What was characterized as a “profound impact” from the shale gas boom on current and future natural gas prices was cited as one of five key factors contributing to uncertainty in planning for new electric generation in the United States, according to a report released in mid-July by the Electric Power Research Institute (EPRI).
In its report “Integrated Generation Technology Options,” EPRI reviews the status and relative strengths and weaknesses of natural gas, coal, nuclear, biomass, wind and solar electricity generation, noting that natural gas combined-cycle technology for power generation “appears to be poised for significant growth over the next decade.”
EPRI concluded that this is in contrast to coal-based power generation capacity additions, which have “slowed due to uncertainty surrounding future carbon legislation, technical and economic feasibility of carbon capture and storage (CCS) and new emissions controls regulations,” along with higher capital costs.
Gas-fired heavy-duty combustion turbines have an advantage in any scenario calling for market restructuring and deregulation over coal and nuclear operations for new baseload generation, EPRI’s report concluded, noting that gas technology has better short-term economics and addresses the immediate concerns over global warming.
“The shale gas boom has ushered in a new economic paradigm for natural gas-fired power,” EPRI’s report said. “The emergence of these new supply sources has led to an unprecedented, though necessary, expansion of the transmission pipeline network, resulting in natural gas at a delivered price that is both low and nearly independent of geography.”
EPRI’s analysis also said concerns about future natural gas prices persist. There is a scenario that envisions substantial increases in new gas-fired generating plants sparking an increase in the cost of the fuel from the higher gas demand. The higher prices could “continue well beyond the duration of current natural gas forward price curves,” the report said.
Short of breakthroughs in integrated gasification combined-cycle (IGCC) technology, also known as clean coal, the EPRI report painted a pretty bleak outlook for coal-fired generation. It said coal-fired generation declined by 11% in 2009. However, coal still supplies 45% of the domestic U.S. electricity supplies, although low natural gas prices continue to push it down in the dispatch order.
Although his counterpart heading coal giant Peabody Energy Corp. strongly disagreed, Aubrey McClendon, CEO of unconventional oil/gas developer Chesapeake Energy, predicted a strong shift from coal to natural gas in the power generation sector, citing huge chunks of the existing coal-fired fleet that will be retired or need substantial investment in emissions controls by 2020. McClendon and Peabody CEO Gregory Boyce offered divergent views on what will happen to the U.S. power sector at the summer meeting of the National Association of Regulatory Utility Commissioners on Monday in Los Angeles.
Noting that a large number of coal-fired plants initially planned for the past decade have been canceled, EPRI’s report said it is likely any future traditional coal-fired facilities will have to include CCS. But utility-scale CCS deployment is not expected to be feasible in the near term, and in the meantime the gas boom is expected to continue.
In addition to shale gas, the other major factors that continue to fog the crystal ball of power generation planners are the weak economy and its impact on power demand; capital cost uncertainties for various alternative technologies to gas; uncertainty over national carbon legislation; and impacts on existing generation plants from pending or anticipated environmental rules.
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