Natural gas market indicators

October 30, 2009 by Chris McGill · Leave a Comment
Filed under: Natural Gas

In keeping with the supply asset theme from the previous market indicators report, the Interstate Natural Gas Association of America released a report on October 20, 2009 that examines estimated midstream infrastructure requirements under various market scenarios. The report points to $130-240 billion that may be spent on midstream assets between now and 2030 ($6-10 billion per year) with about 80 percent targeting natural gas transmission pipelines.

Most of the pipeline infrastructure is suggested to connect new gas supply rather than to meet specific consumption increases. Two additional interesting components of the outlook include $50 billion in expenditures for connecting arctic gas to the North American grid and a baseline expectation of consumption growth to more than 31 Tcf per annum by 2030. This view is more aggressive for natural gas demand than the current Energy Information Administration outlook, which doesn’t exceed 25 Tcf by 2030.

In the near term, economic data suggests that we may soon see an end to the “official” recession, with a positive reading on third quarter Gross Domestic Product. Economic fundamentals (and their resulting impact on demand) have been a bit of a wild card in recent months, and if the economy heats up we may see renewed tightness in the supply/demand balance.

Visit this link to download the full Natural Gas Market Indicator. Topics covered include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

Tags: market indicators

More on energy efficiency and the White House

October 28, 2009 by Pam Lacey · 1 Comment
Filed under: energy

Last week, I posted my thoughts on how the White House Missed the Boat on Energy Efficiency. I also posted a link to that post on the LinkedIn Green Group of which I’m a member. I wanted to share the following comment from someone in the United Kingdom:

You are absolutely right in pointing out that electricity is a poor way to provide heat for our homes and buildings. Natural gas, though, is still a fossil fuel so the emphasis would be better placed on use of solar devices (maybe coupled with heat stores and/or heat pumps) to provide primary heat source with gas very much as a back up. As for electricity generation, users in the UK can source 100% renewable electricity from just one company: Good Energy (www.goodenergy.co.uk)

I also wanted to share my response.

I support renewables too. Unfortunately, the United States is not as far along as you are in the UK with renewables. Only 7% of our electric power comes from renewable energy. See U.S. Government web site for energy information.

Our recent economic stimulus legislation provided funding and incentives to expand wind and solar and to extend thousands of miles of electric transmission lines to connect the wind in the West to our urban areas on the coasts, but it will take some time before there is enough for a significant portion of our population to purchase 100% or anything near it in renewable-sourced electricity. In the meantime, there are some practical things we can do in the U.S. to make serious reductions in carbon emissions. We can install solar on our roofs, purchase renewable sourced electricity to the extent it is available, and install efficient natural gas water heaters (preferably tankless) and natural gas furnaces. Oh yes, and it would help if people lived close enough to their jobs to bike or walk to work, but that’s another topic…

Further carbon reductions can be achieved by installing the latest technology – natural gas heat pumps that provide hot water, heat and air conditioning.

And in a few years, it will be possible to use hydrogen in fuel cells, using the natural gas grid to deliver natural gas that can be reformulated into hydrogen, and capturing the carbon as a solid that can be “sequestered” in light weight carbon fiber bodies for cars and other products. They are already installing residential fuel cells in Japan, but they are still releasing the CO2 from the reformulators.

A recent break through could change that — A company called Atlantic Hydrogen has figured out how to capture the carbon from natural gas as solid carbon black.

Tags: efficiency

Offsets – one of the least exciting (and potentially most important) parts of climate legislation

October 27, 2009 by Mike Pomorski · Leave a Comment
Filed under: Natural Gas, energy

EPA released its analysis of S. 1733 (Kerry-Boxer) last Friday. Much media coverage (for example, this article in the New York Times) has focused on EPA’s finding that the legislation would have a small ($100 per year) financial impact on families.

The $100 impact, from page 19 of the analysis, is all well and good, but policymakers would do well to read page 20 also, specifically the section titled “Sensitivities to Offset Availability.”

One big reason why costs are contained is EPA’s belief that offsets will be widely available at reasonable prices. EPA writes that “all analyses that have looked at the issue have shown that the availability of offsets is one of the most important factors influencing allowance prices.”

Offset availability requires their processing and verification. Regarding the United States’ ability to process and verify these offsets, EPA writes that “there are many institutional design issues, including the measurement, monitoring, reporting and verification requirements, surrounding estimates of offset availability.”

That is quite an understatement. In Kerry-Boxer, these “institutional design issues” occupy almost 70 pages in Sections 731-744, and include (but are not limited to) the creation of an offset registry, quantitative modeling of additionality, leakage, reversals, a petition and approval process (including an appeals process), third party verification requirements, and a significant amount of inter-agency cooperation. These 70 pages do not determine which offset projects themselves are viable; they only describe the process to determine whether they are viable.

The offset process is an essentially brand new government function, for which EPA simply “assumes that the institutions are put in place to process the domestic and international offsets needed to realize reductions on the magnitude shown in the analysis.” All of the political, bureaucratic, and quantitative complexity of offset verification is assumed away.

If offsets are not available or are significantly delayed we can expect much higher costs. EPA cites an MIT study and writes that “the allowance price in the medium offsets case was 193% higher than the allowance price in the full offsets case.” These types of quantifications do not lend themselves to newspaper (or blog!) headlines, but there they are.

So remember, when you hear a low-cost estimate for Kerry-Boxer (or any other climate bill), ask yourself what is required for costs to be contained and whether those assumptions are realistic.

Tags: legislation