Natural gas has had an amazing run in the US, with production nearly doubling since 2005 while the price has fallen over 70%. The benefit of cheap natgas has flowed into US households and businesses. Gas demand is dominated by electricity production (35%), industrial use (33%) and residential electricity (17%). Gas plants can also ramp up and down quickly and support the integration of intermittent renewable energy sources like wind and solar.
The newfound gas is a by-product of fracking technologies rolled out 10-15 years ago that reinvigorated spent oil and gas fields in places like Texas, Oklahoma, Wyoming, North Dakota and Pennsylvania. Wells are drilled horizontally, pummeling shale rock with sand and water to get at oil and gas deposits, which come up together. The overabundance of natural gas and limited pipeline capacity means the gas is often vented or flared off. But shale wells have a much faster depletion rate than traditional wells, are expensive to drill and maintain (roughly $45 a barrel for the crude) and are vulnerable to price volatility. This last wave of shale drilling has been supported by companies borrowing heavily on last year’s gas price, which has collapsed with the onset of Covid 19 putting the US shale industry on the edge of bankruptcy.
Coal has dropped from 45% of US electric production in 2010 down to 24% in 2019 – and been mostly replaced by natural gas fired power (along with substantial renewable growth). The combustion of natural gas produces 50-60% less CO2 than coal per unit of energy, although the venting, flaring and leaking of natural gas/methane pushes actual emissions well above 50% of coal. Nevertheless, the big shift from coal to gas is a major reason US greenhouse gas emissions declined from over 7,000 million metric tons to less than 6,000 million metric tons over the past 5 years.
But natural gas is still highly additive to global emissions. It was responsible for 581 million metric tons of CO2 emissions in 2018, about 33% of US energy related emissions. Coal is still the largest emitter at 1,150 million metric tons but most of those plants will be decommissioned in the coming years. And while nuclear plants are carbon free, many of those plants are being decommissioned as well. If we replace these coal and nuclear plants with natural gas, the math says we will be well short of our Paris climate goals of limiting the Earth’s temperature rise to 2° C. Further natural gas build out beyond the next five years has been described as a “climate disaster” rather than a “middle ground.”
Natural gas was viewed as the “long blue bridge to renewables” via its flexibility and lower emissions than coal. Renewables like solar and wind are now cost competitive and growing rapidly, but we will face a shortfall of 1,750 TWh of electricity production as coal and nuclear power plants are retired. For renewables to take the place of this lost power generation, we are going to have to increase our production of wind and solar 10-20x over the next ten years, along with massive investments in battery storage and grid technology. Absent federal government action in terms of a carbon tax and mandated renewables, this will not happen and we will blow the carbon budget by miles. Robust state level renewable portfolio standards like California and New York are exactly what we need but we need all states on the same page to get it done.
