The United States stands at an energy crossroads. Coal-fired power plants generated about half of our electricity as recently as 2007, but are now being retired at a record rate due to age, cost, and the need to cut carbon pollution. Aging nuclear power plants, which generate about twenty percent of our electricity, are also heading towards retirement, and few new plants are being built.
What will replace them? There are two paths forward.
Two paths, different outcomes
One path moves towards a clean energy future of highly energy-efficient buildings and machines; a growth of renewable energy sources coupled with energy storage that can help meet load demand; vehicles powered by alternative fuels; and distributed power generation with a sophisticated smart grid that allows users to buy and sell electricity into the grid at opportune times. Along this path, natural gas use rises in the short term, after which it begins to taper off.
Along a second path—tempting to many power producers today—coal plants (and retiring nuclear power plants) are largely replaced with power plants that run on natural gas while efficiency and renewables continue to grow, but play a smaller, more supporting role.
Which path is better? A new UCS study entitled “The Natural Gas Gamble” confirms that, from both an economic and environmental perspective, we should head towards the clean energy future. Natural gas can contribute to that future in a limited, more balanced way, but it can also become a runaway train headed in a different direction if we are not careful.
Volatile prices and too much carbon
Natural gas prices are low right now but, like all fossil fuels, prices are volatile and likely to rise, especially if the United States starts exporting large quantities to a gas-deprived world as expected. The more dependent we become on natural gas, the more our economy will reel from price shocks such as the one that hit New England last winter during the “polar vortex” when gas prices shot up by ten to twelve times above average, saddling New England electric customers with electricity rate hikes of thirty percent.
A good way to hedge against this price volatility is to invest in renewable sources such as solar and wind that are highly predictable and can help lower the price of natural gas by reducing the demand for it. This strategy also guards against the possibility that high natural gas prices cause a temporary resurgence of coal burning.
And while natural gas-fired plants do cause less carbon pollution than coal (about half the carbon emissions), they are still large emitters; the natural gas extraction and distribution industry is the largest source of methane, a greenhouse gas 34 times more potent than CO2. A careful look at our long-term carbon budget makes it abundantly clear that we can’t reach the level of reductions we need (80 percent reduction by 2050) with a strategy that relies primarily on fuel switching from coal to gas.
The truth is, wholesale switching from coal to gas actually threatens to impede progress to a clean energy future. That’s because natural gas plants have a useful life of 30 or more years, and pipelines last 50-100 years. So, a massive build-out of new plants and new pipelines will either lock us in to a largely natural gas future, or create “stranded assets” that will make it harder to cost-effectively reduce our emissions later. And because our pool of energy investment dollars is limited, today’s investment in natural gas capacity crowds out investment in new transmission lines, energy storage, and smart grids—all of which are needed to make the clean energy future work.
A smarter role for natural gas
So how do we make sure natural gas supports, rather than impedes,that clean energy future?
The key is re-thinking its role. Rather than seeing it as an economic and global warming panacea (which it is not), natural gas can be a facilitator of clean energy.
Natural gas has at least three important roles to play: First, in the short run, existing gas plants can ramp up further to displace coal and achieve low cost, significant emission reductions. Second, new plants and pipelines can be built strategically in places where they are needed to provide back-up capacity to renewable sources, taking advantage of the fact that highly efficient gas plants can start up and shut down very quickly to complement variable solar and wind powered energy. Third, low natural gas prices (and hence electric prices), provide an “energy dividend” that makes it easier to invest in a clean energy future. In New England, for example, before last winter’s price spike, an average residential consumer’s electric bills dropped by about twenty dollars per month between 2008 and 2012, largely because of a drop in natural gas prices. This enabled states such as Massachusetts to make significant investments in energy efficiency and renewable energy, paid for largely through small charges in utility bills that were easily tolerated by consumers because of the larger price drop.
How do we make sure natural gas plays this more limited role? The ideal way is to institute carbon pricing that removes the subsidy currently given to natural gas producers that allows them to emit heat-trapping gases for free. The next best option is for the EPA is to lower carbon and methane through regulation. The EPA’s Clean Power Plan is a step in the right direction but it needs to be strengthened to encourage states to make additional investments in renewable energy and efficiency rather than relying on natural gas to meet their carbon reduction targets. Similarly, EPA has now issued a welcome proposal to limit methane emissions from natural gas wells, but this regulation needs to be amended to govern existing gas wells, not just new ones. Finally, states can help by maintaining and boosting the target levels of energy efficiency and renewable energy portfolio standards, both of which have delivered cost-effective reductions across the country.
Thinking ahead about the best ways to meet future energy needs means finding a smarter role for natural gas.