Overreliance on Natural Gas: Risky for the Climate and the Economy

February 3, 2014
Steve Clemmer
Director of Energy Research & Analysis

In last week’s State of the Union (SOTU) address, President Obama reiterated his support for climate science by unequivocally stating “The debate is settled. Climate change is a fact.” He also should be commended for highlighting the urgency of the problem as local communities are already experiencing damaging and costly climate impacts like drought, wildfires, heat waves, and coastal flooding.

But the President’s enthusiasm for increasing natural gas production and use as an important climate solution missed the mark. And like his climate action plan speech at Georgetown University last June, the President highlighted the economic benefits of increasing U.S. natural gas production, while failing to mention the economic risks of an overreliance on natural gas.

More natural gas is a bridge to a warmer world

“If extracted safely,” said President Obama, “it’s the bridge fuel that can power our economy with less carbon pollution that causes climate change.” To his credit, the dramatic shift from coal to natural gas and renewable energy has helped reduce carbon dioxide (CO2) emissions from the U.S. electricity sector to their lowest levels since 1994. After all, burning natural gas to generate electricity produces about half the CO2 as coal. However, natural gas is still a fossil fuel that emits CO2 when combusted and methane when it’s extracted and distributed, contributing to global warming in the process.

A recent UCS analysis and a just released infographic show that transitioning to a natural gas dominated electricity future would not be sufficient to meet U.S. climate goals as power plant carbon emissions would barely change between today and 2050. This is because, in addition to replacing coal, natural gas generation would grow to replace aging nuclear plants and help meet the projected growth in electricity demand.

Achieving a low carbon electricity future

To limit the worst consequences of climate change, a 2010 National Research Council report recommended an economy wide carbon budget that would cut U.S. power sector carbon emissions 90 percent from current levels by 2050. To achieve this low carbon future, we found that natural gas generation would need to peak sometime in the next 15 years and then steadily decline to well below current levels by 2050.

While different technology pathways are possible for achieving these emission reductions, we found that a pathway relying on renewable energy to provide 80 percent of U.S. electricity by 2050 and energy efficiency to reduce electricity use by about one percent per year was the lowest cost. In contrast, pathways assuming large-scale deployment of coal and natural gas with carbon capture and storage (CCS) and new nuclear plants were much more expensive and would take much longer to implement.

Reducing fugitive methane emissions

We also show that methane leakage from natural gas production and distribution reduces natural gas’s climate advantages over coal, while boosting the advantages renewables and efficiency have over natural gas. Methane is at least 25 times more potent than CO2 over a 100-year timeframe and at least 72 times stronger over 20-years, according to the Intergovernmental Panel on Climate Change (IPCC).

A White House fact sheet on SOTU says the administration is taking steps to make gas production safer by developing new environmental standards for oil and gas drilling on public lands and initiating a multi-sector strategy to reduce methane emissions. While this is welcome news, even if we were able to reduce methane leakage completely, our analysis shows that natural gas would still be a problem from a climate perspective because of its carbon emissions.

Economic risks of natural gas

In addition to being risky for the climate, the recent spikes in natural gas and electricity prices experienced in several parts of the country due to cold weather shows that an overreliance on natural gas also has important economic risks (for more details see this blog by my colleague Mike Jacobs). This problem was most acute in New England, as high demand and competition for natural gas for both electricity and home heating drove natural gas and electricity prices to record high levels.

Making matters worse, some natural gas power plants had to be shut down due to supply constraints and limited pipeline capacity, while other plants were shut down due to equipment failure from the cold weather. Other Northeast and Midwest states faced similar problems on January 22, when natural gas prices reached $120 per million Btu and electricity prices exceeded $1,000 per megawatt-hour (10-20 times typical prices for this time of year). Even Texas, a major producer of natural gas, experienced high prices and outages at natural gas plants due to the cold weather.

ICF graph

Source: ICF International, Polar Vortex Energy Pricing Implications, January 13, 2014.

The good news is that in all of the regions, wind power made an important contribution to reducing the impact of these outages and price spikes. As more aging coal and nuclear plants are retired in the coming years, this highlights the importance of diversifying the electricity mix with renewables to provide a hedge against rising and volatile natural gas prices.

Implementing EPA carbon standards

Our analysis demonstrates that encouraging states to use renewables and efficiency for complying with EPA carbon standards for new and existing power plants would be a cost-effective, near-term opportunity for reducing the climate and economic risks of an overreliance on natural gas. Given the 30- to 60-year lifetime of most new power plants, the choices we make now will greatly influence whether the worst impacts of climate change can be avoided.