Natural Gas versus Coal - perhaps the UK experience revisited?

Back when North Sea oil and gas were discovered the British Coal Industry was a powerhouse in the land. Coal gas was used for domestic cooking, with the fuel generated by large gas works that dotted the landscape. Skip forward a little, and there was a massive campaign to convert the burners that had used coal gas over to a smaller size that allowed them to burn the natural gas becoming available from the North Sea. And with oil and natural gas coming ashore in increasing quantities the British coal industry rapidly faded from its peak to a fainter shadow of energy production, and coal gas became a historical item.

Coal gas is formed by the partial combustion of coal, natural gas (NG), on the other hand, occurs as a hazard in most coal mines. As the coal is mined the pressure comes off the coal, or it is fragmented, and the natural gas can escape. Once it reaches a certain concentration in the air it becomes explosive, and a heat source (a metal pick rubbing on sandstone for example) can ignite it, causing ignition of the gas, with a consequent disaster as those in the mine vicinity can be killed. Thus there are many precautions (which I will describe at another time) to stop that ignition, or to stop the flame from spreading very far.

But the natural gas can also be collected, and if it is collected in a purer form than that diluted by the ventilation currents of the working mine, it becomes a valuable resource, which the British miners now use to help power the mining process itself.

Sixteen generators are installed across 5 deep mine sites. These embedded generating sets are fuelled exclusively on mines gas. Some of the electricity generated is used at UK COAL sites representing a substantial energy cost saving.

However this harmonious use of the fuel projects a different attitude than that which existed as the National Coal Board died. And now that same struggle may be gearing up for a rematch in the United States, as the growing surplus of natural gas leads industry leaders to press Congress about forcing coal’s replacement with NG as part of the new Clean Energy Initiative. So far it hasn’t worked.

For all its pronouncements that gas could be used to replace aging, inefficient coal-fired power plants — and reduce greenhouse gas emissions in the process — lawmakers from coal-producing states appear committed to keeping coal as the nation’s primary producer of power.

However the folks at Chesapeake are now starting to face off against those of Peabody to try and influence the Senate version of Waxman-Markey. And the debate brings renewable energies into the picture, not necessarily to NG’s advantage. (Which is a little odd given that NG plants are generally considered the back-up power when the wind don’t blow or the sun don’t shine).

“By allowing free emission allowances to maintain coal production from existing coal plants, while providing mandates that there be more wind and solar, you squeeze gas out in the middle,” said William F. Whitsitt, an executive vice president at Devon Energy, a major natural gas producer.

This is not really something that it easily fixed in the marketplace, since the return on investment needed for the construction of a major power plant requires that there be a sustained market for the power produced, and concurrently a reliable cost-effective source of the fuel that will be required to generate the electricity for a significant portion of the plant lifetime.

Now the U.S. currently has a glut of natural gas. As a result futures have fallen to $2.508 per million Btu (give or take equal to 1 kcf). This has to start hurting some of the producers since, inter alia, Chesapeake has noted that it is costing them around $4.44 million to drill new wells in the Marcellus, a field in which they anticipate being the biggest player. The company is still very positive about that development – but notice the long-term price they are expecting to justify that optimism:

Based on drilling results by Chesapeake and others in the industry, the company has recently increased its targeted average EUR in the Marcellus from 3.75 bcfe per well to 4.2 bcfe per well. Assuming flat NYMEX natural gas prices of $7.00 per kcf (compared to a recent 10-year NYMEX strip price of approximately $7.02 per kcf), the company’s estimated pre-tax rate of return from a 4.2 bcfe horizontal Marcellus well drilled for $4.5 million is approximately 71% excluding the benefit of drilling carries and more than 1,000% including the benefit of drilling carries.

Back in March Chesapeake was reducing its production from the Haynesville shale however, back then they were also predicting that the drop in drilling activity would produce results before the end of the year.

During March 2009, most Mid-Continent natural gas prices at major interstate pipeline delivery points will average around $2.70 per thousand cubic feet, a price at which most natural gas production is unprofitable. We believe low wellhead prices combined with constrained capital availability will likely cause U.S. drilling activity to decline well beyond the 40% drop already seen since August 2008. As a result, U.S. natural gas production will begin to dramatically decline before the end of 2009 and consequently natural gas markets will regain better supply/demand balance by the end of 2009, if not sooner.

Given the continued excess in the marketplace, it would be nice if the NG industry could find a reliable market of greater size in power generation. They have already managed to corner around 25% of that market – but as yet have not managed to convince folk, such as the manager of our local power plant (which is already constructed to burn natural gas, but which blanked off the nozzles) to switch back.

Perhaps he, like so many others, realizes that as soon as the glut goes away, and the short-lived nature of the gas shale wells being what it is, that will likely happen within the year, then the price will go back up, and it will become less economic than the current coal contract.

Hence the desire of the natural gas companies to get a little more assistance from Congress in the struggle for the future.

It depends on how well they sell, and how well the coal companies manage to resist. All tied up with the debate about climate change, which seems to be less certain with recent publications (in New Scientist among other places) suggesting that the globe may cool for a while before reheating, this could be an interesting debate. And perhaps one with less certain an outcome than the British experience.

Changing Light bulbs at the White House

Last Friday the House passed the Waxman Markey bill on energy and climate change, establishing, among other things a cap and trade system for carbon, although the details and the timing are not as yet such that the true impact of the legislation can be accurately estimated. I say that in part because the bill must be approved in the Senate and then the two versions reconciled, but also because I rather suspect that one the basic legislation gets put in place it will be modified and tweaked until something with a little more teeth finally emerges. Thus while the current step is significant, I don’t really expect that it will be close to what we ultimately have to live with.

But the Senate vote is not here yet, and after trying, with remarks, to help encourage the bill through the House, the President was in the Grand Foyer of the White House, this afternoon, with Secretary of Energy Chu to add a little more encouragement. He noted:

this is a moment where we've been called upon to cast off the old ways of doing business, and act boldly to reclaim America's future. Nowhere is this more important than in building a new, clean energy economy, ending our dependence on foreign oil, and limiting the dangerous pollutants that threaten our health and the health of our planet.

And that's precisely what we've begun to do. Thanks to broad coalitions ranging from business to labor; investors to entrepreneurs; Democrats and Republicans from coal states and coastal states; and all who are willing to take on this challenge -- we've come together to achieve more in the past few months to create a new, clean energy economy than we have in decades.

But his remarks today were more than just an encouragement to the Senate to get on board after the House action, he also announced an effort by the Department of Energy to increase energy efficiency of appliances. He started with light bulbs, which he noted were more financial rewarding that might at first appear

The first step we're taking sets new efficiency standards on fluorescent and incandescent lighting. Now I know light bulbs may not seem sexy, but this simple action holds enormous promise because 7 percent of all the energy consumed in America is used to light our homes and our businesses. Between 2012 and 2042, these new standards will save consumers up to $4 billion a year, conserve enough electricity to power every home in America for 10 months, reduce emissions equal to the amount produced by 166 million cars each year, and eliminate the need for as many as 14 coal-fired power plants.

The President went on to talk about the need to impliment technologies that will improve the efficiency of buildings -

We're talking about technologies that are available right now or will soon be available -- from lighting to windows, heating to cooling, smart sensors and controls. By adopting these technologies in our homes and businesses, we can make our buildings up to 80 percent more energy efficient -- or with additions like solar panels on the roof or geothermal power from underground, even transform them into zero-energy buildings that actually produce as much energy as they consume.

He ended with a comment that I will also quote, but which (when juxtaposed to apply to the climate change debate) could equally apply to the tactics of his supporters.

But the fact is we're not lacking for ideas and innovation. All we lack are the smart policies and the political will to help us put our ingenuity to work. And when we put aside the posturing and the politics; when we put aside attacks that are based less on evidence than on ideology; then a simple choice emerges.

We can remain the world's leading importer of oil, or we can become the world's leading exporter of clean energy. We can allow climate change to wreak unnatural havoc, or we can create jobs utilizing low-carbon technologies to prevent its worst effects. We can cede the race for the 21st century, or we can embrace the reality that our competitors already have: The nation that leads the world in creating a new clean energy economy will be the nation that leads the 21st century global economy.

I would disagree about the level of ideas and innovation that are really out there. Many of the new ideas get caught in the net of surveys carried out by blogs and newspapers seeking new topics for stories. Thus if the idea is out there and viable then in today’s electronic age odds are that we would be hearing of the potential. (We hear a surprising amount of what is going on from quite a few people thanks to the grace of e-mail etc). From that there really are not that many outside-the-box creative ideas that are that dramatic, and yet likely to succeed in changing the way the world gets energy.

It is easy to say that we have these talents and dedicated engineers, but we don’t have enough of them, and the protocols can slow rather than accelerate developments. Many of the new ideas have been submitted to NSF who must now review them on their merits to select the best. NSF does this with physical panels of folk that meet, and discuss a set of the proposals over a day, generally ranking the proposals with only the top one, historically, being in the ballpark to get funding. Now with all the packages, the numbers of proposals have driven dramatically (into the thousands) and still the panels must meet and evaluate. But the numbers of people not involved in one proposal or another rise to a higher level of the available scientific populace, given the new opportunity, so finding the right reviewers and dividing up the proposals into packages of a reasonable size, is likely to be a huge undertaking, especially with the demand for rapid decisions in order to get the money from the Stimulus out into the community. (So raise your glass to those willing to serve on those panels (I may be one) since it is otherwise a relatively thankless job with little tangible reward). And I am also a little cynical that we will see many truly innovative ideas. I would be delighted to be proved wrong, but when the dust settles I fear that all we will see is more of the same.

To finish on a personal note, we did take delivery of the Fusion Hybrid this afternoon, and are still trying to remember which button operates what. It looks very much on a par with the Camry apart from the TV camera that comes on when you are backing up, and the collision alarm when there is a car/truck in your blind spot. Both have proved their value already. Now if we could just work out how to play music . . . . .

If you claim to be scientific, then be so

When I was taught basic science and engineering it was understood that if you proposed a hypothesis, or theory, and ran an experiment where the results went against the theory, then the theory was wrong. It is a precept I have used all my professional life to help lead a technology from being some lab curiosity to the point where it is a multi-billion dollar industry, with still more potential applications poised to move it into a second generation of growth. We did this by getting some ideas, and then running experiments to see if they worked, and then, when the results showed the original idea wrong, modifying our ideas, and then trying another experiment.

Under the modern penchant for description it is a process that is being referred to as the “scientific method,” albeit to us it was just a logical way of making progress. To make progress one must constantly be willing to look at the data, and re-analyze the underlying concept you have been applying as more data becomes available. Sounds logical doesn’t it. And yet that is not what one has seen, or is likely to see in the future, when folk discuss the drivers for what may, or may not be, the warming of our planet.

Back 20 years ago Dr Hansen of the Goddard Institute for Space Studies (GISS) gave testimony before Congress that suggested, given the increasing levels of carbon dioxide in the atmosphere, that the world temperature would continue to rise, as this gas forced retention of a greater percentage of the solar radiation that the Earth was receiving. Spring forward a decade and that warming is no longer occurring. Proponents of the idea have gone from touting each year as being hotter than the last, to muttering that the last 10 years have been the hottest on record (while failing to mention how short that record really is) and with global temperatures falling even that “ten-year” ploy is likely soon to be no longer accurate. But does that cause the world to pause and consider that, perhaps, the global warming theory is wrong. Not at all, suddenly scientific thinking on the subject is closed. That step, and the unwillingness of the AGW proponents to engage in open rational debate, with all relevant data available for public scrutiny, should begin to get you worried.

Just this last week there are reports of an EPA official suggesting that perhaps the EPA should consider what has happened in the last three years, not just the information available from before that time. And, in the mode of the Administration practice, he was of course quietly told to shut up and get on board with the plan. How easily we slip from outrage when this was suggested to be done to Dr Hansen, to accepting when it is done, and apparently got away with by the current EPA Administration.

The argument that is made at the “Real Climate” types of website is that all these issues have been raised and answered before, and that therefore, inter alia, no new information, except that supporting their arguments will be tolerated. And yet there is no scientific rebuttal given, no “here is the graph that proves you wrong!” No instead there are the ad hominem attacks that the proponent of this new question is not a “climate scientist.” The Wegman report noted how small the group of climate scientists are that seem to control the literature, and how incestuously they have interacted in writing papers and conducting research. Heaven forbid, apparently that anyone with an ounce of scientific training be able to look at a graph and determine whether it is rising or falling. We are however, literate and can read graphs that show among other things that Alaskan glaciers are advancing, but discussion of that is improper apparently without the right qualification.

But even with the right qualification, if your ideas on global warming are incorrect, then regardless of qualification and the knowledge that you have, your presence is unwelcome in the company of your peers. So it appears is the case of an expert on polar bears.

But one of the world’s leading experts on polar bears has been told to stay away from this week’s meeting, specifically because his views on global warming do not accord with the views of the rest of the group.

Dr Mitchell Taylor has been researching into the status and management of polar bears in Canada and around the Arctic Circle for 30 years, as both an academic and a government employee. More than once since 2006 he has made headlines by insisting that polar bear numbers, far from decreasing, are much higher than they were 30 years ago. Of the 19 different bear populations, almost all are increasing or at optimum levels, only two have for local reasons modestly declined.

Dr Taylor agrees that the Arctic has been warming in the past 30 years. But he ascribes this not to rising levels of CO2 – as is dictated by the computer models of the UN’s Intergovernmental Panel on Climate Change and believed by his PBSG colleagues – but to currents bringing warm water into the Arctic from the Pacific and the effect of winds blowing in from the Bering Sea.

I begin to become quite concerned that we are starting to see the deliberate suppression of scientific views and information, a deliberate withholding of information from the public on the realities of climate change, as opposed to what those now in power want us to believe, regardless of fact. There is a denial of the latest information, and a distortion of the record, such that folk don’t have to face the reality that the original hypothesis, that increased carbon dioxide levels produce accelerating global warming, is wrong.

We have just seen the Waxman:Markey bill pass the House with the prospect of a myriad regulations that will likely, despite the claims of the legislation, likely reduce employment in the county. Why, because as the regulation forces renewable energy sources not just to supply an increased demand for energy but to displace existing energy sources then we lay off those now working to supply that energy. Once a wind turbine is erected it does not take a climate scientist to realize that the number of folks employed from that point in feeding that power into the grid is close to zero. Contrast that with the miners who mined the coal, the railway workers who transported it, and the power station employees that ran the plant that converted it into electricity, all of whom now get laid off. Common sense tells you that this is a job reduction program, but then who said this whole effort was about logic and rational discussion?