From the No Schist, Sherlock Files: "Despite climate risks, utilities bet big on natural gas…"

Guest post by David Middleton

For the fossil fuel industries, 2016 has been a terrible year.

Amid historically low commodity prices and stricter environmental regulations, coal companies went bankrupt, oil and gas rig counts slumped, and utilities retired fossil generators like they’re going out of style.

But amid the struggles, one fossil asset class remains prized: gas pipelines. Earlier this month, oil giant Enbridge announced it would pay $28 billion for gas pipeline company Spectra, creating the largest energy infrastructure company on the continent.

Utilities are getting in on the act as well. In the last 12 months, Duke Energy unveiled plans to buy distributor Piedmont Natural Gas, Dominion announced it would buy Questar, ConEd dropped $975 million on a gas pipeline venture, and Southern Co. finalized its merger with AGL Resources.

These mergers indicate at least some perceived value in the sector, but power companies are investing directly. Dominion and Duke are working with gas companies on the giant Atlantic Coast Pipeline, utilities in the Northeast are pushing to build their own gas transportation, and regulated utility Florida Power & Light was even investing directly in Oklahoma shale gas production until the state Supreme Court struck that down in May.

The interest in gas pipelines reflects a widespread expectation that natural gas consumption is set to grow over the next few decades. In May, EIA estimated gas consumption will rise about 1% a year through 2040, increasing to 34 trillion cubic feet (Tcf) from 28 Tcf last year.

Much of that growth is expected to come from growing power sector demand. EIA expects 8 GW of gas generation capacity additions in 2016, reflecting this recent trend. From 2000 through 2015, the U.S. added 284.36 GW of gas capacity — nearly 70% of the 410.28 GW of total utility-scale capacity added to the grid.

Over the past five years, lower gas prices have allowed utilities to run their coal plants less often, helping the power sector reduce harmful air pollutants, including CO2, to near 1990 levels. And thanks in part to gas, even most of the 27 states challenging the Obama administration’s Clean Power Plan are in agood position to comply.

But if natural gas is helping the U.S. power sector meet its environmental goals today, its ability to do so in the future remains shrouded in doubt. In particular, climate researchers are concerned that if utilities continue investing in natural gas assets at the current rate, the power sector will not be able to meet climate goals under the Paris Climate Accord, ratified this month by more than 30 nations and expected to go into force next year.

“This sort of relentless growth in gas demand is out of sync with the nation’s climate goals,” Lorne Stockman, author of a recent report on gas infrastructure from environmental group Oil Change International, told Utility Dive. “We have to start actually applying a carbon budget to our planning because if we build infrastructure today that we can’t afford the emissions from in 10, 20 or 30 years, then we’re essentially building infrastructure we can’t afford to use to the end of its economic life.”

[…]

Continued on Utility Dive

I love this bit:

Scientists say the U.S. can’t build much more fossil fuel infrastructure if it wants to meet the Paris climate goals. So why are utilities going all-in on gas?

How dare those evil utility companies ignore the warnings of “scientists”!!!

And this bit:

In particular, climate researchers are concerned that if utilities continue investing in natural gas assets at the current rate, the power sector will not be able to meet climate goals under the Paris Climate Accord, ratified this month by more than 30 nations and expected to go into force next year.

“This sort of relentless growth in gas demand is out of sync with the nation’s climate goals,” Lorne Stockman, author of a recent report on gas infrastructure from environmental group Oil Change International, told Utility Dive. “We have to start actually applying a carbon budget to our planning because if we build infrastructure today that we can’t afford the emissions from in 10, 20 or 30 years, then we’re essentially building infrastructure we can’t afford to use to the end of its economic life.”

Note to “climate researchers”: The Paris Climate Accord isn’t worth the paper it’s written on in these United States.  It was never submitted to the Senate for ratification as a treaty.  It is not legally binding on anyone in these United States, not even evil utility companies.

Note to Lorne Stockman: Who the Hell is “we”?   *We* don’t “have to start actually applying a carbon budget to our planning.”  Utility companies have to do what is in the best interests of their owners (usually shareholders); not what is in the best interests of the current occupant of the White House, the IPCC or environmental terrorists  activists.

For utilities, gas benefits often outweigh climate risks

Utilities and the gas industry often bristle at framing natural gas as an environmental problem. The explosion of gas production in the last five years has enabled historic carbon reductions in the electricity sector, they rightly say.

“The United States is leading the world in the production of oil and natural gas and in the reduction of carbon emissions which are near 20-year lows,” Michael Tadeo, spokesperson for the American Petroleum Institute, wrote in a statement to Utility Dive. “Greater use of clean, affordable natural gas along with our industry’s investment in new technologies has made this possible. Moving forward, it’s critical that our nation’s leadership on these important issues continue for generations to come.”

[…]

Conflicting priorities

Despite the risks it presents to shareholders and the environment, utilities continue to invest in gas because of its low cost and reliability.

“We don’t agree with the premise that it makes economic or, in a lot of cases, technical sense at the moment to abandon natural gas,” Nipper said, reflecting other utility comments. “We still need baseload generation, and renewables cannot provide that. We’re just not there yet on the storage and other pieces of the technology framework necessary to make that happen.”

[…]

Stockman and other environmental groups say there is enough fossil fuel generation on the U.S. grid to support the expansion and integration of renewable energy, though some localized regions are exceptions.

Many utilities dispute that. But even if there are alternatives to new natural gas infrastructure, investing in the resource appears quite lucrative for many power companies today.

[…]

Note to Lorne Stockman: How could you know that “there is enough fossil fuel generation on the U.S. grid to support the expansion and integration of renewable energy”?  And what in the Hell makes you think that utility companies would build gas infrastructure “to support the expansion and integration of renewable energy”?  Anyone with at least two functioning synapses between their ears would understand that utility companies have a far better perspective on how much gas infrastructure they need than would “climate researchers.”

The Raison D’être for Destroying Our Energy Infrastructure

In a March 2016 study in Applied Energy, Oxford University researchers introduced the idea of a “2°C capital stock,” describing a “stock of infrastructure that implies future emissions consistent with a 50% probability of a peak global mean temperature increase of 2°C or less.”

Assuming the transportation sector and other industries are on their way to the 2° target — and they are not — researchers found that the global power sector will reach that capital stock next year.

“Our core result is that for a 50% probability of limiting warming to 2°C, assuming other sectors play their part, no new investment in fossil electricity infrastructure (without carbon capture) is feasible from 2017 at the latest,” researchers wrote, “unless energy policy leads to early stranding of polluting assets or large scale carbon capture deployment.”

Given that emissions continue to rise from other sectors, Oxford researchers wrote that we have probably actually hit that capital stock already.

If other sectors only decrease emissions following a path to 480-530 parts per million (ppm) of CO2 in the atmosphere, as opposed to the 430-480 ppm plan of the Paris Accord, “the 2°C electricity capital stock was installed in 2011,” researchers wrote. And if realized emissions from other sectors follow a pathway to above 530 ppm, “new electricity generating assets needed to be zero carbon long ago to meet the 2°C (50% probability) target.”

For utilities, the upshot of this growing body of research is that the U.S. government will likely have to take more aggressive binding action to bring the U.S. back into alignment with the Paris Accord at some point — at least, iffuture administrations intend to keep the promises brokered by Obama.

That’s not a done deal, of course, and there’s a chance that utilities may never face stronger regulations. As Michael Dobson, a former climate advisor for the Marshall Islands, recently wrote, fossil fuel companies are currently “pricing in” the possibility that Trump will win in November and “the fragile, hard-won consensus on global climate action will evaporate soon after; and that investments in oil, gas, and … coal might not be such bad bets after all.”

But barring an about-face on climate policy, meeting the U.S. goals will likely require legislative action or another round of carbon regulations, meaning gas plants and pipelines being built today could be rendered inoperable before their full lives.

 

It’s the Schneiderman shtick: Utility companies somehow have a responsibility to comply with regulations future congresses might impose… 

If other sectors only decrease emissions following a path to 480-530 parts per million (ppm) of CO2 in the atmosphere, as opposed to the 430-480 ppm plan of the Paris Accord, “the 2°C electricity capital stock was installed in 2011,” researchers wrote. And if realized emissions from other sectors follow a pathway to above 530 ppm, “new electricity generating assets needed to be zero carbon long ago to meet the 2°C (50% probability) target.”

Using BP’s Statistical Review of World Energy 2015, I built a “model.”

This “model” derives two equations:

1. CO2 (ppm) = 0.0002*(MTOE) + 320.87 (R² = 0.9986)
2. MTOE = 142.16*(Year) – 275,639 (R² = 0.9698)

Note:  MTOE = Millions of Tonnes of Oil Equivalent.

Note to nitpickers:  Yes, I know the top and bottom charts and equations 1 and 2 should have been listed in the opposite order.

These two equations enable me to project fossil fuel use and atmospheric CO2 into the distant future (beyond my retirement date… which with oil at $45/bbl is either very far off in the future or sooner than I would prefer).  Using the assumption that the mix of crude oil, natural gas and coal would remain at a constant ratio (that of the period 2005-2014), I come up with an atmospheric CO2 concentration of 683 ppm in 2100, about half of RCP 8.5 (Venus) and comparable to RCP 4.5 (non-catastrophic).

To better reflect reality, I looked more closely at the evolution of the ratio of crude oil, natural gas and coal in the fossil fuels mix and I noticed that natural gas and crude oil exhibit very robust trends…

Combining my previous method of projecting total fossil fuel use and the trends in Figure 3, I came up with this…

No doubt Peak Oilers will welcome the return of Peak Oil some time around 2060.

Using BP’s numbers for carbon dioxide emissions…

oil – 73,300 kg CO2 per TJ (3.07 tonnes per tonne of oil equivalent)

natural gas – 56,100 kg CO2 per TJ (2.35 tonnes per tonne of oil equivalent)

coal – 94,600 kg CO2 per TJ (3.96 tonnes per tonne of oil equivalent)

I built carbon emissions scenarios for two cases:

1. Constant ratio of oil, gas & coal based on 2005-2014 averages (left).
2. Decreasing oil, increasing gas and relatively stable coal, based on trends in Figure 3 (right).

Based on a real world “business as usual” emissions scenario, with natural gas displacing oil at its current pace and no carbon tax, I come up with a CO2 right about inline with RCP 6.0, “a mitigation scenario, meaning it includes explicit steps to combat greenhouse gas emissions (in this case, through a carbon tax)“.

Then I took my real world “business as usual” relative concentration pathway and applied three reasonable climate sensitivities to it: 0.5, 1.5 and 2.5 °C per doubling of atmospheric CO2, starting at 280 ppmv (TCR 0.5, TCR 1.5 and TCR 2.5).  HadCRUT4, referenced to 1850-1879 is clearly tracking very close to TCR 1.5…

Since it is highly likely that t at least half of the warming since 1850 was not GHG-driven, the actual climate sensitivity would have to be significantly lower than 1.5 °C per doubling.

The real numbers tell us that the Venus line (+2 °C) will barely be nudged in a real world “business as usual” scenario.

The Only Pathway to Stay Well Below the Venus Line: N2N

Mr. Stockman and his ilk say they want to fight climate change.   Yet they vehemently oppose the only energy source which can economically provide a bridge to a lower carbon future.

If there actually was a need to fight climate change and they were serious about fighting it, they would be pursuing an N2N strategy (natural gas to nuclear).

The fastest, most cost effective, way to reduce carbon emissions would be to transition from coal to natural gas and nuclear power.

Real Clear Energy

Unless these zealots are incapable of basic arithmetic, I have to assume that their true motive isn’t saving the world from climate change.

“This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time, to change the economic development model that has been reigning for at least 150 years, since the Industrial Revolution.”

–Christiana Figueres, executive secretary of U.N.’s Framework Convention on Climate Change

Reference

RCP 8.5, Part Deux: “The stuff nightmares are made from.”