By Scott Gates

Fossil fuels are the backbone of the nation’s energy supply. Almost half of all our electricity comes from burning coal, and oil remains the dominant transportation fuel option–even if today it costs an arm and a leg.

A third type of fossil fuel, natural gas, is increasingly in the spotlight. In addition to its use for home heating and cooking, natural gas has surged as a way to keep your lights on amidst steadily growing demand for electricity.

“Natural gas-fired power plants are presently an easier option than building a coal or nuclear plant,” says John Holt, senior principal for generation & fuel at the National Rural Electric Cooperative Association (NRECA). “You can manufacture the parts for gas turbines quicker, and site and build a facility more rapidly–and with less opposition. If other types of generation are ruled out, as is becoming commonplace, natural gas becomes the only alternative left for a reliable baseload power supply.”

By 2012, it is anticipated that a little more than 35,000 MW of new generation will come on-line nationwide as new power plants are built to meet growing demand, according to the U.S. Energy Information Administration (EIA). Natural gas will be used to generate more of that power as plans for coal-fired plants are challenged. The risk with gas, however, is that it relies on an increasingly scarce–and expensive–fuel source.

Natural gas emits about half the carbon dioxide as coal when burned–1,135 lbs. of it for every 1,000 kWh generated versus 2,249 lbs.

For this reason, and for the relative ease of building a natural gas-fired plant, more than half of the 21,000 MW co-ops expect to add over the next 10 years will be gas-fired. Modern natural gas plants are similar in size to coal-fired cousins.
The average U.S. coal-fired plant has a 600 MW capacity, while an average new, combined cycle natural gas plant has a comparable 500 MW capacity.

Last spring, Associated Electric Cooperative, a Springfield, Mo.-based generation and transmission (G&T) co-op serving six other regional G&Ts and 51 distribution co-ops in three states, scrapped plans for a 660-MW coal plant that had been three years in the making. Costs ratcheted up 30 percent while permits were being processed, due to skyrocketing prices of basic building materials like concrete and steel.

“The timing was unfortunate,” says Roger Clark, director of member services and corporate communications at Associated Electric. “Our resource plan now focuses on natural gas alternatives. We have a combined cycle unit that we purchased several years ago that has never been constructed–that’s certainly one option we’re looking very closely at.”

G&Ts in similar situations across the country are including natural gas generation as a bigger part of resource plans, along with renewable energy and efficiency measures, in an effort to make up for delayed coal-fired and nuclear generation.

As demand for electricity surges, growing fuel cost concerns plague natural gas. Those costs turn an otherwise quick fix to the problem of meeting demand into more of a gamble. The price has tripled since 2002 and jumped 93 percent since August 2007 alone.

Price fluctuations in natural gas really come down to a matter of what is available compared to what is being used. In 2006, the United States used 21.6 trillion cubic feet (Tcf) of natural gas, with 29 percent going to electric power, according to EIA. Of that amount, 19 percent was imported, most of which came via pipeline from Canada. The remainder was drawn from rapidly dwindling domestic resources.

EIA pegs U.S. natural gas reserves at 211 Tcf. BP, which also keeps tabs on global resources, gauges the figure at 209 Tcf. If natural gas consumption continues at its current rate without an increase in imports, our national reserves will be tapped out within about 10 years.

“The future of natural gas supply hinges on liquefied natural gas [LNG] imports,” says Ken Kern, a director at the National Energy Technology Laboratory. The United States currently gets the majority of its LNG from Trinidad, in the Caribbean, and the African countries of Egypt, Nigeria and Algeria.

LNG is essentially methane that has been cooled and liquefied for easier long-distance transport. Double-hulled tanker ships bring the resource to specially designed terminals dotting the U.S. coastline—six  are currently receiving imports, from Freeport, Texas, to Everett, Maine. A terminal in Puerto Rico also serves North America.

Once unloaded, the liquid gets transferred by pressurized, heavily insulated trucks to storage facilities, or heaters at the docks warm LNG into its natural state for pumping into a pipeline. The resulting gas can be burned for electricity, as well as used in homes for heating and cooking.

Several LNG terminals are in development in anticipation of the country’s coming reliance on imported natural gas. Another 40 such projects are being discussed, according to the Federal Energy Regulatory Commission.

But with LNG, foreign sellers can divert a tanker carrying it at sea to higher-paying customers anywhere on the globe.

That means demand for natural gas alone may not be enough to bring tankers ashore.

“Even if LNG supply grows adequately to meet our needs, the concern is that Japan, India, China and Europe will have the first shot at the product because they’re closer to the key sources in the world,” warns  Kern.

A strained supply of LNG could lead to further price increases, eventually being reflected in electric bills.

“LNG from overseas would account for 30 percent of U.S. electricity generation,” says Mike Ganley, NRECA director of strategic planning & analysis. “From a political standpoint alone, this sets the stage where supply disruptions could dramatically impact electricity prices.”

Electric cooperatives are tackling local generation problems with what resources are available, bridging the gap between now and when (hopefully) advanced low-emissions technologies become available in the future. Natural gas will help in this effort, although to what extent remains a weighted question with potentially broad-reaching impacts.

“We have some tough decisions to make in the next 10 years,” says Associated Electric’s Clark. “How we get through this is going to make a huge difference.”

Sources: U.S. Department of Energy, U.S. Energy Information Administration, National Rural Electric Cooperative Association, National Energy Technology Laboratory, BP plc, Associated Electric Cooperative.

Scott Gates writes on technology and energy efficiency for the National Rural Electric Cooperative Association, the Arlington, Va.-based service arm of the nation’s 900-plus consumer-owned, not-for-profit electric cooperatives.