Will Shale Crowd Out Coal and Green Energy?

Ken Silverstein | Jan 04, 2012

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Now that France’s Total and China’s Sinopec have invested $4.5 billion in two of this country’s premier natural gas developers, common wisdom is suggesting that the fate of shale-gas here will outshine all competing energy forms. But is that logic well considered?

Estimates are that at least a century’s worth of shale-gas is now recoverable from underneath America’s feet. Some are betting that such volume will drive down the cost of that fuel, making the alternatives unattractive.

“With the new abundance and lower prices, lower-carbon gas seems likely to play a much larger role in the generation of electric power,” writes Daniel Yergin, in his new book “The Quest.” By comparison, nuclear would seem expensive while coal would appear to be more carbon intensive. Meantime, it creates “a more difficult competitive environment for wind projects.”

Yergin, however, is admonishing policymakers not to rely exclusively on shale-gas. That’s because too many factors can disrupt markets and include everything from politics to environmental and natural disasters.

Shale will not just become a U.S. phenomenon. But it will also have a great impact around the globe. Global proven reserves are estimated to be at 6,600 trillion cubic feet, according to the U.S. Energy Information Administration. China and the United States have the most supplies at 1,275 and 862 trillion cubic feet, respectively. In this country, for example, shale gas has grown 48 percent a year from 2006 to 2010. It now makes up a third of all natural gas supplies.

The other countries sitting atop huge swaths of shale gas are Argentina, Mexico, South Africa and Australia. And while France has such potential, the regulatory environment there is unfriendly to developers and instead, it is choosing to maintain its reliance on nuclear power. For that reason, Total sees a future in the United States where it has invested $2.32 billion in Chesapeake Energy in Ohio’s Utica shale region. China’s Sinopec placed a similar amount in Devon Energy.

“This is consistent with our strategy to develop positions in unconventional plays with large potential and, in this case, with value predominantly linked to oil price,” says Yves-Louis Darricarrere, with Total. “Total is conscious of the environmental aspects linked to developing shale acreage.”

Diversifying Risks

In “Quest,” Yergin points to the Japanese nuclear accident and the Arab Spring that caused oil prices to spike as two geo-political events simultaneously occurred. Both had a tremendous effect on the energy economy. But the energy analyst adds that shale-gas is most impacted by the environmental issues here.

To extract the shale-gas that is embedded inside of rocks, a concoction of water, sand and chemicals is pumped a mile beneath the earth’s surface. Not only does it take a huge amount of water but the mixture that comes back to the top is filthy. Many communities have therefore expressed concern about their water quality.

Another major fear is that the production process is more carbon-intensive than that of developing conventional natural gas. And that unease has been underscored by the International Energy Agency in France that cautions against unguarded heat-trapping emissions and is suggesting more investment in clean technologies.

According to the BP Energy Outlook, global energy consumption will rise by 1.7 percent a year until 2030. The contribution to energy growth of renewables from solar, wind, geothermal and biofuels is predicted to increase from 5 percent in 2010 to 18 percent by 2030.

At the same time, the outlook says that natural gas is projected to be the fastest growing fossil fuel while coal and oil are likely to lose market share as all fossil fuels experience reduced growth rates. Fossil fuels’ contribution to primary energy growth is projected to fall from 83 percent to 64 percent.

An advisory board that includes Yergin reported in the fall to the U.S. Department of Energy that jitters centered on shale-gas development can be addressed by increasing the level of transparency: “Regulators will have more complete and accurate information, industry will achieve more efficient operations and the public will see continuous, measurable, improvement in shale gas activities.”

Shale’s rise will undoubtedly make a dent in the U.S. market place. Part of its ascent will come at the expense of coal and part will affect wind and solar. But if the country mitigates its risk by diversifying its energy interests, green power will also innovate and see an upswing in production.


EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Follow Ken on  www.twitter.com/ken_silverstein

energybizinsider@energycentral.com


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Comments

Shale overthrowing Coal?

I am not sure that the coal industry is going to take that large of hit from the "shale-boom". Although we may start to use natural gas for our energy needs, we will still need coal as well. In fact, we can probably expect a rise in the use of coal for the steel industry. That is because we need high quality steel in order to build the wells. That being said, we can also anticipate an economic boost from the shale-gas drilling as well. Particularly, this takes place right now in the trucking industry. People are requesting that the truck stops now have places to fill up on the much cheaper natural gas. If you would like to read the rest of the article that I found on this subject, I will provide it below. 

http://shalestuff.com/economy-2/shale-drilling-benefits-economy/

Will Shale Crowd Out Coal and Green Energy?

It is indeed wonderful to record shale gas potential.  BUT, one needs to be extra careful pushing this in a hurry and after the callous usage of fossil fuels and their  global impacts.

While it is good to have an alternate to fossil fuels, we need to note its restriction to USA & China, predominantly.  Even the slightest intention of its exploitation to global energy needs would open up a pandora's box of political, economical and environmental issues.

Since renewable seem to be doing well at this juncture, it is advisable to postpone shale gas proposal at least for the next decade to assess their need. 

Wrong Use of Shale Gas

I can understand the big rush to harvest gas from shale – more profits.  But why are we in such a hurry to deplete this valuable resource by using it for base load electrical generation?  The above article notes that there is at least a century’s worth of gas but at what rate of consumption?  We need to think hard about using gas, a portable source of energy better suited for powering transportation vehicles than it is to generate electricity.  

 

Jan. A. Radder

Shale Gas vs. Coal

I have already submitted “Shale Gas Friend or Foe” for publication in Energy Biz. Abstracting from my article, natural gas fired power plants cost 10% less to operate than coal-fired units and of converting coal-fired plants to natural gas is about the same as retrofitting to comply with USEPA requirements. Present price of Natural Gas is less than $4/MMBTU but as demand increases so will price. Projections range from 2013-2015 when Natural Gas may reach inflection point raising electricity costs to consumers. About one year ago [‘Natural Gas – Power Plants’ Fuel of Choice”], I warned against “putting on our energy eggs in the natural gas basket”.

Richard W. Goodwin West Palm Beach FL

Will Shale Crowd Out Coal and Green Energy?

Hi Ken

        Good article. However, I think the title should read "How Shale is Crowding Out Coal and Leading Green Energy".

The realities of our energy requirements are such that we need a bridge to the future right now. Shale gas (and oil) is that bridge.

Also, the chemicals in frac fluids represent less than 1% of total volume and flowback to the surface is never 100%. In fact, it is usually less than 25%. Also, all frac jobs being performed now are with reused water from previous frac stages.

 

Generating with natural gas

The really good features of generating with natural gas are related to the potential efficiency improvements, at least to my way of thinking.  By analyzing demand trends, developers can potentially build combined cycle gas turbine plants in properly sized power islands to maintain the most consistently high efficiencies.  This is a flexibility not inherent in coal-fired steam, gas fired steam, and large nuclear facilities.  (I do think we are missing the boat on not more actively pushing through small modular reactors which may have the potential of replacing coal-fired boilers in existing plants which still have significant remaining life in their turbine generators and balance-of-plant facilities.  SMR's have the potential to cycle parallel reactor units up and down with load.)

The point though about the efficiency of CCGT is that it reduces both the amounts of carbon dioxide emissions and the heat emissions on a per MWh basis.  The decrease in heat emissions means a decrease in water vapor emissions assuming the plant is using a cooling tower or open circuit cooling and, thereby, water usage.

Renewables cannot be relied upon to produce a steady power output and typically, neither wind nor solar is most available during the maximum peak usage period.  Therefore, these must be backed up with fossil-fueled power which generally means natural gas.  But the effects of subsidized renewables on wholesale power markets drives the developers to the lowest cost generation--either older, existing facilities which are less efficient or simple cycle gas turbines, also less efficient.  If we truly want to decrease carbon emissions while simultaneously maintaining or improving grid reliability and maintaining the affordability of electricity, the Feds are barking up the wrong tree using taxpayer money to stimulate wind and solar--in fact, they are actually hindering achievement of their stated goals.

Byron Wooldridge, PE