Natural gas is energy’s new king — but how long will it reign? California may offer some clues
Natural gas has overtaken coal as the nation’s No. 1 source of electricity and the gap appears to be getting wider each year.
-Even in California, natural gas is at the top. Why has it grown so quickly? Hydraulic fracturing (fracking) and horizontal drilling techniques have made natural gas abundant, which has driven down its price.
-The costs of renewable energy sources like wind and solar are dropping too and in an ironic twist, adding renewables to the grid often requires natural gas to “fill in the gaps.”
-But natural gas faces headwinds — from environmental groups and a growing school of thought there’s a glut of natural gas in California’s power system.
-A number of energy companies like San Diego’s Sempra see shipments around the world of liquefied natural gas (LNG) as a big money-maker.
Natural gas is now the nation’s leading source of electricity. It is abundant and cheap, which has not only crippled the coal industry but has also impacted virtually every other source of power that makes up the energy grid.
Some have estimated there is enough natural gas in the U.S. to meet the country’s energy needs for about 200 years.
But “King Gas” has its critics — especially among environmentalists — and California’s fast-changing energy landscape offers hints that a long, smooth reign for natural gas is far from assured.
The nat gas revolution
As late as 1986, natural gas made up just 10 percent share of the country’s power. By 2016, that figure leaped to 34 percent, supplanting coal as the No. 1 source of electricity. The U.S. Energy Information Administration last week projected the nation’s use of electricity from gas will exceed coal by 6 percent by next year.
What changed?
The combination of hydraulic fracturing (fracking) and horizontal drilling techniques in shale formations such as the Barnett in Texas and the Marcellus Shale in Pennsylvania and parts of Ohio and West Virginia allowed producers to unlock vast amounts of natural gas.
Just a few years ago, the U.S. had to import natural gas from other countries to meet its needs. Today, there is so much the equation has been turned around: American producers now export natural gas to places like Mexico.
Burgeoning supplies caused the price of natural gas to drop. At some periods between 2003 and 2008, the price approached $14 per million BTUs. Since the fracking boom, prices averaged less than $3.20 between 2012 and 2016.
Despite the recent deep freeze in large parts of the country, the price on the natural gas futures market remained below $3 per million BTUs.
Low prices, combined with the flexibility afforded by natural gas — combined-cycle gas plants have the ability to “ramp up” power very quickly — makes it very attractive to utilities.
In addition, natural gas burns twice as cleanly as coal.
“The biggest, most disruptive innovation in the energy sector in the last 30 years is unconventional natural gas,” said Frank Wolak, professor of economics and an energy expert at Stanford University. “There is no doubt that if that innovation had not occurred, we would be burning even more coal and coal would probably be an even greater share of the U.S. electricity mix than it was even in, say, 2000, before the shale gas boom.”
A ripple effect on other energy sources
Even major oil companies are focusing more on natural gas. For example, of the 16 new projects BP plans to complete by 2021, 12 of them involve natural gas instead of oil.
Diesel is also feeling the impact. An increasing number of city governments have transitioned their fleet of metropolitan vehicles, such as buses, from diesel to natural gas. In San Diego, diesel-powered garbage trucks are in the process of being replaced by trucks running on compressed natural gas.
Low natural gas prices have delivered a body blow to nuclear power, eating into their revenues. An analysis by Bloomberg New Energy Finance said more than half the reactors in the country are losing money.
The San Onofre Nuclear Generating Station shut down in January 2012 and the sole nuclear plant left in California, Diablo Canyon, is slated to begin to closing its doors in 2024.
It appears nuclear’s losses equals gains for natural gas.
When San Onofre closed, the percentage of natural gas as a percentage of California’s in-state generation ballooned from 45.4 percent in 2011 to 61.1 percent in 2012, according to figures from the California Energy Commission (CEC).
The renewables/nat gas rivalry
But the price of renewable energy sources such as solar and wind is falling, too.
And lower costs plus aggressive mandates from state policymakers have resulted in California becoming a leader in integrating renewables into the state’s power mix.
In the CEC’s most recent figures, the percentage of in-state generation from renewables reached 27.9 percent in 2016 — nearly twice as much generated in 2009.
No other single energy source in California other than renewables can rival natural gas.
But in a world where the push-pull between fossil fuels and renewables is often just as polarized as the current political climate, an irony has played out: Growth in wind and solar is often linked to, not separate from, growth in natural gas.
That’s because wind and solar have problems with intermittency — that is, solar production slips when the sun doesn’t shine and electricity generated by wind wanes when breezes don’t blow.
Supplies of natural gas smooth out the gaps.
Mark Zoback, director of the Natural Gas Initiative at Stanford University, said the relationship between renewables and natural gas is not an either/or proposition.
“They’re naturally complementary,” Zoback said. “When you have a lot of renewables, if the sun is really shining, which is mostly in the afternoon, or the wind is really blowing, which is mostly at night, you can cycle the natural gas plants to compensate for what the renewables are or are not doing.”
Zoback said the long-term future of energy will belong to renewable sources but they’re not there yet and abundant supplies of natural gas will help foster the transition.
The opposition
Environmental groups, which consider fracking anathema, are uniformly opposed to natural gas.
While cleaner than coal, natural gas is nonetheless a fossil fuel that emits greenhouse gases. Natural gas is mostly made up of methane and there are concerns about leaks because methane, if released into the atmosphere, is about 30 times more potent than CO2.
Many green green groups consider every new gas well as a roadblock in the path toward an energy future powered completely by renewables.
