Switching electric generation from coal to natural gas is the only way the US can meet carbon-reduction goals, says a new Deutsche Bank analysis.
Mark Fulton, managing director and global head of research for Deutsche Bank Climate Change Advisors, told the US Association of Energy Economists conference in Washington DC on October 11 that “renewables alone cannot do the job,” though the study indicates wind and solar will play important roles. The October 2011 report, titled “Natural Gas and Renewables: The Coal to Gas and Renewables Switch is on!” can be downloaded here.
Fuel switching is both relatively easy and economical, he said. Pending EPA regulations of coal pollutants, including mercury, will force up the cost of retrofitted coal to 6-9 cents per kilowatt-hour (from a current average around 3 cents), making natural gas competitive up to $6 per million Btu, and possibly up to $8/mmBtu.
At the latter price, Fulton said, US shales hold 50-100 years of economically recoverable reserves.
New coal is expected to cost 10-14 cents/KWH, he said, and with popular health concerns, new coal is probably impossible. So is nuclear, he said, with safety worries spawned by Fukushima.
Fulton said some 35 gigawatts of US coal generation are at risk of being shut under the new EPA rules, but “over half can be replaced” by fuel-switching. Moreover, he noted, initial replacements can be made by running existing gas capacity more efficiently, with new builds not needed for several years. The study foresees 38% of US electricity coming from gas in 20 years, up from 23% now.
The US has 60 GW of coal capacity that’s over 65 years old with efficiency running over 13,000 Btu/KWH, a level he termed “crazy” when new combined-cycle natural gas plants can produce at 8,000 Btu/KWH or better.
“How long are we going to let this pollution go on?” he asked.
Both wind and solar are coming closer to cost parity with other electricity sources, he said. Wind may achieve that mark in some regions in as little as two years.
Fulton said his study does assume some technology breakthroughs will be made in areas like storage that will enable more renewables, and pointed to new approaches such as General Electric’s design combining wind and gas turbines.
Douglas Arent of the National Renewable Energy Laboratory pointed to government and industry projections that put wind integration costs, for reserve power to compensate for its variability, below $5 a megawatt-hour. He said much of integrating wind consists of “understanding its variability” and being better able to predict it.
Fulton said the Deutsche Bank study projects that solar will become economic in the next decade becomes far more important in the next decade, as analysts assume storage breakthroughs – being worked on by universities, government labs, and private companies – will make solar thermal power “really economic.”
“By 2100, the planet will be powered by solar,” he said.
Regulation Can Protect Fracking
Fulton said his team had looked at the life-cycle carbon impact of natural gas including fracking, and found it “much, much cleaner than coal.”
“Even with fracking, it’s 47% better than coal” for CO2 emissions, he said, as long as fracking is “handled properly.”
With best practices, both water resources and fugitive methane emissions can be well managed, he said.
The industry as a whole is fighting any new regulation, especially from the federal level, but he said reasonable regulation could control the offenders without penalizing responsible producers.
Photo Caption: This photo taken on September 29, 2009 shows the pilot site of a coal plant with carbon capture and storage (CCS) technology at the Mikawa power station at Omuta, Fukuoka prefecture, on Japan’s southern island of Kyushu.