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Natural Gas Generation


  • [ GWh of Electricity Added: ]

    733K
  • [ Jobs Impact: ]

    • Low
    • Medium
    • High
  • [ Budget Impact:]

    • Low
    • Medium
    • High
  • [ Conventional Pollutants Reduced: ]

    SO2
    96,145 tons
    NOx
    68,027 tons
    Hg
    1.29 tons
    PM
    14,739 tons
  • [ Megatons of GHG Reduced: ]

    367

Overview

The shale gas boom in the United States has spurred utilities to switch power generation from coal to less expensive and cleaner natural gas. As a result, coal generation has fallen 14% off its average between 2000-2009.1 While estimates vary, evidence suggests the U.S. has sufficient natural gas resources to meet its needs for decades to come.2 As a result, the Energy Information Administration (EIA) now estimates that coal generation capacity will fall from 318 GW to 278 GW by 2040.3 Nevertheless, substantial coal capacity could remain online, so federal policy should be designed to ensure a continued move towards natural gas and the benefits it provides.

Analysis

A single GWh of natural gas generation emits roughly 55% less CO2 than a GWh of coal generation.4 Also, natural gas emits no mercury, whereas coal is the highest mercury emitting generation technology.5 In addition to the cost savings6 and public health benefits of switching away from coal, natural gas has created thousands of direct high-paying jobs and raised land values in many economically depressed regions of the country.7 It has even reduced carbon emissions enough that the U.S. is now compliant with the Kyoto Protocol targets.8

Despite its low cost and environmental benefits, market-led conversions to natural gas may be nearing their end.9 Though there is ample supply, analysts predict the price of natural gas will increase, reducing its economic advantage over coal.10 And demand may plateau, as the least efficient coal plants are all shuttered and the remaining coal fleet continues servicing customers.

Government action could change that. If new EPA power plant standards are put into place, 733,000 GWh could switch from coal to natural gas.11 This would eliminate approximately 367 megatons of greenhouse gas emissions every year.12 This is like removing about 23% of the coal plants in the U.S.13 It would further remove roughly 96,000 tons of SO2, 68,000 tons of NOx, 1.29 tons of mercury, and 14,000 tons of particulate matter.14

Implementation

To sustain the trend of fuel switching, the federal government should implement measured policies that set standards and assist industry in its adjustment and compliance to the new rules.

Implement Balanced Emissions Standards for Existing Power Plants

As part of President Obama’s new initiative towards reducing U.S. greenhouse gases, EPA will expeditiously pursue a New Source Performance Standard (NSPS) for CO2 emissions from existing power plants.15 By enacting a balanced approach to rein in existing power plant emissions, EPA can ensure little disruption to economic growth and electricity supply thanks in large part to the natural gas generation that will take the place of coal. There are a number of options currently proposed by the NGO and business community.16 EPA should consider all approaches, but ultimately choose one that provides flexibility to utilities and defines emissions targets for states that are based on its existing generation mix to allow a gradual decrease in highest emitting plants. At the same time, steps should be taken to evaluate and consider the existing generation mix of utilities so as to not unduly penalize those who have already taken steps under state clean air regimes or due to a business interest.

Assist Utilities in New Standard Compliance

The federal government should form a public-private, multidisciplinary working group to develop a strategy to assist utilities transitioning from coal to alternatives. The Clean Air Act allows the EPA to regulate carbon dioxide from existing electric plants.17 But while cost may be considered, undue burden on industry may not prohibit regulation.18 Thus far, Congress has been unable to find a suitable compromise. Through this new working group, engagement with electric utilities adversely affected by EPA’s carbon-focused standards should help ease the transition from legacy coal plants to new generation. Methods to assist utilities could include revolving loans, loan guarantees, outright grants, or some other financing method to put the full faith and credit of the U.S. government behind the public interest in transitioning to cleaner energy.

Create a Job Retraining Program for Coal Workers

The federal government should facilitate the retraining of America’s coal plant workers and miners for new economic opportunities. As the electricity market moves towards natural gas, renewables, and other advanced generation technologies, the coal industry will inevitably shed jobs. The number of coal industry workers has already dropped from about 176,000 in 198319 to roughly 83,000 today.20 The Department of Labor’s National Emergency Grants21 have been used to aid displaced coal miners and has had success in retraining former coal workers,22 but the impact has been limited by the modest allocation made thus far. Building out a program similar in scope, but using a sustained, proactive approach and supported with consistent additional funding, would help reorient coal labor to the new market realities.

EndNotes
  1. Based on data released in the Energy Information Administration’s February 2013 Short-Term Energy and Summer Fuels Outlook. See United States, Department of Energy, Energy Information Administration, “Short-Term Energy and Summer Fuels Outlook,” Report, February 12, 2013. Accessed February 14, 2013. Available at: http://www.eia.gov/forecasts/steo/.
  2. The Energy Information Administration fluctuates in its estimations of how much natural gas is available, but has estimated that the U.S. has access to as much as 827 Tcf (trillion cubic feet) of natural gas, or about 38 years of average use. Other groups have estimated more than 100 years’ worth of resources. For example, the Potential Gas Committee estimates that there is nearly 2,170 Tcf of recoverable natural gas in the United States. These projections do not include the potential resources in methane hydrates found on the ocean floor. See United States, Department of Energy, Energy Information Administration, “Annual Energy Outlook 2012,” Report, p.57, June 25, 2012. Accessed February 14, 2013. Available at: http://www.eia.gov/forecasts/archive/aeo12/index.cfm; See also “Natural Gas Resource Assessment,” Report, Potential Gas Committee, Colorado School of Mines, April, 2011. Print; See also United States, Department of Energy, National Energy Technology Laboratory, “Energy Resource Potential of Methane Hydrate,” Report, February, 2011. Accessed March 4, 2013. Available at: http://www.netl.doe.gov/technologies/oil-gas/publications/Hydrates/2011Reports/MH_Primer2011.pdf.
  3. United States, Department of Energy, Energy Information Administration, “AEO2013 Early Release Overview,” Report, p.12, 2013. Accessed March 4, 2013. Available at: http://www.eia.gov/forecasts/aeo/er/pdf/0383er(2013).pdf.
  4. United States, Department of Energy, Energy Information Administration, “How Much Carbon Dioxide (CO2¬) Is Produced Per Kilowatt-Hour When Generating Electricity With Fossil Fuels?” February 22, 2012. Accessed July 2, 2012. Available at: http://www.eia.gov/tools/faqs/faq.cfm?id=74&t=11.
  5. Elizabeth Pacyna, Jozef Pacyna, Frits Steenhuisan, and Simon Wilson, “Global Anthropogenic Mercury Emission Inventory for 2000,” Article, Atmospheric Environment, Vol. 40, Issue 22, July 2006, pp. 4048-4063. Accessed March 4, 2013. Available at: http://www.sciencedirect.com/science/article/pii/S135223100600313X.
  6. Based on analysis of EIA data. In April 2012, U.S. electric utilities spent $3.10 for 1MMBtu of natural gas and $2.49 for 1mmbtu of coal. However, EIA also states that a combined cycle natural gas plant only requires 7,619 Btu to generate 1 kilowatt hour of electricity, while a coal-fired steam turbine requires 10,142 Btu to generate 1 kilowatt hour. Calculations based on this data show natural gas is 33% more efficient than coal, so comparing coal and natural gas for electric generation means that coal must add a 33% premium to its price. Adding this premium results in a price of $3.31 for an amount of coal that will generate as much electricity as $3.10 worth of natural gas. EIA’s price data is available in the “Receipts and Cost of Fossil Fuels for the Electric Power Industry by Sector, Btus” spreadsheet. See United States, Department of Energy, Energy Information Administration, “Receipts and Cost of Fossil Fuels for the Electric Power Industry by Sector, Btus,” August 24, 2012. Accessed September 19, 2012. Available at: http://www.eia.gov/electricity/monthly/index.cfm; See also United States, Department of Energy, Energy Information Administration, “Average Heat Rates by Prime Mover and Energy Source, 2011,” Annual Electric Generator Report, Table 8.2, January 30, 2013. Accessed April 14, 2013. Available at: http://www.eia.gov/electricity/annual/.
  7. Mohsen Bonakdarpour, Bob Flanagan, Chris Holling, and John W. Larson, “The Economic and Employment Contributions of Shale Gas in the United States,” Report, IHS Global Insight (USA) Inc., December 2011, pp.1-2. Accessed July 2, 2012. Available at: http://www.ihs.com/images/Shale_Gas_Economic_Impact_mar2012.pdf.
  8. While the U.S. never ratified the Kyoto Protocol and its targets are not legally binding, it provides a benchmark by which to compare emissions reductions occurring from fuel switching. See United States, Department of Energy, Energy Information Agency, “Table 12.1: Carbon Dioxide Emissions from Energy Consumption by Source,” Monthly Energy Review 2012, August 29, 2012. Accessed September 19, 2012. Available at: http://www.eia.gov/totalenergy/data/monthly/pdf/sec12_3.pdf.
  9. Data released by EIA in March 2013 showed coal consumption was on the rise towards the end of 2012, and a report in April 2013 showed natural gas generation was down from 2012. See United States, Department of Energy, Energy Information Administration, “Monthly Energy Review,” Report, Table 6.2, March 27, 2013. Accessed April 11, 2013. Available at: http://www.eia.gov/totalenergy/data/monthly/index.cfm?src=email#coal; See also United States, Department of Energy, Energy Information Administration, “Year-to-date Natural Gas Use for Electric Power Generation is Down from 2012,” Report, April 11, 2013. Accessed April 11, 2013. Available at: http://www.eia.gov/todayinenergy/detail.cfm?id=10771#.
  10. Analysts from both the government and private sectors all appear to agree that the price of natural gas will climb. For example, Goldman Sachs suggested the average price of natural gas in 2013 would climb to $4.00. Meanwhile, EIA predicted a rise to an average of $3.74. See “Goldman Sees Higher Natural Gas Prices in 2013,” Article, Moneynews, April 12, 2012. Accessed April 11, 2013. Available at: http://www.moneynews.com/Markets/Goldman-Natural-Gas-Prices/2012/04/12/id/435615; See also Erich Schwartzel, “U.S. Report Predicts Rising Natural Gas Prices in 2013-14,” Article, Pittsburgh Post-Gazette, January 9, 2013. Accessed April 11, 2013. Available at: http://www.post-gazette.com/stories/business/news/us-report-predicts-rising-natural-gas-prices-in-2013-14-669602/.
  11. Analysis on NRDC’s plan to regulate carbon emissions from existing power plants and EIA data. Note, this analysis uses more recent data for generation than NRDC in order to establish a baseline more consistent with today’s energy mix. See “Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Creating Clean Energy Jobs, Improving Americans’ Health, and Curbing Climate Change,” Report, Natural Resources Defense Council, December, 2012. Accessed April 1, 2013. Available at: http://www.nrdc.org/air/pollution-standards/files/pollution-standards-IB.pdf.
  12. Based on peer-reviewed analysis of GHG output by energy source. While U.S. natural gas plants have a capacity factor of 42%, this is largely due to their use as a peaking option. However, if used as a baseload option, natural gas is estimated to have a capacity factor of 87%. This is the figure used for PowerBook’s analysis of switching from coal to natural gas. Note that for the purposes of this analysis, we assumed that new source performance standards go into effect in 2017. See Benjamin Sovacool, “Valuing Greenhouse Gas Emissions from Nuclear Power: A Critical Survey,” Article, Energy Policy, June 2, 2008, p. 2950. Print; See also United States, Department of Energy, Energy Information Administration, “Levelized Cost of New Generation Resources in the Annual Energy Outlook 2012,” July 12, 2012. Accessed March 4, 2013. Available at: http://www.eia.gov/forecasts/aeo/electricity_generation.cfm.
  13. Ibid
  14. For the purpose of analysis in the PowerBook, the average coal plant size is assumed to be 550 MW when burning subcritical bituminous pulverized coal. See, e.g., United States, Department of Energy, National Energy Technology Laboratory, “Subcritical Pulverized Bituminous Coal Plant,” Report. Accessed March 4, 2013. Available at: http://www.netl.doe.gov/KMD/cds/disk50/PC%20Plant%20Case_Subcritical_051507.pdf.
  15. United States, The Executive Office of the President, “The President’s Climate Action Plan,” Report, p. 6, June 2013. Accessed June 26, 2013. Available at: http://www.scribd.com/doc/149894606/Barack-Obama-s-Climate-Action-Plan.
  16. “Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Creating Clean Energy Jobs, Improving Americans’ Health, and Curbing Climate Change.”; See also Bob Wyman and Stacey VanBelleghem, “CAA §111(d) GHG Program,” Report, National Climate Coalition, April 2013, Print.
  17. 42 USC Sec., 7411. Accessed April 1, 2013. Available at: http://www.law.cornell.edu/uscode/text/42/7411.
  18. United States, Environmental Protection Agency, “Background on Establishing New Source Performance Standards (NSPS) Under the Clean Air Act,” Report. Accessed April 11, 2013. Available at: http://epa.gov/carbonpollutionstandard/pdfs/111background.pdf.
  19. United States, Department of Energy, Energy Information Agency, “Coal Production in the United States – An Historical Overview,” Report, p.8, October, 2006. Accessed April 11, 2013. Available at: http://www.eia.gov/cneaf/coal/page/coal_production_review.pdf
  20. Ken Ward, Jr., “W.Va. Coal Loses About 900 Jobs,” Article, The Charleston Gazette, November 6, 2012. Accessed April 11, 2013. Available at: http://wvgazette.com/Business/201211060040.
  21. For example, the Department of Labor issued a grant for $5.2 million for eastern Kentucky. See United States, Department of Labor, “US Department of Labor Announces $5.2 Million Grant to Assist Eastern Kentucky Coal Miners, Spouses Affected by Layoffs,” Release, March 4, 2013. Accessed April 11, 2013. Available at: http://www.dol.gov/opa/media/press/eta/ETA20130361.htm.
  22. See http://www.doleta.gov/NEG/.