Wrestling for World Energy Dominance: Will Natural Gas “Outmuscle” Renewables?

Given the need to rapidly reduce energy-related greenhouse gas emissions, many see a role for natural gas as a proven, reliable transitional fuel that can replace coal generation relatively quickly and inexpensively. You can find Worldwatch’s extensive research on the issue here. Natural gas emits 56 percent fewer carbon dioxide emissions than coal during combustion, and gas plants are easier to turn on and off in response to demand than typical baseload plants like coal and nuclear. Natural gas can thus complement renewable production by compensating for ongoing concerns about the variability in supply.

A natural gas plant in Morro Bay, California.

Other observers, however, are less optimistic. They point out that the falling price of natural gas could also undermine renewable energy projects, even including some already under way. Although the renewables sector is growing and production costs are declining, deployment of renewables could be stifled by the low cost and fast construction time of natural gas-fired power plants. Critics of the rapid increase in natural gas production warn that the success of gas could push back large-scale implementation of renewable energy sources.

Minnesota, the fourth largest wind-producing state in the United States, after Texas, Iowa and California, is working to maintain its wind industry despite attempts by opponents to remove statewide Renewable Portfolio Standards (RPS). U.S. wind production has been expanding rapidly since 2005, but the growth in new capacity slowed in 2010. This slowdown is attributed in part to the overall lower power demand as a consequence of the economic recession but also to the low prices of the expanding natural gas industry.

The natural gas sector is booming, especially with the expansion of drilling of unconventional sources like shale gas, which uses the controversial process of hydraulic fracturing. U.S. gas production increased 10 percent from 2005–09, with most of that growth coming from shale sources.

The International Energy Agency’s World Energy Outlook, released last week and subtitled “Are we entering a golden age of gas?”, projects that gas will be second only to oil in the world’s energy consumption mix by 2035. According to the IEA, natural gas use will increase 50 percent by 2035, with 35 percent of this growth coming from unconventional sources like tight gas, coal bed methane, and shale gas.

World Primary Energy Demand by Fuel Type (IEA World Energy Outlook, 2011)

Uncertainty about the full lifecycle greenhouse gas emissions from shale gas as well as environmental concerns with the hydraulic fracturing process warrants further investigation. The process of hydraulic fracturing has been linked to water pollution due to the chemicals in the fracturing fluid, which is injected into the well holes to fracture the rock to release bubbles of gas. Several hundred chemicals may be present in fracking fluid, many of which have been linked to adverse health effects and/or cancer. Our research has shown that these problems can, but in the past have not always been, adequately addressed. Environmental assessments of individual project sites, the best available technologies – and if not applied by industry voluntarily, best-practice regulation – as well as mandatory transparency standards about the technologies and chemicals used, are key if shale gas is to play its role as a low-carbon transition fuel that environmentalists can embrace.

Regarding the climate forcing effects of natural gas, the amount of methane that escapes during the extraction process is of particular concern. Methane has a global warming potential (GWP) between 21-25 times that of carbon dioxide, meaning that per pound emitted, the impact of the heat-trapping gas is 21 times stronger for methane than for CO2. On the other hand, it only remains effective in the atmosphere for roughly 10 years, compared to CO2’s average of 100 years or more. Some lifecycle analyses demonstrate that natural gas has a larger greenhouse gas footprint than coal, although others do not.

The IEA report also indicates a strong growth in renewables, forecasting a near doubling by 2035. Yet this projected growth is optimistic, because it relies on the assumption that support for renewables within countries will remain constant. The authors acknowledge that with lowered prices and increased demand for natural gas, this support may not be maintained.

Many U.S. legislators argue that climate regulations are too costly, hamper economic growth, and raise electricity prices for consumers. But without such government support for renewables, natural gas may outcompete renewable energy, at least in the short term. This scenario would prove problematic because although natural gas is the least carbon-intensive fossil fuel, a large-scale transition to renewables will still be required to stave off global temperature increase in mean temperatures of more than 2-degree Celsius, the level climate scientists say might be the maximum warming acceptable to avoid the most devastating effects of climate change (others think the tolerable level is much lower).

In countries without RPSs or alternative mechanisms like feed-in tariffs, carbon pricing or renewable energy subsidies, cheap natural gas will likely be the energy source of choice for new generator construction. The IEA projects that average gas prices for 2015–35 will be $0.065 and $0.095 per kilowatt-hour for the United States and European Union, respectively, compared to $0.091 in the U.S. and $0.115 in Spain for wind power generation in 2008. The EU natural gas price even includes a $40 per ton carbon price assumption, which suggests that if the U.S. were to implement a carbon pricing scheme, wind could become cost competitive with gas. Without binding international agreements—and if natural gas remains as cheap as these projections indicate—some nations might cut back on renewable energy mandates or government support.

Despite the role of natural gas in the transitional energy economy, its low cost and abundance could push back the further development and employment of technologies that would foster renewable growth, such as energy storage, distributed generation, and smart grid technology.

During a recent discussion about the IEA report in Washington, D.C., IEA Executive Director Nobuo Tanaka explained that one of the factors leading to the success of natural gas is the uncertainty in climate change policy. Natural gas production is growing rapidly with the expansion of shale gas, but most renewable energy technologies still require additional support to achieve widespread market penetration. The prices of renewables technologies, such as wind turbines, are decreasing, but RPSs and other government support systems are still needed to encourage growth in the industry, at least in times where fossil fuels are still directly subsidized at $550 billion every year worldwide.

Maintaining existing supports for renewables and exploring new mechanisms like a global carbon tax would ensure a speedy transition to a sustainable economy. The “golden age” of gas should not become a stop sign on the road to renewables.

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