Skip to content

Putting our national head through a natural gas noose

Mr. Obama’s administration, true to his campaign threat, is aggressively shutting down the coal industry.  Virtually no new coal-fired power plants are being ordered or built in the United States.  When coal-fired electric power plants are retired at the end of their design life, they’re pretty much all being replaced with natural gas-fired generation.

America has four primary sources of electric generation, coal, nuclear, hydro power and natural gas.  Note the graph below from the Energy Information Administration that the contributions of nuclear and hydro have remained about the same while coal and natural gas are trending in opposite directions — less coal, more gas.

The problem with doing this over the long haul is twofold. First, it’s reducing our fuel diversity for electric generation. Utilities diversify their fuel mix for the same reason mutual funds diversify their investments. Smart people don’t put all their eggs in one basket. Fuel diversity prevents a disruption in one sector of the energy industry from ruining their ability to keep the lights on. If the nation becomes overly dependent on natural gas, something like a hurricane in the Gulf of Mexico can disrupt supplies. Once the national utility infrastructure is built for natural gas, a supply disruption will literally put out your lights. Power plants built to run on natural gas can no more revert to coal than your automobile could.

The second problem with reliance on natural has is that the market is setting itself up for a catastrophic price bubble. Due to the effects of hydraulic fracturing, the supplies of natural gas are extremely high right now. This means the price of gas has crashed. In fact, gas is so cheap that gas drillers such as Chesapeake Energy have written off proven gas fields because it’s no longer economical to recover the gas. Gas is so cheap that your power bill has stayed the same even as super-cheap coal has been replaced with gas generation.

But this state of affairs will not last.  Forces are at work right now which will eventually turn the price of gas from a crash to a skyrocket.  There is serious and growing concern about the environmental effects of the drilling industry’s extraction methods.  It’s alleged that these methods contaminate ground water supplies.  The EPA, no friend of American energy suppliers, will eventually intensify regulation, placing some areas off limits and driving up the cost of drilling and extracting gas.  When that happens, your power bill — which contains a fuel cost partly reflecting the price of natural gas — will rise along with it.  The more your utility uses gas, the bigger will be the effect of the price bump.  In central Florida where I live, power generation is poised to shift to around 80 percent gas-fired within the next three or four years.

Now to make things worse, the Nuclear Regulatory Commission has announced it’s suspending new licenses for nuclear plants.  This will affect not only plants that have requested construction licenses, but may also affect existing plants that have requested extensions for their operating licenses.  If the NRC digs in on this issue, several nuclear plants across the country may be shuttered.  And these would have to be replaced with natural gas generation because coal generation is no option, hydro power is all tapped out, and the so-called “renewables” sector (see graph above) simply cannot carry the freight.

As things stand right now, America’s fuel diversity is already tilted too far away from coal and toward natural gas.  As this trend continues, the threat to the reliability of our electric grid and the stability of power pricing will only grow.


Post a Comment

Your email is never published nor shared. Required fields are marked *