Some time ago, Natrual Gas (= mostly Methane) became a popular fuel that could be used to generate electricity. Before that (in the 1980's and 1990's), Ngas use was largely restricted to heating and chemicals (especially for hydrogen synthesis) uses. The consequences of the additional use - to make electricity -have, in the year 2005, turned out to be "Oops", and a major screw-up. The result is higher priced electricity, higher heating costs, closed factories and very expensive chemicals - especially ammonia. And ammonia costs do relate to food costs, and even automotive fuels.
More below on this strange outcome that springs from the expansion of the market for natural gas in the U.S.
Firstly, Ngas is now a very expensive fuel - for example, see here for its price BEFORE delivery via pipelines:
http://www.oilnergy.com/ and
http://www.oilnergy.com/...
Relative to crude oil on a $/Btu basis, Ngas is now the equivalent of near $85/bbl, but the comparison is a bit more complicated. There is a dramatic trend of increasing prices, when examined on a 1 year and multi-year timespan.
Natural gas can be combusted to yield more heat energy per lb of CO2 produced than for oil products or coal - no doubt about it. And there is usually less particulates, sulfuric and nitric acid precursors, or mercury emitted from Ngas burning than from coal or oil (especially residual oil, alias #6 Fuel Oil). But Ngas is a pain to transport, unless it is done by pipeline. To make it a liquid, methane has to be cooled to -162 C - about the same as liquid air. So if Ngas is found in North America, it can be transported by pipeline to the insatiable U.S. market, where it can be distributed to a variety of up to 100 million customers, some big and some small. If the Ngas is found overseas (like Africa, for example), you can either liquify it or convert it into methanol and send it to the U.S. or Europe, use it in Africa, flare it or just leave it in the ground. But if the Ngas is found in Canada, Mexico or the U.S., one now has access to a market that will pay, at present, about TWICE the average world price.
A few years ago, we were told by a seemingly endless parade of "experts" that the U.S. had very plentiful Ngas supplies. So consuming up to 25 % of total U.S. Ngas production to make electricity was a good idea. Especially when Ngas was selling for between $2 to $4/MBtu (about 4.5 to 9 cents/lb). This would allow either old coal burners to be replaced, or else avoid the construction of more yucky coal and nuclear (VERY expensive, VERY government subsidized, potentially VERY dangerous, VERY much an ultra-toxic waste disposal problem) power plants to make our electricity. Remember the advertisements on "clean" burning natural gas?
Well, the combination of an overestimation of continental Ngas reserves and the increased consumption - notably in combined cycle power plants, that are, in effect, an ADDICTION to Ngas - demand has exceeded supply. Prices are going up and up, many Ngas users are either shutting down (such as much of the U.S. Ammonia production, where Ngas was converted to CO2 and H2, and then the H2 was reacted with nitrogen (from air) to make ammonia, NH3) or swithcing back to coal. This has the following pervesre results:
- Electricity prices go way up, especially in palces like New York, where electricity producers are supposed to be different companies from the Distribution monopolies. In this case, Ngas prices tend to set the marginal price for electricity, and then everybody (even low cost coal burners and hydro plants) can charge these high prices for electricity.
- Heating prices go way up. Most residences, factories, office buildings and office/industrial complexes, once they are connected up to the gas lines, are hooked for some time. In general, the only alternative is fuel oil, and this also happens to be competitively priced with Ngas.
- Cost of production rises, especially if Ngas/oil cost is a big component of the overall price of the good and/or service. For example, concrete and bricks need a lot of heat to make the mass quantities produced by various plants, and these are not high value added goods. But our country cannot survive without conrete and life without bricks means more wood consumption, alias less trees in the forest. Ammonia is another problem in the making. Without a nitrogen fertilizer boost, corn production would average around 27 bushels/acre, but with an adequate fertilizer supply (manure, urea, ammonia, ammonium sulfate, ammonium nitrate), corn production goest to 150 to 200 or more bushels/acre. And there is not enough manure to go around, hard as that may be to believe.
- As cost of productions rise faster than customer's willingness or ability to pay, layoffs start happening. Layoffs begat other layoffs. Etc.
What to do about this situation? And what about when Ngas prices go to $20 to $30/MBtu next year ? Other than say "Ouch"?
Well, there are ways to make electricity other than to burn a primo fuel such as Ngas. Its use to make electricity, especially in large stand-alone plants that do not cogenerate, should be drastically curtailed. And the executives of companies and quasi-governmental entities such as Exxon-Mobil and Calpine that bought into the line about "abundant" Ngas should also be drastically punished, but that is unlikely to happen until Hell freezes over. One way to discourage Ngas consumption for electricity production would be to steadily and significantly tax any Ngas used to make electricity, especially in mass quantities.
One possible bad consequence of that would be the substitution of Nags powered electric plants with coal burners or nukes. Well, these new polluters should also be taxed significantly, in a steadily increasing fashion. For example, adding a tax of up to 4 cents/kw-hr based upn the CO2 pollution would provide a significant incentive to make any new coal burners dispose of their CO2 pollutant via sequestration. Yes, that's how much sequestration will cost, with repsect to the coal burner's property line. The CO2 pipeline and sequestration site operation will add still more cost.
As for importing large quantities of LNG.... it won't be likely for the next 4 years. And odds are, that will just export U.S. demand, while we import all available LNG that we can. Of course, a temporary increase in methane supplies will allow greater levels of methane addiction to occur, while we export more billions of promisesary notes (no money after all, just promises of it) to pay for this form of instant gratification. And these facilities are expensive... a better investment would be domestic electricity supplies and/or efficiency improvments.
At present, technologies such as modern wind turbines can produce electricity for about 4 to 8 cenbts/kw-hr, depending upon the site wind speed. That is less than the 10 cents/kw-hr just gor the Ngas fuel in a modern, efficient combined cycle plant. By any proper comparison, wind turbines become the "economic winner" versus Ngas. But life is not fair, and neither is the U.S. market place, so this becomes a political and social problem, and a political and social solution is required. As for that malarkey about the costs of integrating large amounts (up to 15 %, for example) of wind power into the grid... less than 0.5 cents/kw-hr (see http://www.ewea.org, for starts, or http://www.wind-energie.de/... for starts).
After all, Ontario has just announced plans to use wind to provide up to 15 % of their electricity with wind (see the news at http://www.canwea.ca). And this is a province with a dreadful nuke addition, which has been an economic disaster, resulting in huge welfare subsidies for their nukes (and $30 Billion in debt). If the nuke-religion provincial leadership (most people in the province are sick of nukes/don't want any more of this grief/potential death) can opt for wind, why can't the U.S. ? After all, we actually have easier access to wind than does Ontario, since Ontario is almost entirely covered in trees. Except for a couple of shallow lakes and some farmland, Ontario is endowed with lots of land with "poor to moderate" wind resources, at least where it counts, which is within 150 meters of the ground. But once again, Canada is showing that it likes being a civilized country. We are still stuck with Bu$h....
So, in conclusion, the N in Ngas.... does that stand for No or Natural....? It all depends on how fast we consume this fossil fuel, and what we consume it for. But, based on the current prices for Ngas, and the likelihood of more Category 5 (or higher... once the next level is defined) hurricanes in the Gulf of Mexico next summer, we can't continue to burn mass quantities of methane for electricity and also use it for most people's source of heating. And there is not enough wood to go around, and the idea of the coal stove as a replacement for residential Ngas heat is not very appealing or practical. But anyway, Decision time!