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Sunday, 09 June 2013 22:00

Cheap natural gas continues to dominate energy discussions

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Veolia Energy’s Jim Monterusso, right, says Michigan should consider a progressive energy policy like Ohio that provides incentives for the use of waste energy recovery technologies and natural gas. Veolia Energy’s Jim Monterusso, right, says Michigan should consider a progressive energy policy like Ohio that provides incentives for the use of waste energy recovery technologies and natural gas. MIBIZ FILE PHOTO

As companies welcome lower utility costs thanks to cheap natural gas, some wonder whether the current energy situation could be doing a disservice to the development of renewable energy — and to the planet.

Considering the long-term volatility of the natural gas market, it’s impossible to say how long current prices will last. But industry professionals say because of fracking, prices are expected to stay in a record-low range into the foreseeable future. Projections from the U.S. Energy Information Administration show natural gas staying below $8 per million BTU until 2040.

“Even if prices jumped another 25 percent, they’d still be in the record-low range,” said Jim Monterusso, general manager of Veolia Energy North America in Grand Rapids. “I don’t expect $10 gas to return anytime soon.”

According to the EIA, natural gas prices hit a 20-month high in April largely because of prolonged space heating needs related to a cold spring, especially in the Midwest. Natural gas prices averaged $4.17 per million BTU in April, but the EIA expects prices to fall again this summer on lower demand compared to record-high demand last year.

Meanwhile, natural gas futures prices for August 2013 delivery averaged $4.34 per million BTU, up from $2.46 per million BTU a year ago, according to the EIA.

For now, the cheap natural gas makes Veolia’s steam production more cost-competitive. The company operates a natural gas-generated steam loop that serves about 130 customers in downtown Grand Rapids. Veolia is a global energy company that operates the largest number of district energy systems in the country.

From a business development standpoint, Monterusso said the upshot to having cheap natural gas is that industrial users are more likely to expand and bring production back to the States when their utility costs are low. Better energy prices are trumping cheap labor costs elsewhere, he said.

“This has been a positive catalyst for our business,” Monterusso said.

While 37 percent of electricity nationwide was generated from coal in 2012, natural gas generation, which accounted for 30 percent of electricity in 2012, has been on the rise, according to the EIA. Recently, coal has gained back roughly 3 percent of the market share for electric production it lost to other forms of generation.

However, stricter regulations on the use of coal and emissions from fossil fuel-fired power plants are expected to increase. That has some in the industry, including Monterusso, looking to natural gas. Not only is natural gas a cleaner burning substitute compared to coal, but it could also bridge the gap as renewable energy technologies improve and innovators develop energy storage technologies to go along with them.

Cogeneration is a much more specialized use, fitting for large users in the agricultural, industrial and commercial sector who need both electricity and steam.
Monterusso said Ohio, in particular, is a state with a progressive energy policy around natural gas. Ohio allows some “waste energy recovery” (WER) technologies to qualify as a renewable resources under the state’s Renewable Portfolio Standard (RPS). Under a law passed last year in Ohio, cogeneration with WER technologies also qualifies as an efficiency measure under the state’s “Energy Efficiency Resource Standards.”

However, the incorporation of waste energy recovery technologies into the state’s renewable portfolio standard isn’t a simple task, Monterusso said. Counting combined heat and power systems and WER as an efficiency measure requires a complex accounting and raises questions in calculating energy savings and thermal efficiencies, in system performance assessments and in how utilities can apply their efficiency program incentives.

In Michigan, the RPS guidelines are written to only consider truly renewable sources like wind, solar, hydro and biomass.

“The fact of the matter is Michigan’s RPS only has room for wind and solar,” Monterusso said. “It’s more narrowly written here. And in the regulatory environment here, you can’t put electrons on the grid unless you work through the regulated monopolies.”

In effect, Michigan’s energy policy makes smaller, distributed energy projects unviable, he said.  

While the passage of an RPS was intended to encourage renewable energy installations in Michigan by requiring electric utilities to generate 10 percent of their portfolio from renewable energy sources by 2015, Monterusso says the law has had the opposite of its intended effect, effectively discouraging the renewable market, he said.

Even though natural gas is cheap and available technologies make it more efficient and less harmful to the environment than coal, it still contributes to greenhouse gas emissions. Staunch environmentalists argue making use of what’s cheap and abundant doesn’t do enough to cut down the amount of greenhouse gas emissions.

The debate over greenhouse gas emissions is occurring as the amount of carbon dioxide in the Earth’s atmosphere approaches or exceeds the 400 parts per million threshold, according to the National Oceanic and Atmospheric Administration. It’s a level scientists say has likely not been seen on Earth in about 3 million years, an increase due mostly to human factors. Most scientists say the amount of carbon dioxide in the atmosphere needs to stay below the 450 parts per million level to avoid the worst impacts from global climate change.

Others believe that cheap natural gas could further prolong renewable energy generation from becoming more cost-competitive, said Bruce Goodman, an environmental and energy attorney with Varnum LLP in Grand Rapids.

While wind and solar technologies continue to become more competitive in the marketplace, natural gas generation looks to remain the generation method of choice into the foreseeable future, he said.

The utilities are the first to say that reliable generation is the top concern and that traditional fuels like coal and natural gas are irreplaceable when it comes to maintaining baseload power.

“Really in continuing to use natural gas, there are those that would ask, what is the true cost to keep releasing CO2,” Goodman said.

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