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Unlikely Partners: Natural Gas and Renewable Energy

February 6th, 2013

OMAHA (Capstone Energy Services) – As the renewable energy movement intensifies to increase electric generation volumes using wind and solar, it is becoming increasingly clear that natural gas generation will not only be a competitor, but also a necessary ally in the movement’s success. Natural gas has been termed by some as the “bridge fuel” from coal to cleaner forms of power generation. EPA actions to reduce power plant emissions have precipitated retirement of many older inefficient coal plants and replaced by new natural gas plants. They are relatively quick and inexpensive to build, using a much cleaner fuel source. They can produce electricity almost as inexpensively as some coal fired facilities because of the current low price of wholesale natural gas. These new plants are a competitive nightmare for wind and solar facilities, many of which are having difficulty competing, even with the benefits bestowed on them by State and Federal Governments.

At the same time, it has become clear, that the success of wind and solar technologies will require the use of additional traditional generation facilities to compensate for their variability. The output of these generation facilities is subject to the availability of their energy source – wind or sun. Lost generation, when these energy sources are not available, must be replaced by other generation supplies. Unlike natural gas, there is no economically viable technology available to store electricity, making “real time” replacement of lost generation capacity a necessity. Natural gas generation meets these requirements very well. These plants have the capability to increase and decrease deliveries relatively easily, particularly in comparison to coal and nuclear facilities. In addition, new plants can be located where they can most effectively operate in conjunction with other generation resources on the system. Natural gas generation is therefore becoming not only a competitor of renewable energy but also a stabilizer.

This unlikely alliance does have its opponents. The Sierra Club and other environmental groups are steadfastly against increases in natural gas production because of the use of hydraulic fracturing technology or “fracking”, arguing that it is inherently unsafe. At least six different federal agencies and many states are evaluating the safety of this technology, which might impede its use or, at a minimum, increase regulatory oversight. Others oppose natural gas production in any form because of the amount of methane gas purportedly released directly into the atmosphere, although the cited studies are currently the subject to vigorous debate. It is unclear what effect these opposing forces will have on natural gas producers’ capability to meet the needs of the electric generation market as well as the myriad of other planned uses including industrial feedstock, transportation and liquefied natural gas (LNG) exports.

Another impediment to the success of this unlikely partnership is infrastructure. The electric power transmission system must be expanded and altered to reach and integrate the new renewable energy facilities. The natural gas pipeline system must be expanded to move new onshore shale production to all the new generation facilities. In addition, the operational protocol of pipeline systems will likely need to change in order to effectively manage the real time variability created by gas fired generators supplementing renewable generation facilities.

From a cost perspective, it is relatively clear that electricity to consumers will rise. In general, natural gas is more expensive than coal or nuclear (the two largest sources of U.S. generation capacity) and renewable generation is more expensive than natural gas. How much prices rise will not be known until the uncertainty regarding natural gas supply, the amount of renewable energy in the generation portfolio and, most importantly, the amount of operational and technological efficiency improvements that renewable generation resources can make in the next few years become more certain.

While it is not clear how fast or far the generation transformation will go, it is becoming clear that natural gas generation and renewable generation are becoming unlikely partners in maintaining the integrity of the electric grid. Hopefully those on all sides of the debates and controversies will eventually concur and facilitate a smooth transition.

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By Ed Freeman

Glossary Terms

Glossary Terms

Nominated Volume

The physical quantity of gas requested, typically in MMBtu/day, for a specific contract or for all contracts at a specific point.

Marketing Affiliate

A marketing company that has corporate ties to an interstate pipeline, an intrastate pipeline, or a local distribution company.

Energy Only Providers

Power marketers or other electricity vendors who provide and bill for only the energy component of the electricity consumed by the end-use customer.

Therm

A unit of heating value equivalent to 100,000 British thermal units (Btu).

Real Power

The component of electric power that performs work, typically measured in kilowatts (kW) or megawatts (MW)--sometimes referred to as Active Power.

Injection (Storage)

The process of delivering natural gas into a storage field for future delivery and use.

Price Ceiling

Statutory maximum lawful prices for various categories of natural gas, including gas destined for both the intrastate and interstate markets.

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Energy Delivery Chains

Energy Delivery Chains

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Energy & the Environment

Energy & the Environment

How we assist clients in responding to national environmental concerns.

  • Initiate and manage a "Green" energy procurement program
  • Evaluate national legislative and regulatory initiatives
  • Research state and local energy efficiency programs and incentives
  • Track energy use and related emissions estimate