By Dave Menicucci
Just a few years ago renewable technologies seemed poised to carve out a significant foothold in the energy production market. Conventional energy prices had skyrocketed and Congress and the president had begun to craft laws and policies to accelerate large-scale applications.
But like a looming hurricane, frightful storm clouds have appeared on the renewable market horizon. Vertical and horizontal hydraulic fracturing (called fracking) has allowed vast reserves of natural gas and oil to be extracted from previously impervious layers of rock-hard shale.
In fracking a drill bit is guided into fossil fuel-laden rock. Water and chemicals are explosively forced into the well fracturing the rock and releasing gas and oil. Horizontal drilling technology allows the driller to guide the bit horizontally, thus enabling a single well to be used to drill radially underground, exploiting a large area.
Natural gas has many environmental problems. For example, a study by the National Energy Technology Lab (NETL) suggests that the environmental impact of the fugitive losses of gas during extraction and transport is significantly greater than those of coal. Fracking is also suspected of contaminating ground water and causing ground tremors, both of which degrade property values and imperil human health.
In response, the Environmental Protection Agency recently issued the first comprehensive regulations for fracking, the most important of which would force the capture of fugitive emissions and spills. But implementation is delayed until January of 2015.
However, natural gas will be on the scene for years to come. The Energy Information Administration (EIA) reported that U.S. gas production has recently skyrocketed, driving down prices, which today are less than $2/MMBTU, 80 percent lower than just a few years ago and about the same level as 1998. And they continue to fall. What’s more, the US production rate of around 24 trillion cubic feet (Tcf) per year meets the existing domestic demand with some to spare. The EIA says that the nation has a 90 year domestic supply of gas at current consumption rates.
The benefits of low-cost gas are rippling through the economy. A NETL study found that emissions from gas combustion are about 45 to 60 percent those of coal. Some consumers are seeing reductions in their utility bills as electric utilities convert their coal plants to gas. NSTAR, a Boston-based utility that has been doing conversions, recently notified its commercial customers of a 34 percent electricity rate reduction. Residential rate reductions will follow.
All this good news is not so good news for many renewable technologies, especially those that compete with gas directly, such as solar hot water, solar pools, and concentrating solar power (troughs and power towers). These technologies generally displace gas-generated heat for domestic, commercial and industrial applications. An array of federal and state incentive programs have been leveling the playing field for these renewable technologies by reducing both the upfront costs of installations as well as production costs, creating attractive payback periods. This low-priced domestic gas will roil the solar thermal technology markets. Photovoltaic technologies too will feel the pinch, as they will be competing with cheaper electricity.
Gas will be on the scene for the foreseeable future. It is reducing consumers’ energy costs and producing jobs for a nation slowly crawling out of recession. President Obama mentioned his administration’s commitment to it in his recent State of the Union address.
But that ought not imply that renewables should be discarded and progress abandoned. Government incentives need to be maintained and research programs should be continued or enhanced. One day gas and oil will be fully depleted and renewable technology must be available as the nation’s final and most sustainable energy solution.
Dave Menicucci is a retired researcher from Sandia Labs. He owns and operates a New Mexico energy consulting and investing corporation. He is also a member of the engineering research faculty at the University of New Mexico.
To learn more about the interface of renewable energy and natural gas, register today for the World Renewable Energy Forum in Denver, May 13-17.