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Study Weighs Gas for Generation Versus Residential, Commercial Use

Direct use of natural gas -- such as for space and water heating, cooking and clothes drying -- is a good thing, and more of it would be even better, according to the American Gas Foundation (AGF). This is particularly true when caps are placed on carbon dioxide (CO2) emissions.

More residential and commercial direct use of gas would improve the productivity of energy supplies as well as reduce costs and CO2 emissions, according to the AGF study "Direct Use of Natural Gas -- Implications for Power Generation, Energy Efficiency, and Carbon Emissions."

It looked at the impact of increasing direct use of gas as opposed to using electricity for the same tasks. Based on Department of Energy and Energy Information Administration (EIA) data, the study developed scenarios that considered gas supply, technology and possible climate change programs to determine the net effect in total energy use, costs and CO2 emissions.

"Although there are several factors that drive the use of natural gas for power generation, there is a growing concern that the overall natural gas supply/demand balance could be adversely impacted as demand of natural gas for power generation continues to grow," the study says.

It notes that since the mid 1990s more than 90% of generation capacity additions have been gas-fired units for peaking and intermediate loads. Growth was driven, in part, by environmental regulations and the high capital costs of coal-fired power plants. "During this time frame there was a belief that the North American market had an unlimited supply of a relatively cheap and environmentally friendly fuel available," the study says.

The study credits demand for gas from power generators as well as from other sectors for driving gas prices from $2-3/MMBtu in the 1990s to $9/MMBtu today. "Even with relatively higher natural gas prices, demand for the use of natural gas in electric power generation has continued to increase and is driven by several factors," the study says. These include the efficiency of gas-fired units and emerging CO2 emissions restrictions. As demand for gas for power generation is expected to grow, the study says it's time to look at optimizing the use of gas and suggests that at least some of it might be better burned in homes and businesses than in power plants.

Among the study findings:

Gas demand for electric power generation is expected to increase significantly. Nuclear power and renewables could offset part of the increase, but gas demand is still projected to be higher over the forecast horizon with an accompanying upward pressure on gas prices, noted the AGF.

The Lieberman-Warner bill introduced last year by Sens. Joseph Lieberman (I-CT) and John Warner (R-VA), if enacted, would cut GHG emissions but could also drive up the price of natural gas, according to research by the EIA (see Daily GPI, May 1).

The study, which was prepared for AGF by Black & Veatch, and a summary are available on the AGF website, www.gasfoundation.org.

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