The American Public Power Association (APPA) has released a detailed, 95-page study titled Implications of Greater Reliance on Natural Gas for Electricity Generation (4.8 MB PDF) that analyses the costs, required rule changes, and risks of replacing a major portion of the coal fired electricity in the United States with natural gas. APPA is the national service organization for the nation’s more than 2,000 community- and state-owned not-for-profit electric utilities serving 45 million customers.
Unlike the declaration of casual pundits, established “energy gurus”, or natural gas supportive politicians, the challenge is substantial. It will require major long term investments financed largely by debt capital that will need to be repaid by collecting fees over many decades. Based on the assumptions made and documented in the study, the capital cost of the conversion would be approximately $735 Billion. That cost specifically does not include any predictions on the cost of the natural gas fuel or the effects of a change in the supply and demand curves at various times of the year.
The study authors noted that a strategy requiring that kind of capital investment cannot legitimately be described as using natural gas as a “bridge” fuel to a post fossil fuel energy supply system; the entities making the long term investments will expect that the newly built infrastructure will generate revenue for a long enough period to repay the capital and associated interest payments. The study authors remind readers that pipelines, power plants, and storage facilities are often financed over a 20 to 30 year period.
Here is a graph showing how the study summarized the various costs associated with the conversion. (Note: The study also included some additional operational costs like training and management of the fuel purchasing function, but those costs would be incurred over time and are not properly considered to be capital investments.)
In addition to the cost of the conversion, the study pointed out numerous complexities and challenges that would accompany the shift. It talked about the effects of balancing the flow of gas in the pipes to the demand for electricity, the importance of revisiting and perhaps revising the curtailment plan used in the event of a limitation on gas supplies, the potential impact of major storm damage similar to the damage caused by the hurricanes of 2005 (Katrina, Rita, and Wilma), and the need for small utilities who are used to managing the slowly changing nature of the coal market to become more expert in the dynamic daily trading associated with natural gas.
As I was reading the section on nominations and balancing (page 72-75), I thought about how this aspect of natural gas supply management would work in a system where gas fired generation is assigned to provide reliability for a growing installed base of unreliable, weather dependent power sources like wind turbines and solar collectors. The pressure variations in the system piping and the rapid changes in production that can come as a result of major weather systems would need mitigation strategies and perhaps some additional storage volumes to provide surge volume.
The study describes the technical reasons why utilities normally choose to build new facilities as replacements for existing coal facilities instead of attempting to convert the existing facilities to burning gas. It also explains why the seemingly simple option of operating already built, but underutilized, gas turbine combined cycle plants at a higher capacity factor to replace coal fired electrical generation is much more complicated than it appears from a high level point of view.
The organization that commissioned the study is not in the fuel business; it is a group that represents community and state-owned non profit utilities that have a chartered mission to serve the electrical power needs of their customers. From the press release announcing the study publication, here is the organization’s stated reason for commissioning the investigation and working to ensure that the findings it reveals make it into the energy policy conversation.
“There is a significant body of regulation underway and the potential for new regulation or legislation that will impact coal plants in particular,” said Mark Crisson, president and CEO of APPA. “This study raises questions and concerns about the significant hurdles utilities would face converting from coal to natural gas in the face of these regulations. Other studies have addressed supply. We commissioned this study because we are concerned about just how utilities would extract, store, and move natural gas to where it is needed in a reliable, sustainable, affordable and environmentally sound way. It strongly suggests that policymakers will need to take a fresh look at the regulations and incentives to make sure the problems identified in this study are addressed going forward,” Crisson concluded.
At some point in the not too distant future, I hope that the vendors of smaller reactor plants will have made enough progress in their design and licensing efforts to enable a similar study to be undertaken to determine the potential costs and benefits associated with replacing coal fired boilers with nuclear steam supply systems. Many of the fuel supply and infrastructure challenges associated with replacing coal with natural gas would be non-issues.
Instead of replacing a relatively inexpensive solid fuel that can be delivered by train and stored by piling it in the open air with a more expensive gaseous fuel that requires new delivery pipelines and is very difficult to store locally, we would be replacing an inexpensive solid fuel requiring frequent deliveries with a significantly cheaper, cleaner, and more concentrated solid fuel that only needs to be delivered every 18-24 months. Instead of replacing one CO2 emitting technology with another one that releases about 50-70% of the CO2 per unit power, we would be replacing a major air pollution emission source with one that has no local emissions at all.
If you have time and want a better understanding of how natural gas is extracted and delivered from sources to customers in the US, I highly recommend reading the full study. It was a real eye opening experience.
Aside: I found a footnote on page 77 of the study to be particularly intriguing. Still existing portions of the largely repealed Power Plant and Industrial Fuel Use Act of 1978 require that new natural gas or petroleum fired baseload power plants self-certify to the Secretary of Energy that they can burn coal or another alternate fuel as a primary fuel source. (The act defines “baseload” as a plant having a capacity factor of 40% or higher.) The self certification must confirm that the proposed gas fired plant:
(i) has sufficient inherent design characteristics to permit the addition of equipment (including all necessary pollution devices) necessary to render such electric powerplant capable of using coal or another alternate fuel as its primary energy source; and
(ii) is not physically, structurally, or technologically precluded from using coal or another alternate fuel as its primary energy source. (See Public Law No. 100-42 and 10 CFR 501.60, 61.)
Can anyone explain to me the design provisions that must be included in a gas turbine combined cycle plant to enable it to meet the above requirements? I am aware of the technical possibility of coal gasification – is that the method that is assumed for this conversion? End Aside.