A year ago, I wrote a two-part column in this space predicting that electric utilities would start using significantly more natural gas and less coal to generate power.
That prediction has come true.
My forecast didn’t result from any supernatural ability to see the future—it was a view shared by many industry observers looking at trends over the last two decades.
While coal has historically been the dominant fuel for generating electricity, during the past 20 years, more new natural gas power plants were built in the United States than new coal-based plants. That trend will continue, with many more natural gas power plants currently under construction and in the planning stages. The U.S. Energy Information Administration’s recently updated Energy Outlook study says that by the year 2035, natural gas will produce about 28 percent of the nation’s electricity.
According to that EIA study, the recent trends do not involve new natural gas plants replacing old coal power plants. Many of the new natural gas power plants are in addition to other power sources. Although some older, inefficient coal plants will be shut down, newer high-tech coal plants will continue to generate electricity.
Renewable energy on the rise
Natural gas appears to have two advantages over coal these days. Using natural gas to generate electricity releases fewer unwanted emissions than coal, and the price of natural gas is very low today.
While the mix of fuel sources changes, people’s expectations remain the same: people want a steady supply of electricity. In households and businesses, people want the lights, computers, appliances, and TVs to come on and stay on when they flip the switch. To meet that demand, utilities must look beyond a power plant’s fuel and think about how the power plant operates.
More electricity is beginning to flow into the power grid from on-and-off renewable sources such as wind and solar. The EIA’s Energy Outlook predicts that by the year 2035, renewable energy will produce 15 percent of the nation’s electricity. The amount of electricity these renewable resources can produce at any particular minute of any particular day could be far lower, even zero, a problem electric utilities expect natural gas can help solve.
At a recent National Rural Electric Cooperative Association meeting in Washington, D.C., Dave Mohre, executive director of NRECA’s Energy and Power Division, talked about a key feature of today’s constantly improving natural gas technology.
“One new kind of gas-based power plant can go from a cold start to producing its maximum amount of electricity in only 75 minutes,” Mohre says. “It is also highly efficient and easily adjustable. If it is already operating, it can go from half output to full output in only 10 minutes.”
Natural gas cost concerns
Flexibility is very important to utilities. As clouds approach a large solar array, or the wind dies over a field of wind turbines, an electric utility with an adjustable natural gas power plant can boost its electricity production rapidly to make up for what will soon be lost from the solar or wind source.
Electric utility managers are concerned that increasing the use of natural gas throughout the entire nation might not go as smoothly as expected. Trying to figure out how many natural gas power plants to add to the electric power supply system, and how quickly to do so, involves a lot of variables.
Calculating the cost of natural gas is complicated. Over the long term, the price of natural gas tends to change more quickly and more frequently than the price of coal. As more natural gas supplies are found and more utilities want to use this fuel, new pipelines and new storage areas must be built, which is likely to push natural gas prices higher. Also under consideration is the possibility that a mismatch in timing may cause a newly completed natural gas power plant to sit idle until a new pipeline reaches that location.
New environmental restrictions could also affect the price for natural gas. A major new source of domestic natural gas supplies depends on the use of a new production method called hydraulic fracturing, or “fracking.” Restrictions on this technology and court rulings about what the Environmental Protection Agency can and cannot do to regulate many different kinds of emissions at power plants may add new restrictions to the use of natural gas. That could add another layer of new costs and complications to future natural gas construction projects.
THE UP AND DOWN HISTORY OF NATUAL GAS REGULATION
Natural gas supplies within the United States were very tight during the harsh winter of 1977. Deciding which part of that supply should be used for home heating or for industry or to generate electricity was a tough call. Congress passed the Natural Gas Policy Act of 1978, as well as the Powerplant and Industrial Fuel Use Act, restricting the use of natural gas to make sure residential customers would have enough natural gas to heat their homes. Congress repealed most sections of those old laws in 1987, allowing utilities to once again build new power plants fueled by natural gas.