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MIT Report Finds Natural Gas Has Significant Potential to Displace Coal, Reducing Greenhouse Gas Emissions; Role in Transportation More Limited

Natural gas will play a leading role in reducing greenhouse-gas emissions over the next several decades, largely by replacing older, inefficient coal plants with highly efficient combined-cycle gas generation, according to a major new interim report out from MIT.

In the transportation sector, the study found a somewhat smaller role for natural gas. The use of compressed or liquefied natural gas as a fuel for vehicles could help to displace oil and reduce greenhouse gas emissions, but to a limited extent because of the high cost of converting vehicles to use these fuels. By contrast, making methanol, a liquid fuel, out of natural gas requires much less up-front conversion cost and could have an impact on oil usage and thus improve energy security, but would not reduce greenhouse gases.

The two-year study, managed by the MIT Energy Initiative (MITEI), examined the scale of US natural gas reserves and the potential of this fuel to reduce greenhouse-gas emissions. Based on the work of the multidisciplinary team, with advice from a board of 16 leaders from industry, government and environmental groups, the report examines the future of natural gas through 2050 from the perspectives of technology, economics, politics, national security and the environment.

The Future of Natural Gas is the third in a series of MIT multidisciplinary reports examining the role of various energy sources that may be important for meeting future demand under carbon dioxide emissions constraints. The first two reports dealt with nuclear power (2003) and coal (2007).

A study of natural gas is more complex because gas is a major fuel for multiple end uses—electricity, industry, heating—and is increasingly discussed as a potential pathway to reduced oil dependence for transportation, the study team noted. The interim report just published is intended to contribute to the energy, security and climate debate. A full report with additional analysis addressing a broader set of issues will follow later this year.

The report includes a set of specific proposals for legislative and regulatory policies, as well as recommendations for actions that the energy industry can pursue on its own, to maximize the fuel’s impact on mitigating greenhouse gas. The study also examined ways to control the environmental impacts that could result from a significant expansion in the production and use of natural gas—especially in electric power production.

In the very long run, very tight carbon constraints will likely phase out natural gas power generation in favor of zero-carbon or extremely low-carbon energy sources such as renewables, nuclear power or natural gas and coal with carbon capture and storage. For the next several decades, however, natural gas will play a crucial role in enabling very substantial reductions in carbon emissions.

—MITEI Director Ernest J. Moniz

Two major factors that can make a significant difference in the near term in reducing carbon emissions are using less energy and using gas instead of coal—especially by replacing the oldest, least-efficient coal plants with the most-efficient modern combined-cycle gas plants, said Moniz, who chaired the study, along with co-chairs Henry Jacoby, Professor of Management, and Tony Meggs, MITEI Visiting Engineer. Professor Jacoby is co-director of the MIT Joint Program on the Science and Policy of Global Change.

The study found that there are significant global supplies of conventional gas. How much of this gas gets produced and used, and the extent of its impact on greenhouse gas reductions, depends critically on some key political and regulatory decisions.

In the United States, for example, there is a substantial amount of low-hanging fruit available by displacing inefficient power generation with more efficient, lower CO2 emitting gas plants.

That kind of substitution alone reduces those carbon emissions by a factor of three. It does however raise complicated regulatory and political issues that will have to be resolved to take advantage of this potential.

—Ernest Moniz

Some of the study’s other key findings:

  1. The United States has a significant natural gas resource base, enough to equal about 92 years’ worth at present domestic consumption rates. Much of this is from unconventional sources, including gas shales. While there is substantial uncertainty surrounding the producibility of this gas, there is a significant amount of shale gas that can be affordably produced.

    Globally, baseline estimates show that recoverable gas resources probably amount to 16,200 trillion cubic feet (Tcf)—enough to last over 160 years at current global consumption rates. Further, this global resource figure, excluding the US and Canada, does not include any unconventional gas resources, which are largely uncharacterized in the rest of the world. Russia, the Middle East, and the US have the highest concentration of global gas reserves.

    In the US, unconventional gas resources are rapidly overtaking conventional resources as the primary source of gas production. The US currently consumes around 22 Tcf per year and has a gas resource base now thought to exceed 2,000 Tcf.

    In order to bring about the kind of significant expansion in the use of natural gas identified in this study, substantial additions to the existing processing, delivery and storage facilities will be required in order to handle greater amounts and the changing patterns of distribution (such as the delivery of gas from newly developed sources in the Midwest and Northeast).

  2. Environmental issues associated with producing unconventional gas resources are manageable but challenging. Risks include: Shallow freshwater aquifer contamination with fracture fluids; surface water contamination by returned fracture fluids; excessive demand on local water supply from fracturing operations; and surface and local community disturbance, due to drilling and fracturing activities.

  3. Natural-gas consumption will increase dramatically and will largely displace coal in the power generation sector by 2050 (the time horizon of the study) under a modeling scenario where, through carbon emissions pricing, industrialized nations reduce CO2 emissions by 50% by 2050, and large emerging economies, e.g. China, India and Brazil reduce CO2 emissions by 50% by 2070. This assumes incremental reductions in the current price structures of the alternatives, including renewables, nuclear and carbon capture and sequestration.

  4. The introduction of large intermittent power generation from, for example, wind and solar, will have specific short and long term effects on the mix of generation technologies. The short term effects (meaning daily dispatch patterns of various fuels) of large amounts of wind generation for example will reduce gas generation significantly and could force baseload coal plants to cycle, an outcome which is highly undesirable from an operational perspective.

    In the longer term, the reliability of a system in which renewables assume a baseload role in power generation will require additional flexible natural gas peaking capacity, although this capacity may be utilized for only short periods of the time. Renewables as baseload power, firmed by natural gas generation, will require new regulatory structures to ensure reliability of the system and incentivize the building of flexible gas capacity.

  5. The overbuilding of natural gas combined cycle plants starting in the mid-1990s presents a significant opportunity for near term reductions in CO2 emissions from the power sector. The current fleet of natural gas combined cycle (NGCC) units has an average capacity factor of 41%, relative to a design capacity factor of up to 85%. However, with no carbon constraints, coal generation is generally dispatched to meet demand before NGCC generation because of its lower fuel price.

    Modeling of the ERCOT region (largely Texas) suggests that CO2 emissions could be reduced by as much as 22% with no additional capital investment and without impacting system reliability by requiring a dispatch order that favors NGCC generation over inefficient coal generation; preliminary modeling suggests that nationwide CO2 emissions would be reduced by more than 10%. At the same time, this would also reduce air pollutants such as oxides of sulfur and nitrogen oxides.

  6. A global “liquid” market in natural gas in which supply sources are diverse and gas prices are transparent, set by supply and demand with price differences based on transportation costs, is desirable for US consumers.

    There are currently three regional gas markets—North America, Europe and Asia—which have very little integration and which rely on completely different pricing structures. Modeling suggests that the integration of these markets would result in substantially lower consumer prices for US consumers.

The study makes many recommendations regarding the role of natural gas in a carbon-constrained world, suggesting that policy makers should consider supportive policies in the following areas:

Supply

  • Require disclosure of all components of hydraulic fracture fluids.
  • Require integrated regional water usage /disposal plans for unconventional gas production.
  • Support renewed DOE R&D program weighted towards basic research and “off-budget” industry-led program weighted to technology development, demonstration, and transfer. Programs should be designed to optimize gas resources and ensure that they are produced in environmentally sound ways.

Power generation

  • Pursue displacement of inefficient coal generation with natural gas combined cycle generation.
  • Develop policy and regulatory measures to facilitate natural gas generation capacity investments concurrent with the introduction of large intermittent renewable generation.

Transportation

  • Remove policy and regulatory barriers to natural gas as a transportation fuel.

Global markets

  • Support polices to foster an integrated global gas market, including the integration of natural gas issues into the foreign policy apparatus, with strong involvement of the Executive Office of the President, supported by a strengthened natural gas policy apparatus at the Department of Energy.

  • Export US knowledge in unconventional gas characterization and production to nations that can advance US strategic interests.

While the new report emphasized the great potential for natural gas as a transitional fuel to help curb greenhouse gases and dependence on oil, it also stresses that it is important as a matter of national policy not to favor any one fuel or energy source in a way that puts others at a disadvantage. The most useful policies, the authors suggested, are ones that produce a truly “level playing field” for all forms of energy supply and for demand reduction, and thus let the marketplace, and the ingenuity of the nation’s researchers, determine the best options.

Illustrating the role of natural gas as a bridge to a low carbon future, the study’s authors stressed that it would be a mistake to let natural gas crowd out research on other low- or no-carbon energy sources, but it would also be a mistake to let investments in such alternatives crowd out the expansion of natural gas resources in the near term, particularly for the purposes of CO2 emissions mitigation.

The study received support from the American Clean Skies Foundation, Hess Corporation, Agencia Nacional de Hidrocarburos of Colombia, and the Energy Futures Coalition and the MIT Energy Initiative. The report issued this week is a preliminary overview of a more detailed report that will be released later this year.

Resources

Comments

jcwinnie

In the past, to slur someone, you would say, "Your mother wears combat boots." Now, it would be, "Your mother goes to MIT."

Search for Tony Meggs, listed as MITEI Visiting Engineer, and you find him listed as Group Vice President for British Petroleum.

American Clean Skies Foundation, which provided support for the study, was founded by Aubrey K. McClendon, the billionaire CEO of Oklahoma City-based Chesapeake Energy Corp., one of the country's top sellers of natural gas.

kelly

It does age to read reports about 90 years of one energy
reserve and 100's of another - yet we remain oil addicted.

HarveyD

The majority already knew that NG pollutes less than coal. Higher cost is the problem for large users such as power generating plants. One way to put coal and NG on the same (cost) footing would be to introduce a carbon and other pollutants tax. This approach could also benefit the introduction of other clean power generating facilities such as Solar, Wind, Hydro etc.

ejj

This weekend, Exxon Mobil just finalized their acquisition of XTO Energy in Fort Worth, a leading nat gas company. With XTO now on Exxon Mobil's books, look for Exxon Mobil to start influencing governments around the world to increase ways nat gas is used and consumed to drive up the price, which has been beaten down big time. They are also going to begin more foreign nat gas development projects. The supply is there now in the US and will be there soon elsewhere --- now they have to create more demand to get a return on their investment in XTO.

ToppaTom

Natural gas prices have been beaten down big time by supply from oil wells and oil companies.

Look for those who want to reduce oil imports, those who wish to reduce greenhouse gases, MIT and Exxon Mobil to all push natural gas usage.

Increased consumption will tend to drive prices up but the supply here now in the US and soon to be more here and elsewhere will drive it down.

More demand will ensure natural gas producers get a return on their investments and create more supply.

Aussie

I think MIT have overlooked an important point, namely that truckers are already paying several times as much per energy unit for diesel as electrical power companies pay for gas. If they switch from diesel to CNG they will outprice the power companies who I believe currently enjoy gas prices of around $4 to $8 per mmbtu or gigajoule. Outside the US diesel works out more like $40 for that amount of energy. This will put such a price hike on gas I see no way that most electricity will be made with gas by 2050, unless the world economy shrinks a whole lot. Already Norway and Saudi Arabia are talking of conserving gas some 40 years earlier than that.

I suggest most electricity should be made with nuclear power with just a small amount of gas peak load. Save gas for CNG, ammonia, process heat and so on.

Engineer-Poet

The planning horizon for nuclear is so long there is no way it can make a major dent in gas demand anytime soon. The USA already has all the initial paperwork for every plant that will be operating by 2020. Absent radical changes in the regulatory system, this will continue. I don't like it (I'd rather we could flip the switch on factory-built LFTRs 2 years after planning starts), but that's what we've got here.

Wind farms go from site plan to fully built in 18 months. That's where the offset of gas demand is going to be for the next 10 years.

SJC

Trucks could use CNG/diesel to save money, clean the air and reduce oil imports. Once the fuel budget is looked at the conversion can be paid back in only a few years.

Kit P

I suspect E-P does not remember when oil was used to make electricity at the same share that NG does today. It took ten years for new nuke to replace the oil generation.

It takes the same amount of time for an EIS for wind, nuclear, coal, or NG. It does take a about two years longer to get a design certification for a new nuke design but that is a one time process at the NRC now.

A new 1600 MWe nuke will have a 95% capacity factor. It takes about 3 years to pour the concrete for such a large plant. You may be able to poor the concrete and erect 200 MWe of wind capacity in 18 months after the permits are in hand but it will only have a 33% capacity factor. Nuke plants last 60 years and wind turbines about 10 years if that.

Finally, the best wind resources are not near where electricity is consumed. The hardest thing in the energy world to get built is new power lines.

Engineer-Poet
I suspect E-P does not remember when oil was used to make electricity at the same share that NG does today.
You're wrong about that, as you are about most things. You also read poorly.

As of 12/31/08, there were 25 reactor license applications in the USA. That's around 30-35 GW of new capacity, or around 250 TWh/yr at 90% capacity factor. Wind is going to contribute at least half that much by 2015, and probably an equal amount before 2020. Wind will cut into the expansion of gas we've had lately, while the nuclear will take a bite out of coal.

Arne

@Kit P:

Some reactors under construction in the Western world:

- Olkiluoto 3. License issued in 2000. Commissioning expected somewhere in 2012. But that date has been postponed quite a few times, so there's no guarantee that it will be ready. Actually, it is to be expected to be postponed again a few times. That's 12 years.

- Japan: Shimane 3 and Ohma 1. Both have an estimated construction time of 6 years.

- Flamanville 3 (France): start of construction 2007, expected commissioning 2012.

Quite a bit longer than your optimistic 3 years.

Arne

Additionally, there is 1 reactor currently under construction in the USA: Watts Bar 2. Construction had started way back in the previous century, but was halted. Construction resumed in 2007 and it is expected to come on-line in 2013. That's six years too (for a partial build).

Kit P

Anne

I was referring to the time it takes to pour concrete. I find pictures of construction of foundations for wind turbines (later mostly covered) and reactor buildings similar just different scale.

It does take a long time and a lot of money to bring power plants on line. I will be happy to talk about 104 nuke plants producing 20% of US electricity at the lowest average cost most of which are over 20 years old.

But first Anne I want you to tell me about the electricity 20 year old wind turbines are still running today. Since nukes do a very good job of making electricity when people need it and last 60 years, you may want to avoid comparisons with wind which is a terrible way to make electricity and do not last very long.

I think that we should continue to build wind farms as fast as we can. I will be very happy if reliability of this generation of wind turbines improves.

HarveyD

The world (and USA's) power mix will change every decade or so. Coal is at its peak (50% in USA) and will gradually be replaced by NG, Nuke, Wind, Solar in the next 4 or 5 decades.

In the longer run (2050/60-2100), NG power plants will also be gradually replaced by Nuke, Wind and Solar. What percentage will come from those 3 sources? It may be very different between individual countries. China and EU may eventually be more with Nuke. USA and Canada may have closer split due to the availability of sunny places in USA and wide isolated areas with excellent winds in Canada. Very high DC voltage power networks could be used to extend the area (North-South and East-West) and power availability 24/7. E-power sharing between USA and Canada will become a major trade item.

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