Are natural gas companies purposely overproducing to build market share and deter competition?
John Horgan and I had another conversation on Bloggingheads.tv about nuclear energy. He asked a lot of good questions; I hope that you find my responses worth considering. In the above embedded video segment, we talked about the causes of low natural gas prices in the US. I explained how I believe that the situation is not an accident of a passive market. Instead, I believe low natural gas prices in North America is the result of purposeful decision making by people that are carefully selected and are well-compensated for their demonstrated planning skills.
Natural gas prices around the world are several times higher than they are in North America, which is the place where there was a lot of talk about a “nuclear renaissance” during the period from about 2002-2008. It seems fairly obvious to me that the talk of building as many as several dozen large new nuclear power plants, each with the ability to displace between 180 and 250 million cubic feet of natural gas every day they operated, was seen as a real threat to the dominant market position enjoyed by the oil and gas industry.
Low North American natural gas prices have also worked to reduce US coal consumption and resulted in the cancellation of a number of new coal plant projects. That effect is consistent with my theory that low natural gas prices in North America have been the result of a purposeful decision by multinational oil and gas companies to build market share in a lucrative market where the insiders know that there is a great deal of inertia. As some politicians like to remind us, the US energy market is about 25% of the world market.
When natural gas prices inevitably continue to rise (they are already about 75% higher than their nadir), the market will not be able to respond quickly because both coal and nuclear plants take at least five and more likely ten or fifteen years to design, plan and construct.
I am very worried; I hope you are too.
Recommended Reading
US Energy Information Agency: Today in Energy for September 6, 2013 – Vermont Yankee nuclear plant closure in 2014 will challenge New England energy markets
If this doom scenario happens, the inertia of the NRC will surface.
Their mission to protect the environment would never have been a source of concern to this inept organization.
And building dozens of nukes at a time will finally be possible with an urge to act.
On the other side of the moon, the nuclear renaissance is doing quite well on a planetary level.
The message is well received in countries that are cash conscious of the risk of importing fossil fuel in US dominated dollars.
That is a big source of motivation for 89% of the emerging world. That is a lot of nukes underway.
Rod,
In a word, Yes, I am worried.
I wish I could find the video where some of the Thorium folks were working to get Nuclear included in the Renewable definition. The CEO of Shell got up and lectured about how many years they had worked on that definition and that Nuclear just does NOT fit.
The definition (Wind / Solar) was created and refined by the Oil and Gas companies to regain market share from Nuclear power plants! 5 this year folks.
Seeing how the Renewable Energy (Unreliables) Mandates have operated to kill Kewaunee and Vermont Yankee, it is hard to believe this was not planned.
The linch-pin is the legal requirement for electrical grids to accept all of the electricity tendered by unreliable generators.
We are accustomed to thinking about the total energy provide over the course of a year from unreliables and it’s percentage of total capacity, but that just doesn’t reflect the true effect on the grid.
Consider. If unreliable generation is 15% of total energy for a given grid, then with capacity factors in the neighborhood of 20%, the unreliable capacity must be around 75% of average demand.
Some times almost all of the unreliable capacity will be generating. That means, that there are times when the unreliables are supplying 75% of the electrical demand, the electricity must be accepted, and almost everyone else must shut down.
Unreliables do not generate at that rate for very long, but if it happens with any frequency at all, base load generators will be demolished.
It’s akin to strafing or vandalism. Every so often, unreliables jump in and jump out quickly, but while they’re passing by, they do horrible damage to the actual productive, affordable members of electrical generation society.
Of course this was predictable. The simplest grid models would show that if you allow large, intermittent suppliers on the grid, it will kill baseload. It looks to me like this plan goes back further than just rolling out fracking. First, get a huge proportion of the USA to pass Unreliables Mandates — all curiously similar, with similar legal requirements to accept unreliable energy first, and all passed quietly with very little news about their debate (any debate?) and passage.
What is the history of the passage of unreliables mandates in the state houses? I smell a giant swarm of rats.
With that kind of rate structure in place, it doesn’t even matter if we could win public opinion over to building more nukes. They can’t survive on a grid with an unreliable mandate in place once unreliable generation gets close to 10% of average demand and unreliable nameplate capacity reaches 40 – 50% of average demand.
Track down the politicians responsible for the renewable energy mandates, and investigate the shit out of their finances (to see if they’ve been taking money from Big Oil)!
All politicians both parties are on Big Oil’s pad.
Oh, forgot one thought.
What happens when unreliables reach 25% – 30% of demand? On the average, they’re generating 25% – 30% of total energy demand, but with some frequency they’re going to supply 100% – 120% of the power demand for brief periods.
What happens when the supply of power is more than 100% of demand?
Further, at that point, their average capacity factor should see a sudden and steepening decline. If there is no where to which to store or export the power, then one has a ceiling on unreliables production. Whenever the production exceeds that ceiling, the result is discarded.
So, at lower total production levels, all the energy produced by unreliables could be used (with extreme costs) and count as energy generated for purposes of calculating capacity factor, but as unreliable **nameplate capacity** exceeds 100% of average power demand, one starts lopping off portions of energy generation which cannot be used. So all the windmills are still generating about the same energy per windmill, but now, during some periods, large amounts must be discarded as unusable, thus lowering the overall capacity factor. As the unreliable’s capacity grows, its capacity factor must shrink by an increasing percentage.
Is that clear?
Cost the Ontario taxpayer over $2B so far according to the its Auditor general. Here’s an analysis showing the all in cost of wind at 48 cents a kwh up from its feedin tariff of 14 cents.
opinion.financialpost.com/2013/06/27/ontarios-power-trip-mcguintys-bigger-debacle/
@Seth.
So much misinformation and lies. Do you have anything substantive to offer on these issues. Please … anything?
FIT rate for wind in Ontario is 11.5 cents/kWh (not 14 cents as you report).
And sure. Ontario has a glut of energy (and is exporting electricity to neighboring regions). Have you heard of the phase-out of coal in 2014 (and planned decommissioning and refurbishment of Darlington and Pickering reactors). I believe this is called “planning” and is generally seen to be a good thing.
I suppose you are arguing for GA to be added to exports to pay for cost of energy in the Province … right? Nuclear has as much a role to play as wind concerning exports (perhaps even more).
And your link does not show “all in cost of wind at 48 cents a kWh.” What you say makes no sense. None. Please explain. The ball is in your court.
You have to be one of the stupidest commenters on this site. It’s my guess based on the similarities that you post on Huffpo as Idyl – the dude that gave Robert Hargrave’s post on Huffpo the boot.
If you call a friend at home who can read, they may be able to explain somehow at that kindergarten level you require, that that the 11.5 cent Ontario tariff is for installations above the the 4 GW already contracted for at the 13.5 cent level. Given the enormous cost it is unlikely more than 3 GW will ever go online.
I really don’t know what to say to a person so stupid. Did you get that the nukes and hydro plants were around and producing long before the decision was made by some corrupt politicians influenced by Big Oil money to build these worthless wind plants. Now it’s the nuke and hydro plants are responsible for the excess power produced by wind? Derp!!!
I get that the article I linked to is one of those word problems that grade 3 arithmetic students find so difficult.so I’ll be Miss Ruby and set it up for ya.
1) Total 1 year wind production 4.8 TWh
2) $533M in wind export losses
3) $325M in gas backup costs
4) $325M in nuclear steam releases and hydro spill
5) 13.5 cents a kwh wind tariff
6) 8 cents a kwh 5 times sized wind transmission costs (per New England ISO)
Works out to 47 cents a kwh. I’ll leave the arithmetic for that friend at home who I assume can do ‘rithmetic fur ya and ‘splain it all so you can understand with your diminished capacity.
.
@seth
Please provide your commentary, facts and arithmetic with less vitriol and personal attacks.
@EL
Please stop accusing others of lying because they interpret information in a way that conflicts with your world view.
Why should Ontario’s existing nuclear plants built share the blame for untimely overproduction that results in dumping electricity onto a reluctant grid operator at rock bottom prices? When was the last time a nuclear plant produced an unexpectedly large amount of power when it was not needed?
@Seth.
I take it I really don’t have to comment on this, since your errors are obvious.
The analysis you provide does not suggest the cost of wind “works out to” 47 cents/kWh.
@Rod Adams.
Because there is an overcapacity of nuclear in Ontario. Such plants are designed to operate on a baseload basis, and at 50% generation are driving up exports. Until refurbishments (as you have indicated), such plants are not as flexible as coal or natural gas.
These types always need reinforcement.
1) EL is admitting he is IDYL the commenter responsible for booting nuclear expert Hargraves from Huffpo.
2) As all can see, my 47 cents a kwh arithmetic is accurate. EL/Idyl’s is well known as innumerate.
3) Once again the Ontario’s nukes and Hydro plant have been operating many years without any need for dumping power. It was the imposition of wind/solar power by corrupt politicians, that has resulted in the continuing loss of $billions of taxpayer funds.
opinion.financialpost.com/2013/09/09/ontarios-power-trip-dear-minister-heres-my-plan-to-not-produce-electricity/
@Seth.
I am confused why you think I had anything to do with Hargraves being “booted” from HuffPo (or having his posts removed from the site). Could you please explain?
Keep in mind that in 2017 China will have its first commercial HTGR in service, while India and Russia will have Fast Breeders in service 1st of 5 to 2020 for India, next year. With several MSR’s predicted for 2020, as well as possible IFR’s in England, it would seem the US will soon be reimporting its own next technology in shipping containers. These reactors will simply be plopped on site in old nuclear plants eliminating any need to decommission anything other than the old reactor pressure vessel. The nuke companies rightly see these decommissioning funds.as a cash cow hence Safestor.
@Jeff
Excellent illustration, in graphic terms, about why wind & solar will drive all baseload power plants off the scene!
You are a little pessimistic.
In Germany nameplate capacity of solar is now 34GW and wind 30GW. The max consumed in Germany is 65GW. So you may expect that wind+solar may produce 50GW a number of times in a year. But that is not the case as wind and solar do not coincide.
With the present moderate expansion rate of 2GW/a for wind and 3GW/a for solar, it may take up to 10 year before the capacity of solar and wind is so much that they drive all baseload power plants off the grid.
So the German closing scheme of NPP’s is such that the last NPP is closed in 2023.
This summer only gas and old coal power plants were driven off the grid, due to low load factors and low wholesale prices.
In the future only flexible power plants can hold a competitive position in the grid. Especially with wind those should be capable to fast up and down regulation. E.g. from 3% to 100% in 30minutes.
In the future only flexible power plants can hold a competitive position in the grid.
Actually, if that requirement was applied consistently to all sources, wind and solar would hold no competitive position whatsoever. Can we depend on wind and solar to ramp up to 100% in 30 minutes, reliably, whenever needed? No, we can’t depend on wind and solar to do that.
That’s why the commenters around here call them “unreliables.”
What you are really saying is that all other power sources should have to compensate for the erratic output of wind and solar. And instead of getting a premium for their reliability, they are punished. They are forced to be load following plants. That makes gas and coal plants less efficient, more prone to breakdowns, and less profitable. Those are more reasons why the cost of electricity spirals up in an all-renewable regime.
http://dddusmma.wordpress.com/2013/08/09/cycling-damages-power-plants/
French and German nuclear plants already do load following on a daily and weekly basis. To do the hourly load following you want, it will be required to use Generation IV reactors. But the plants will still be underutilized, which adds costs for no good reason.
@Ernest
…if that requirement .. to all sources, wind and solar … no competitive position …
Right! But wind and solar are renewable and do not add heat to the atmosphere!
Hydro also does not, but hydro has no problem with the needed flexibility it helps to fill the gaps in wind and solar and waste/biomass electricity.
French and German NPP’s do their best with load following, but are not flexible enough. Not easy to bring their output below 25% of their max.
Even the French market had negative energy prices this summer (despite having very little wind & solar)..
The up- en down regulating damage, explained in your link, is one of the reasons the Germans install low temperature burning (circulating) fluidized bed power plants.
There’s not enough hydro storage capacity to let Europe go all renewable. So wind and solar are being backed up with fossil fuel. When wind and solar replace nuclear they cause much more atmospheric heating than nuclear can ever possibly do.
Germany’s carbon emissions have increased for a second year in a row. Denmark has the world’s highest penetration of wind power and is supposed to be a model of good governance. In Denmark carbon emissions are going down but still they are above the EU average and well above France, according to the EEA.
@Ernest
“…Denmark carbon emissions …are above the EU average and … France ../i>”
Not strange as Denmark is much colder (much higher latitude)!
“…Germany’s carbon emissions have increased for a second year…”
Temporary fluctuations. The trend is down.
Much faster than the EU and France! Despite closing ~45% of its nuclear capacity (that 45% generated ~15% of Germany’s electricity). And that will continue as Germany adds each year >5GW renewable capacity.
@Bas
Germany shutdown a total of 8,336 MWe out of 20,339 total MWe; that is 41% (admittedly a quibble from your 45%). See the table on this page – http://www.world-nuclear.org/info/Country-Profiles/Countries-G-N/Germany/#.UjAiomR4ZQo
However, I think that the note below the table is fascinating –
Perhaps I should revise my opinion of German thinkers; maybe they really are more patient and have a longer term view than some of the leaders in American industry. They apparently recognize that politics can change a lot faster than one can build a new nuclear power station.
Rod,
Your table starts at 2008.
But the comparison period was 1990 – 2013.
1990 being the general accepted Kyoto reference.
I took 1991 – 2003 because 1990 had a relative high number of closures and it is not quite clear whether that year should be included.
Wikipedia gives an overview of all NPP’s:
http://de.wikipedia.org/wiki/Liste_der_Kernkraftwerke#Deutschland
They closed 10GW in that period and still have 12GW running.
(I could not find an english version; but the table should be clear.
You can also check US and other countries).
@Bas
Lying with statistics includes picking your base year. The table you linked to includes 6 Soviet built East German plants shut down after the fall of the Berlin Wall.
Of course, Germany loves pointing to 1990 as the base year because it gives them the ability to take credit for the emissions reductions achieved by closing a large number of inefficient Soviet era coal power plants in East Germany.
Sorry, please read 1991-2003 as 1990-3013
Not getting any better – 3013 is a thousand years from now.
Not only that, but Germany fought very hard to get 1990 chosen as the base year for the Kyoto protocol for precisely the reasons that you mention.
Not strange as Denmark is much colder (much higher latitude)!
Fine then compare Denmark with Sweden which has a colder climate. Sweden with enormous hydro resources and a large nuclear fleet had 2/3 the carbon emissions per person as Denmark. Sweden has much better chances to reach its carbon free goal in 2050 than Denmark. Denmark is struggling against the current without nuclear and hydro storage.
Rod: It took about 13 years for the politics to swing around in Sweden. From deciding to shut reactors prematurely in 1997 to planning new build in 2010.
@Ernest,
….compare Denmark with Sweden which has a colder climate..
As you already write, that comparison is not valid due to Sweden’s huge hydro.
Same for Norway. Finland would be correct as that is also flat.
Just a question:
Is the list of NPP’s (‘Kernkraftwerke’) for USA correct on this Wikipedia page?
http://de.wikipedia.org/wiki/Liste_der_Kernkraftwerke
It amazes me as it states that San Onofre 2 and 3 were shut down in January 2012 already.
So I do not understand the recent electricity price peak in California that somebody mentioned here (he said that it was caused by this shut down).
Btw.
You can change the order of the list by clicking on the column header.
@Rod
…Lying with statistics includes picking your base year. The table you linked to includes 6 Soviet built East German plants shut down after the fall of the Berlin Wall…
I noticed that they closed almost 2GW in 1990. So I did not include that year.
So the period over which the 45% is calculated is 1991-2013.
Sorry for the mistakes, they look stupid 🙁 (was in a hurry, had to leave).
@Brian
Your accusation implies that West-Germany had less CO2 per capita than East-Germany in 1989/1990. I doubt that.
I visited East-Germany in ~1982 and saw they had few (small) cars driving around.
So while that may be true regarding heating (East-Germany is also colder in winter), for sure that is not true for transportation (= the 2 biggest CO2 producing activities).
The West-Germans at that time drove >100miles/hr on their ‘Autobahn’, passing me like crazy (Rod you would love that; no speed limit at the highway!).
May be you can find a site with the numbers, that supports your accusation?
Otherwise; why would Germany want that 1990?
Bas – What?! No it doesn’t. How can you perpetually be so confused?
All that it implies is that the reunified Germany shut down a large number of old, inefficient, soviet-era fossil-fuel-burning (i.e., coal) plants in the early nineties, shortly after reunification. Of course the Germans understood this by the mid-nineties, when the Kyoto protocol was being negotiated, and so they lobbied hard to “grandfather” in these already realized “gains” so as to game the system.
Forbes and Bloomberg both disagree with you.
http://www.forbes.com/sites/richardfinger/2012/07/22/were-headed-to-8-00-natural-gas/
http://www.bloomberg.com/news/2013-08-18/shale-grab-in-u-s-stalls-as-falling-values-repel-buyers.html
At the moment, the price that have reached $4 in April seem to stabilize around $3.5. Production is still high despite months of slower investment.
Some of the analysis underestimate the fact that a good number of wells that have rigged for oil also produce gas, leading to a supply of gas despite the fact would not be profitable if gas only was produced.
Rod – thanks, as always, for the post and for the research that singles out another ‘smoking gun’. All – listening to the whole conversation will reward you mightily. And thanks for the excellent comments, as well.
I just found this post on Next Big Future:
Largest Railroad company in the USA is Testing Natural Gas-Powered Locomotives. It’s not just electricity generation.
There is an increasing number of LNG fueling stations for heavy trucks as well. Some 27 billion gallons per year of ULSD can potentially be replaced by LNG in the USA alone.
Rod,
“Natural gas prices around the world are several times higher than they are in North America”
I don’t think natural gas is being deliberately dumped in the US, gas surplus that is co-produced with fracked liquid petroleum is STRANDED — i.e. there is no easy way to transport gas over oceans to ready & eager markets in Europe and Asia, Dubai has the same problem. The US has little LNG export capability, what few import LNG terminals North America has are (pending federal regulatory approval) going to be turned into export terminals, but again it will likely take at least half a decade to do so.
@Aaron
What makes you think that that oil & gas companies were unaware of the export constraints before they began their massive drilling campaign?
Fracking did not increase the total supply available. It merely opened access to known resources that were previously inaccessible. Producers chose to extract more product than their existing market would bear in an effort to capture a larger segment of the market. Only a dramatic price reduction would accomplish that feat. The primary reason the “big boys” could afford to use that tactic was that they had plenty of excess cash to deploy because of the enormous almost uninterrupted run up in crude oil prices since 2000.
Rod,
It is the independents — not the majors — that are responsible for drilling the Marcellus, and hydraulic fracturing was not developed by the “big boy” majors but rather an independent wildcatter, the late George Mitchell, and it is petroleum that they are primarily after as in the Bakken in ND.
However natural gas is also a byproduct of this new petroleum production made so profitable by the global run-up in prices — it wouldn’t be profitable if oil were trading back below $40 bbl — and that really started around 2004 and then spiked ($140bbl) in 2008 just prior to the global collapse of the financial speculative bubble later that year. So yes, the profits earned on petroleum more than offset any losses on natural gas.
Oil prices briefly fell back to pre-2004 levels but then quickly climbed back to the $80-$90 range. So long as world oil prices remain this high fracking, along with mining western Canadian tar sands (XL pipeline) will remain profitable.
What would be a possible solution? I’m surprised this isn’t more discussed in political circles given the confluence of interests: consumer concern with high oil prices, natural gas producers seeking new markets, advocates of national energy security, environmentalists. Natural gas could displace all petroleum imports into North America by displacing petroleum in NGVs, which could easily be made “dual fuel” avoiding 1st generation adopter filling station scarcity.
Natural gas (methane) @4MMBTU is the gasoline gallon equivalent (GGE) of petrol at 50¢, an inflation adjusted price not seen since ever (prior to OPEC the
inflation-adjusted price of a gallon of regular gasoline was ~$2; and from the end of the 1st Persian Gulf war to the late ’90s it traded around and briefly below $1).
So much media attention is focused on electric vehicles yet the cost of the batteries/electronic suite of a Prius, Nissan Leaf not to mention $80k Tesla is 4-5× that of a ~$3k OEM or after-market retro-fit pressurized tank and fuel line. Adoption of cheap natural gas for transport fuel would drive down these historically high global oil prices not seen in ~75 years. Reportedly China has shale gas reserves even greater than the US, so a global adoption of the NGV will displace a significant amount of petroleum and collapse markets just as nuclear fission displaces coal and gas.
From my completely lay point-of-view, I am convinced this is exactly what the gas industry is up to with production and pricing. The scramble to convert to gas in my little corner has been feverish. Some time in the near future, we’ll see less production and more exporting and prices will rise.
Pardon but there’s no topic for this thing going viral on anti-nuke blogs!
Re: http://chic.clipsyndicate.com/video/playlist/1510/4312202?cpt=8&title=ans_nuclear_clips&wpid=752
This must not stand or go uncontested! Yes, there were casualties incurred by the Fukushima evacuation, but to say it killed more than the quake and tsunami is sheer uncontested FUD! Let’s get on these hit-and-run FUD artist’s cases!
James Greenidge
Queens NY
Here is a text link:
Fukushima evacuation has killed more than earthquake and tsunami, survey says
A survey by popular Japanese newspaper Mainichi Shimbun said Monday that deaths relating to this displacement – around 1,600 – have surpassed the number killed in the region in the original disaster.
Causes of death in the aftermath have included “fatigue” due to conditions in evacuation centers, exhaustion from relocating, and illness resulting from hospital closures. The survey also said a number of suicides had been attributed to the ordeal. ( http://worldnews.nbcnews.com/_news/2013/09/10/20420833-fukushima-evacuation-has-killed-more-than-earthquake-and-tsunami-survey-says?lite )
I kinda surprised they would even circulate that. Especially the suicides as they hyped much of the hopelessness, But then again, the anti nukes were never that sharp.
Something’s wrong in the reporting here. They claim 20k+ died in the quake and tsunami but that the evac wasted even more?? How can so many and reporters believe that??
Entry that points out Vermont’s fracking ban and their new commitment to fracked NG!! :
Vermont’s natural gas paradox and its German parallel ( http://blogs.platts.com/2013/09/13/vermont-latest/ )
the anti-nuke activists could make it look like the shutdown was entirely their doing — and to be honest, a lot of analysts think Entergy’s statements on the closure softpedaled the possibility that the company just didn’t have the stomach for the politics anymore — and ignore the fact that what has occurred is an opening for natural gas to grab market share, displacing emission-free power for a CO2-emitting fossil fuel.
What’s REALLY disturbing to me is that the media, who are only all too happy to investigate conspiracies and dig into unfair and illegal practices just for a story to gluck about won’t even regard your premise as worthy of consideration.
James Greenidge
Queens NY