Natural Gas Use in Power Generation

Natural gas is a premium fossil fuel that is easily transported, can be used in many applications, often is the least expensive option from a capital investment viewpoint, and burns with low levels of emissions. Of the fossil fuels, natural gas releases the lowest quantity of carbon dioxide per million Btu of energy consumed. For these reasons, natural gas has become a popular choice among the residential, commercial, industrial, and electricity generation sectors and is also becoming increasingly popular in compressed natural gas vehicles.

With this popularity have come serious supply and demand issues. In 2002, approximately 24 quadrillion Btu of natural gas were consumed in the United States [1]. Of this, approximately 36, 25, 23, and 16% were consumed by the industrial, electric power, residential, and commercial sectors, respectively. Natural gas consumption is projected to increase to ~35 quadrillion Btu, with electric power generation being responsible for much of the increase. This is a concern, because supply is currently not keeping pace with demand as natural gas imports are increasing, prices are volatile, and shortages are occurring during periods of extreme weather.

Natural gas prices are increasing as demand exceeds supply, with electric power generation causing much of the current market strain. Over the past 4 years, new gas-fired plants generating about 200,000 MW have been built, significantly increasing demand for natural gas and affecting natural gas prices [16]. The supply of natural gas is limited, not only by production but also by distribution. The infrastructure to deliver natural gas is not expected to keep pace with demand [17]. Economic concerns, regulatory hurdles, and capital budget constraints are inhibiting proper development of the delivery infrastructure.

The natural gas crisis impacts all sectors that utilize gas; however, the crisis becomes especially newsworthy when residential and industrial users are severely impacted. In the recent past (i.e., beginning with the winter of 2000/2001), natural gas price spikes and their impact on the residential and industrial sectors have received much attention, including interest from politicians. Natural gas prices have been rising for the past 5 years, beginning in January 1999, with spikes being observed during three of the last four winters (i.e., winters of 2000/2001, 2002/2003, and 2003/2004). Winter heating bills tracked by the Energy Information Administration (EIA) showed that the average price of natural gas for residential consumers was $9.53, $7.38, and $8.39 per 1000 cubic feet for the winters of 2000/2001, 2001/2002, and 2002/2003, respectively [18]. The EIA estimated the average natural gas price during the winter of 2003/2004 to be $9.57 per 1000 cubic feet [18]. The cold weather that hit the northeast United States in January 2004 resulted in warnings to the public to conserve energy and to prepare for rolling blackouts because natural-gas-fired power plants were shutting down due to insufficient gas supply.

Industrial consumers, including chemical, fertilizer, and other process industries that use natural gas as a feedstock, are complaining that the high prices are making their products noncompetitive in international markets, thereby aggravating the economic downturn the United States was experiencing in 2003 [16]. This prompted U.S. DOE Secretary Spencer Abraham to write a letter to 30 senators in June 2003 calling for, among other steps, electric utilities to switch from natural gas to coal and other energy sources. Many industrial users, such as the chemical industry, are supporting any energy aid program or initiative, such as switching power plants away from natural gas, that takes away the non-industrial demand for natural gas—be it coal, nuclear, renewables, or conservation [19]. There have been discussions regarding building natural gas supplies, but these have a horizon of at least 10 years, which is too long for the chemical industry.

The natural gas crisis is being closely scrutinized by the U.S. Congress. House Speaker Dennis Hastert (Republican, Illinois) chaired a Task Force for Affordable Natural Gas and planned a series of fact-finding meetings in August and September 2003. The Task Force was charged with identifying the causes of the natural gas shortage, the impact of natural gas prices on the American economy, and short- and long-term plans to encourage a stable supply of natural gas to ease prices. U.S. Congressman John Peterson (Republican, Pennsylvania), who was one of 18 members appointed to the Task Force, held the first public field meeting at Penn State's University Park campus in August 2003 which brought in numerous witnesses from across Pennsylvania. A recurring theme throughout the testimony was the ever-increasing natural gas prices being experienced by homeowners, businesses, and others. Testimony ranged from homeowners on a fixed budget who could not afford their home heating bills to businesses such as a local hospital that upgraded an old and inefficient heating/cooling system to a natural gas system only to find that their natural gas bills nearly doubled from 1999 to 2003 [20]. A sobering testimony was provided by representatives of Columbia Gas of Pennsylvania, who stated that natural gas demand is growing faster than natural gas production, so consumers should expect higher prices as well as greater price volatility [21]. Solutions to the problem included opening areas closed to exploration and production, pipeline construction, increasing storage capacity (i.e., storing natural gas underground during the summer for use in the winter months), increasing conservation efforts, and providing assistance to lower income households. Congress is currently deciding on a course of action to address the natural gas crisis.

A balanced approach to new power generation is needed. Natural gas is a premium fuel, and its use in base-loaded power generation needs to be questioned. Coal, with its abundance and stable prices, should be a fuel of choice for new power generation plants. Coal technologies are becoming more environmentally sound and, as discussed in Chapter 7, will be making even greater strides in efficiency and pollutant reduction in the future.

Natural Gas Price ($/MM Btu)

FIGURE 8-5. Comparison of coal technologies with natural gas combined cycle power plant for various natural gas prices. (From DOE, Coal Technologies Are Cost Competitive, Federal Energy Technology Center, U.S. Department of Energy, Washington, D.C., www.fetc.doe.gov/coalpower/powersystems/images/costcomp.jpg, accessed December 13, 2001.)

Natural Gas Price ($/MM Btu)

FIGURE 8-5. Comparison of coal technologies with natural gas combined cycle power plant for various natural gas prices. (From DOE, Coal Technologies Are Cost Competitive, Federal Energy Technology Center, U.S. Department of Energy, Washington, D.C., www.fetc.doe.gov/coalpower/powersystems/images/costcomp.jpg, accessed December 13, 2001.)

Coal technologies are cost competitive with natural gas (see Figure 8-5) and need to be seriously considered in lieu of natural-gas-fired power plants. A sound energy policy with the goal of energy security mandates this.

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