For the past three years, promoters of shale gas and environmentalists opposed to coal-fired power plants have hailed the sudden abundance of U.S. natural gas as a bridge to a renewable-energy future.
But natural gas has become so cheap that many energy experts and environmentalists now wonder whether it will turn into a long, bumpy detour.
The ‘game-changing’ effect of shale gas.
U.S. natural gas prices, which hit more than $13 per thousand cubic feet in 2008, have tumbled to about $2.50 per thousand cubic feet. Rapidly rising production of shale gas and a warm winter have created a glut and pushed supplies in storage to 21 percent above the average of the past five years.
That has been good news for consumers, whose gas and electric bills have declined slightly. And it is a hopeful sign for the chemical industry, which uses gas as a raw material, and the makers of electric vehicles. President Obama is promoting the use of natural gas in trucks. And since burning natural gas emits half the greenhouse gases of burning coal, it could cut the quantity of climate-changing emissions.
Markets in turmoil
But cheap gas has also thrown energy markets into turmoil. It is impossible for almost any other source of electric power to compete, especially coal and nuclear. By trimming fuel bills, cheap gas has reduced incentives for energy conservation and efficiency. And it has left solar and wind, despite their own falling costs, heavily dependent on government mandates in California and roughly 30 other states, including Maryland.
“Shale gas has changed the game in the United States,” said Paul Browning, head of General Electric’s thermal-products division, which makes gas turbines. “It is putting pressure on other power generation technologies.”
The shale gas rush has raised myriad environmental issues over wastewater disposal, the toxicity of chemicals used to produce the gas, a possible link to earthquakes, and the amount of potent methane gas that escapes during drilling, possibly offsetting the climate benefits of gas over coal.
But the economic issue is disruptive, too. The rush to produce shale gas “is forcing all of us to seriously address what it means for us,” said Ralph Izzo, chief executive of Public Service Enterprise Group (PSEG), a New Jersey-based utility that relies on nuclear energy for half of its power supply. Izzo said it would mean “the delay of the nuclear renaissance for years to come.”
Coal use is fading. PSEG is increasing natural gas’s share of its power generation mix from 15 to 35 percent and shrinking coal’s share from 35 to 15 percent. In North Carolina, Duke Energy’s new Buck natural gas plant is producing power 30 percent cheaper than the company’s renovated Belews Creek plant, one of the most efficient coal plants in the country.
Even gas-producing companies are cutting back because of the glut. Chesapeake Energy, a leading shale gas company, said Jan. 23 that it will cut the number of rigs drilling for gas to 24, a third of its average in 2011. Chesapeake also said it would curtail its natural gas production by about 8 percent. Exxon Mobil said Tuesday that it has maintained its 70-rig U.S. fleet but doubled the percentage of rigs searching for oil instead of gas.
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