding in the sizable externality that often seems to go unrecognized--or at least undiscussed. We understand that shippers add in a terror premium that is reflected in the insurance costs, and that traders add in a terror premium as they trade gas and oil on the international market--but, we're talking about something that is "real" and "visible" to American consumers. We're talking about quantifying the price we all pay for dependence on foreign sources of fuel and pegging that to what we pay at home and at the pump.

We use tariffs to protect all sorts of domestically-produced goods, including food, cotton, furniture, etc. Why not add a defense tariff that represents the amount we have to pay to protect our fuel supply lines--in both blood and treasure--so we can protect domestically produced fuel sources and encourage the continued development and application of alternative/renewable energy.

Generally speaking, we're not big supporters of tariffs. But, in this case, more is at stake than protecting a single industry or a single product. By exposing the true cost of our dependence on foreign sources of fuel, we can more readily see how this situation has affected us--our economic status, our relationship with other nations, and our vulnerability to changing international conditions. Plus, we can also more easily quantify how investing in domestic fuel sources, investing in R&D, investing in new ways of thinking about fuel, our relationship to our environment and to our global neighbors can affect our future.

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by Kristina & Jason Makansi at 7:34 AM on 14 Nov 2007

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