Rethinking the Power Industry’s Dash to Gas

During a recent meeting of state utility commissioners, the CEO of a Fortune 500 electric power company said natural gas prices promise reliability but "always break your heart." What breaks my heart is the electric power industry’s ongoing love affair with natural gas. Using natural gas for generating electricity is not the best or highest use for this clean, green, and domestically abundant resource.

Focusing on the Best Use for Natural Gas

Our energy system will always require some natural gas to be made into electrons. Today 22% of electricity is generated by natural gas. But any engineer will tell you that the most efficient and carbon friendly way to use natural gas is piping it directly into homes and businesses. Policy makers should seek to design policies that incentivize our reliable energy supplies being put to their highest and best use at reasonable costs. Direct use of natural gas does just that.

It is indisputable that for every 100 molecules of methane produced at the wellhead, more than 90 are delivered directly to the stove’s burner tops in my Virginia home. On the other hand, electrons generated from fossil fuels are less than 30% efficient. Basic physics tells you that converting energy reduces Btus. In fact, former U.S. Energy Secretary Samuel Bodman said that "burning natural gas for electric generation is like washing dishes with a good scotch."

An Abundant, Clean Energy Source

In the past decade, many electric utilities have dashed to natural gas for its flexibility and cleaner-burning properties in anticipation of a carbon cap. Natural gas is over 50% less carbon intensive than coal. Almost 90% of the U.S. power generation capacity that has been added since 1998 is natural gas – fired. Today there are more than 1,700 power plants in the U.S. that generate electricity from natural gas. According to the U.S. Energy Information Administration (EIA) 2010 Short-Term Energy Outlook, over 50% of the expected 23,475 MW of new generation capacity planned in the U.S. will be natural gas – fired additions.

There is certainly ample gas to meet our future needs. In 2008, the joint government-industry-academic Potential Gas Committee published its highest-ever estimate of domestic natural gas reserves: 2,074 trillion cubic feet (Tcf). This estimate was 35% higher than two years earlier and 77% higher than the estimate made in 1990. The committee reported that approximately 600 Tcf (29%) of the estimated 2,074 Tcf is gas produced by unlocking shale formations.

Going forward, the EIA projects that natural gas production from U.S. unconventional resources such as shale will increase 35%, or 3.2 Tcf, through 2030. Our collective goal should be to put these new supplies to their most efficient use and be mindful of overreliance on gas to generate electrons.

Growing Storage Capacity

The ability to store those new gas supplies is increasing, which lessens the need to use the fuel immediately for electric generation. The U.S. has the largest capacity for underground storage of natural gas in the world. Natural gas supply is injected and stored in more than 425 facilities across the country in geologic settings including depleted oil and gas reservoirs, aquifers, and salt caverns (bedded salt formations). Operational underground working gas storage capacity increased by about 100 billion cubic feet (Bcf) from the spring of 2008 to April 2009. In fact, the new total of more than 3.8 tcf was essentially filled prior to the 2009 – 2010 winter heating season, resulting in the largest inventory of working gas ever recorded.

A very cold start to winter in December 2009 and January 2010 attested to the value of growing storage. Utilities draw 15% to 20% of all gas consumed during the period of November to March from working gas. This flexibility is crucial to meeting heating load peak demands by local gas utility customers, and all customers for that matter.

The dash to gas has also led to concern that the infrastructure will not be adequate to handle the increasing demand. Investment in natural gas pipeline infrastructure continues to grow steadily while the industry maintains a strong record of safety. In 2008, an estimated $11.4 billion was invested to complete 84 pipeline projects, adding 44.6 Bcf per day of capacity to the pipeline grid. These figures represent a nearly threefold increase over 2007, when $4.3 billion was spent to complete 50 projects that added 14.9 Bcf per day of capacity to the network.

The Better Option: Direct Use of Natural Gas

Ample indigenous gas resources, record gas storage, and flexible and reliable pipelines all help to make the natural gas system one of the most efficient energy systems in the U.S. We should build on this system by dashing to more direct use of natural gas in homes and businesses. Gas should be a building block of a secure energy future for America — not a bridge.

—Bert Kalisch (bkalisch@apga.org) is president and CEO of the American Public Gas Association in Washington, D.C.