The Conundrums of Natural Gas

Natural gas seems to invoke a win/win perspective as the solution to all problems in some discussions about energy policy and the best fuels for electricity generation and transportation.  In these scenarios, the only downside is the pressure it puts on renewable energy technologies.  Yes, natural gas is cleaner than coal.  It exhausts about half the carbon dioxide or CO2produced by coal.  It does not have a nasty byproduct called coal ash, which can have toxic consequences of its own – both environmentally and financially – as we lack good answers to disposal of its waste.

However, the natural gas supply chain of drilling, production, processing, and distribution produces leaks of methane, which is 25 times more damaging to our atmosphere than carbon dioxide.  We don’t even have a good handle on how much methane is leaking into the atmosphere today from our drilling boom, but given the propensity of leaks, spills, and explosions in existing pipeline infrastructure, its safe to extrapolate that an unhealthy amount is already contributing to our atmospheric warming.   That’s not a good thing as we just crossed the boundary of 400 parts per million (ppm) of CO2.  Are we just jumping from the frying pan into the fire in considering natural gas the answer to all our energy problems?

There are a few other caveats for consideration as we make decisions about the future of the electricity fuel mix in the USA.  First, natural gas requires an interstate/intrastate pipeline infrastructure.  Just like electricity has transmission and distribution grids, natural gas requires pipelines for transport.  Many existing pipelines are already at full capacity – particularly during peak demand periods.  Pipelines are prone to congestion points, just like highways or transmission lines.  The current costs to construct a large diameter, 120 mile pipeline in the Marcellus Shale region average around $500M.  Pipelines don’t magically appear overnight.  It can take time to engineer, secure permits, and complete construction.  How much time and money should we invest in building natural gas pipelines versus investment in more energy storage and renewables like wind and solar?  It’s an important question that needs to be answered.

A second caveat is that any fuel that is transportable is also exportable.  The funny thing about capitalism is that the laws of supply and demand dictate that where demand (price) is highest, that’s where natural gas supply will flow.  Utility executives surveyed in a recent study provided some insights into industry concerns about the stability of natural gas prices.  While a majority of them expect that their utilities will increase their use of natural gas by 2020, they are worried about its inherent price volatility.  Natural gas experiences peaks in price that correspond to demand – just like electricity.  Utilities in the Northeast learned that lesson this past winter when a winter cold snap increased increased demand for natural gas.  The outcome?  Utilities were forced to purchase at peak prices.  That’s an unwelcome risk factor for utilities planning long term energy portfolios.

Finally, consider energy security.  Natural gas pipeline infrastructure mirrors the existing electricity supply chain of centralized production, transmission and distribution.  It has the same brittle characteristics of today’s electricity grid.  Break it close to a production source or along a transmission pipeline, and potentially millions of people can be impacted at a cost of billions to the economy.  Does a focus on natural gas really deliver energy security are we merely investing in big fat targets for physical or cyber destruction?

Contrast this to domestic renewables like wind and solar.  They are intermittent sources, but energy storage technologies are advancing, and the latest round of innovations could start a trend of increasing value coupled with decreasing prices like we’ve seen with the solar industry.  Renewables will always be free, and from a price volatility perspective, you can’t find lower risk strategy for energy than that.  Renewables are also conducive to highly distributed generation – most of the 44M rooftops in the USA could hold a solar panel to produce at least some electricity.  More distributed generation offers some resiliency to the electric grid, because widely distributed sources of generation reduce the risks of catastrophic outages.

Natural gas is a fuel for electricity generation that serves as a bridge to a Smart Grid that fully integrates renewables and energy storage into the energy portfolio.  It is better (in some ways) than coal.  But keep in mind that simply transitioning from coal to natural gas is like going from heroin to methadone.  Better yes, but not by much.  You’re still using a fossil fuel that isn’t healthy for the planet, needs its own costly infrastructure buildout, exhibits significant price volatility, and is not guaranteed to remain onshore in the future.