What to think about natural gas?

Large scale renewable energy projects are not in a great place right now. Last week I wrote about the threat posed by sections 1425 and 3001 of the House Continuing Resolution (CR) that would eliminate the loan guarantee program for renewable energy projects. But even if these sections are removed, there is a growing push away from large scale renewable energy production to gas fired power plants as primary candidates for replacing coal plants. Proponents argue that renewable energy can not grow sufficiently fast at this stage, and that there is an abundance of gas in the USA and friendly nations. Also, which is true, natural gas plants will on average emit only half as much carbon dioxide as coal plants. There is particular enthusiasm in the US for shale gas. Partly this is because of the large estimated shale gas resources in the continental US. But primarily, the excitement results from the relative ease with which shale gas has thus far been produced. This is true in particular for the Barnett shale. Excellent production numbers in the Barnett spurred intense exploration of other shales.

But, there are a couple of issues missing from most discussions, including the recent article in the New York times.  Let’s first focus on production. Shale gas is not an easy to produce fuel. Shale is a very low permeable rock. To enable production, gas flow must be stimulated, which is typically done by fracturing the shale, thus creating flow paths for the contained gas. “Fraccing” is still more an (engineering) art than a science: when designing a production process little is known about the rock properties of the deep lying reservoirs. A successful Barnett does not guarantee that similar production successes will be booked in other fields with different geologies at different depths. I believe therefore that the gas industry is over-estimating the ease with which shale gas can be explored. The other issue is political in nature. Many of the coal states also contain shale gas resources. This no doubt makes it easier for any administration to sell a shift from coal to gas, rather than from coal to renewable energy projects. And I wonder how much this political advantage plays a role.

I have no doubt that it is a good idea to replace some of the coal with gas as soon as possible. But this should not come at the detriment of investments in renewable energy projects. Wind and large scale solar are at a stage where they can be implemented, relatively fast. Costs are claimed to be too high still, but as I’ve argued often before, there is no level playing field. Hidden tax advantages for fossil fuel projects are typically not taken into account, and investment money available to the renewable energy industry is simply not as cheap as that for other energy resources. Certainly without a loan guarantee program, capital costs will be too high.

The argument is often made that we should keep investing in renewable energy projects, but need large shale gas investments now to create a bridge between a coal dominated electricity industry and one based on renewable energy production. But, it is a zero sum game, and would it not be a bit naieve to think that after huge investments in shale gas and natural gas production, the gas industry would happily phase itself out in a decade or two? I believe that this simply won’t happen: unless we prioritize renewable energy now, we’ll be living in a gas dominated USA in the future. It may give us fewer carbon emissions than coal, but its emissions is still far above zero.

2 responses to “What to think about natural gas?

  1. Excellent points about the hidden costs of natural gas. We must insist on an apples to apples comparison between fossil fuels and renewables. It’s not enough to simply take industry and government numbers for the cost of excavation and infrastructure creation and assume we have adequately analyzed the situation. In addition to accounting for the benefits realized from tax credits and other favorable and unobvious perks (transportation infrastructure built with government subsidies or tax breaks for example), the hidden costs in the damage to the environment must be factored in, job loss and creation should be considered, technological capital and wealth creation as a result of pursuing renewables – these are real considerations.

    Before we get there we must begin to shape the common ground and agree upon the criteria by which we will make our decisions. Not everyone will agree on the relative import of each factor, but identifying the factors and acknowledging that they are important and deserving attention (such as global warming and jobs) is a step in the right direction.

    Our decisions have consequences, and there is no free lunch. We will pay, either in higher utility rates, job losses, inflation, etc. if we don’t navigate the energy problems wisely. This seems clear: oil is here to stay becuase there is too much it is used for beyond just energy, but the status quo must change and we can no longer indefinitely dump CO2 into the air nor can we rip the planet apart for every ounce of fossil fuel. The cost is too dear. BDale

    • Margot Gerritsen

      I certainly agree, Bill. It is very hard to get an apples to apples comparison for any two energy resources with so many (hidden) tax breaks, subsidies, rules and regulations. For the capital intense renewable energy projects, it is even harder because so much of the cost is determined by financial structures: Is there accelerated depreciation? Will they get a loan guarantee from the government so that attractive loan structured can be negotiated with lenders?

      Thanks for your points.

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