Economics, Energy and the Environment

Energy Fact of the Week: A Profile of Electricity from Natural Gas

Reason magazine’s splendid science correspondent Ron Bailey offers a useful summary of the state of play with natural gas, which has suddenly become controversial now that environmentalists have discovered that natural gas might be an abundant and cheap form of domestic energy. (I had my own short look at the New York Times’s bad faith on this issue in the Weekly Standard last week.)

Ron’s article is especially good in noting the competing possibilities for natural gas use (especially replacing coal-fired baseload electricity generation versus its use as a transportation fuel), and totaling up how much natural gas production will need to increase to meet projected future demand.

At the current time, brand-new advanced combined-cycle natural gas plants are the cheapest form of electricity generation—even cheaper than coal. Combined-cycle natural gas plants run a turbine—essentially a jet engine bolted to the ground—and then use the waste heat to drive a conventional steam turbine, which is why they are more efficient than old-fashioned steam turbine plants. The electricity generation industry has been adding natural gas plants at a fast pace: Since 2000, 80 percent of total new U.S. generating capacity (239 gigawatts out of a total 294 gigawatts) came from natural gas, most of this in the first half of the decade, before natural gas prices spiked and made a hash of the industry’s cost expectations.

As we discovered with a close look at the coal fleet a few weeks ago, there is wide variation within the existing natural gas fleet. As of 2008 (the date of the most recent Department of Energy inventory), there were 1,631 gas-fired power plants in the United States. As Figure 1 shows, half of these plants are very small—under 100 megawatts in summertime output (the peak demand period). Many of these are “peaker” plants that are only used during times of peak demand in the summer, or are co-generation plants for industrial facilities. As was the case with coal, a small number of plants provide a large portion of gas-fired electricity. The largest 80 gas plants produce as much electricity as the smallest 800.

Sources: Department of Energy and author’s calculations.

Only 27 percent of gas-fired power plants (439 in total) are combined-cycle plants, but they produce nearly half (48.4 percent) of total gas-fired electricity. Most are less than 20 years old. We still have over 200 old-fashioned gas-fired steam turbines, with an average plant age of 50, and 741 combustion turbines that lack the second-stage combined-cycle capability, which together produce 51 percent of our electricity. In other words, combined-cycle plants produce twice as much electricity per plant as non-combined cycle plants.

Implication: While retiring old coal-fired power plants gets most of the attention these days, there is a large portion of the gas fleet that needs to be modernized or upgraded too, if the sector is going to achieve its promise.

One thought on “Energy Fact of the Week: A Profile of Electricity from Natural Gas

  1. Several years ago I looked into distributed generation using micro-turbines. California, where I live, pretty much shut down the business. Do you see any place distributed generation or is it just too small?

    Thanks,
    Bill Howard

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