The Benefits of Natural Gas for Power Generation Relative to Coal Continue to Increase

The Benefits of Natural Gas for Power Generation Relative to Coal Continue to Increase 

No new coal burning power plants are planned in the U.S. due to poor economics and risk of stranded assets. Few have been built in the last few decades. A few better and more efficient technologies were incorporated into the newest coal plants but the economics are still poor relative to gas. Coal gasification and ‘synfuel’ development remain uneconomic. Carbon capture and sequestration are only breakeven economic when combined with CO2 flooding in nearby enhanced oil recovery projects. Other CCS projects have thus far been quite uneconomic. Research continues but often it is pointed out that developing wind and solar at current tech levels is currently more economic than these clean coal technologies with the exception of burning coal in power plants.

In contrast natural gas power plant efficiency, versatility, costs, and carbon footprints continue to improve. Electricity conversion efficiency as measured by the operating heat rate in BTU/kWh (British thermal unit per kilowatt-hour) is the main way to measure overall efficiency. As the EIA article indicates the operating heat rate of gas-fired electricity generation decreased by 7% from 2006 through 2015 while it increased by 1% in coal-fired generation over the same period. In 2006 the avg. heat rate of gas-fired generation was 18% less than the avg. heat rate of coal-fired generation. By 2015 the avg. heat rate of gas-fired generation climbed to 25% less than the avg. heat rate of coal-fired generation. The 1% increase in coal-fired heat rates is attributed to installation of pollution control equipment and operational changes such as more cycling on and off. While pollution control equipment was also added to some gas-fired generation the effects on heat rate are less. Another factor that affects conversion efficiency is the trend in retiring less efficient coal and gas plants and commissioning more efficient plants. This is especially true of the highly efficient combined-cycle gas turbine (CCGT) plants. Between 2006 and 2015 combined-cycle technology plants went from 75% of the gas-fired fleet to 85%. On average the CCTG plants are 25% more efficient than single-cycle gas plants. Over the 2006-2015 period the CCGT generation added was over 37% more efficient than the gas generation retired. In contrast the coal-fired generation added over the same period was just 9% more efficient than the coal-fired generation retired and nearly 28% less than the CCGT gas-fired generation added. Gas plants also require less water for cooling than coal plants - about a third, and less effluent. Also there is not the excessive amounts of fly ash and bottom ash produced by burning coal which presents waste-management issues that have already resulted in significant surface-water pollution.

It should be noted that natural gas peaker plants are often under-utilized by design as generation to quickly ramp-up to cover demand peaks and wind and solar intermittency. Peaker plant efficiency will be reduced by lower capacity factor utilization rates. These plants should be included as part of renewable energy systems where applicable and it is unclear whether they were included in the EIA analysis – I am guessing not – but if they were that would make baseload gas-fired efficiency of gas relative to coal even greater. Quick-start and more recently digitally automated gas peaker plants are the most versatile generation to back up intermittent solar and wind and to cover demand peaks.

There have recently been some preliminary studies of fugitive methane emissions at natural gas power plants (and refineries) that have shown that emissions are higher than previously thought although they are still small and improvements can still be made by reducing leaks, venting, and flaring.  Methane emissions during combustion are miniscule (10-20% of total) and most of the leakage was pre-combustion and likely coming from compressors, steam boilers, steam turbines, and condensers. This indicates that methane leak detection and repair efforts need to continue to keep up the climate benefits of gas relative to coal. 

Fuel costs are always changing and sometimes, mainly in the winter months, coal becomes cheaper than gas and where applicable there is ‘fuel-switching’ from gas to coal in the form of under-utilized coal plants becoming increasingly utilized. With unconventional gas resources such as shales that have predictable reserves and production rates the availability of nat gas can be assured so that prices become more stable and predictable. Having adequate pipeline takeaway capacity, mainly out of Appalachia which will be the main U.S. production region for gas for years to come, also helps stabilize prices, makes them more predictable, and makes producing companies less vulnerable to the negative basis differential (lower prices relative to the Henry Hub standard). This aids long term planning. Company planning becomes more predictable and less risky. The risky practice of hedging future prices becomes less lucrative. 

Below is the EIA graph comparing operating heat rates of natural gas vs. coal plants:

References:

Natural Gas-Fired Electricity Conversion Efficiency Grows as Coal Remains Stable – by Energy Information Administration, principal author Glenn McGrath, Aug. 21, 2017

Study: Emissions From Power Plants, Refineries May Be Far Higher Than Reported – by Joe Rudek and David Lyon, in EDF Energy Exchange/EDF Blogs, March 16, 2017

Undervalued BLM Coal (and Oil & Gas Leases): Loophole, Energy Security Socialism (State Capitalism), Subsidy, or All of the Above? And Billionaire Coal Exec and WV Governor Jim Justice's Call for an Eastern Coal Subsidy

Undervalued BLM Coal (and Oil & Gas) Leases: Loophole, Energy Security Socialism (State Capitalism), Subsidy, or All of the Above? And Billionaire Coal Exec and WV Governor Jim Justice’s Call for an Eastern Coal Subsidy

Whether it stems from a desire to fulfill campaign promises or some other cause the Trump administration seems determined to revive coal production and consumption. From an economic standpoint it makes little sense since gas is cheaper than coal. From an air quality standpoint it makes no sense since gas pollutes far less than coal. From a smog perspective gas is over 80% cleaner than coal. From a carbon emissions perspective gas power plants emit half the carbon of newer coal plants and far less than aging coal plants. From a baseload grid perspective increasing gas has no issues in key areas even if it was tripled. (PJM power market studies showed this). From a fuel supply perspective gas can be secured from multiple pipelines and other sources, including coal, if there is a disruption (at least in the PJM market which represents over 20% of GDP and high populations). From a national security perspective it has never happened (other than minor sabotage by anti-pipeline activists) and there is sufficient redundancy among utilities due to the possibility of demand spikes so that most disruptions can be mitigated quickly. Eastern coal is higher in sulfur and some other pollutants than Western coal. The Western reserves of high quality coal are much greater than in the East and Western coal is typically more economic to produce. 

Rolling back Obama’s executive orders on power plant pollution (the Clean Power Plan) and water pollution (Waters of the U.S. rule) has been a priority for the Trump administration. Restrictions on Arctic drilling, offshore drilling, and drilling on federal lands have also been rolled back. There are plans to sell off of a big chunk of the national petroleum reserve (not a bad idea but bad timing amidst a global oil glut that is showing little movement towards lifting, with associated low oil prices). They are trying to roll back the federal rule on methane emissions from oil and gas facilities. The latest is a move to reinstate leasing rules that strongly favor coal companies and some oil & gas companies on federally owned BLM lands by basically collecting royalties below market value. One argument is that favoring coal and other fossil fuels aids energy security. They also significantly cut the royalty rate for offshore leases from 18.75% to 12.5%. These cost reductions are hoped to spur domestic production but supply currently is having no difficulty meeting demand. BLM land is mostly in the West so basically Western coal and offshore drilling will be benefited and be able to compete more favorably with Eastern coal and onshore drilling. Certainly one can argue that Obama went too far on these restrictions and regulations. However, the decarbonization trend is well established worldwide in wealthy countries and now even in developing countries. Utilities too are geared towards decarbonization keeping in mind that Trump-era rollbacks are likely to be temporary. They must plan for the long-term, being cognizant of political and scientific trends. No new coal-burning plants are planned by any utility as they would absolutely be considered stranded assets. 

Downplaying the worldwide scientific consensus on climate change has been another priority apparently with government employees being instructed to replace the term “climate change” with “extreme weather.” This is concerning since it is the preferred terminology worldwide. Budget plans call for decreased spending on clean energy and anything related to climate change. This is in contrast to much of the rest of the world. Pulling out of the non-binding good-faith pledges of the Paris Accord is another situation where the Trump administration is at odds with the rest of the world. Certainly some pullback from Obama policies was/is to be expected but the current purge seems a bit extreme. Trump advisors like Myron Ebel, Steve Milloy, USDA chief scientist nominee Sam Clovis, and others have labeled climate change study as “junk science.” Ebel refers to the “climate-industrial complex” and considers climate change to be liberal propaganda in favor of income redistribution toward the poor. Obviously, the majority of the world’s scientists and citizens disagree. Is this a trend of censorship of science? It would seem so. There was some spin against climate change alarmism among the George W. Bush administration but nothing like this. Many find it disturbing. 

In terms of economic fairness the so-called “handouts” to fossil fuel interests are indeed subsidies as they offer terms ‘below market value.’ One might even see this as a form of corporate socialism or state capitalism. In any case it is favoring private interests over public interests.

West Virginia governor Jim Justice’s call for a $15 per metric ton federal coal subsidy is certainly suspect since he is also a coal company owner! That is basically a 37.5% subsidy since coal is going for around $40 per metric ton – so it is both huge and unprecedented. Did I mention that Justice, like Trump, is also a billionaire? He also switched parties just months after being elected. He is asking for a government handout, a subsidy, a bailout, for the state to take a stake in coal. His argument that less coal and more gas on the Eastern grid puts it at risk (presumably from terrorist attack) is bogus. He is trying to present this as a national security issue (as well as giving potential terrorists ideas). This should not be taken seriously. Maybe he should instead advocate for funds to help miners with black lung, those that have lost their pensions due to coal company bankruptcies, and retraining for unemployed miners. Justice’s proposal would cost taxpayers $4.5 billion per year (about 50 times the BLM leasing 'subsidy' amount). Those who consider climate change to be a real and very important consideration would be understandably devastated by such a move. He projects it would nearly quadruple West Virginia coal production. With the pollution potential of extreme forms of coal mining such as ‘mountain-top removal’ (MTR) this would create further environmental devastation. Environmentalists, both radical and moderate, would consider such a subsidy one of the worst environmental moves in history. Perhaps Justice should focus on paying his millions of dollars in unpaid fines for safety violations at the mines he owns and help keep him extremely wealthy. Perhaps one might call Trump’s and Justice’s ideas the Dirty Power Plan.

 A more recent report suggests that the Trump administration may offer Democratic WV senator Joe Manchin the job of Secretary of Energy, moving Rick Perry to another position. This would be done so that new Republican Justice could appoint Manchin’s replacement. This is assuming that “Blue Dog” Democrat Manchin would in essence abandon his party affiliation as Justice has done. However, Justice was only a Democrat for a year and half while Manchin has always been a Democrat, though often voting ‘across the aisle.’ If it happens it would be considered betrayal of the deepest sort.

The discounted BLM leases due to coal companies selling coal at below market prices to subsidiaries is effectively a federal subsidy for Western coal. So in essence the Trump administration wants to re-instate Western coal subsidies and Justice wants to establish Eastern coal subsidies. Meanwhile some utilities are calling for taxpayer/ratepayer subsidies to keep uneconomic coal plants (and uneconomic nuclear plants) running in the Midwest. Thus, direct subsidization of coal is ‘on the table’ in several forms.

References:

Trump administration refuses to close fossil fuel loophole, admits it will cost taxpayers millions – by Mark Hand, in Think Progress, Aug. 7, 2017

USDA Clamps Down on Staffers Using the Term Climate Change – by Oliver Milman, in Wired, Aug. 8, 2017

Gov. Justice announces plan to put tens of thousands of coal miners back to work – by WSAZ news staff, in WSAZ, Aug. 11, 2017

Manchin Emerges as Possible Pick for Energy Department – in Bloomberg Politics, Aug. 11, 2017

Digitalized Gas Plants and Battery Storage on the Grid: Integration, Collaboration, Competition, and Implications for Cost-Saving, Dealing with Demand Spikes, and Optimizing Gas Peakers

Digitalized Gas Plants and Battery Storage on the Grid: Integration, Collaboration, Competition, and Implications for Cost Saving, Dealing with Demand Spikes, and Optimizing Gas Peakers 

Green Tech Media just put out an interesting analysis of the integration of digitalized gas peaker plants and energy storage, typically lithium-ion based batteries, for dealing with peak demand at low cost. General Electric (GE) is leading the charge at digitalizing the gas plants so they can have faster response times and automated switching. Linked here:

https://www.greentechmedia.com/articles/read/ge-digital-gas-plants-vs-utility-scale-batteries

GE recommends full digitalization of utility generation sources through their ‘asset performance management (APM) system’ and their Predix platform. From the article:

“Digitally assisted, flexible gas plants can handle both peak power and grid stability, calling into question the need for lithium-ion in those roles, said Niloy Sanyal, chief marketing officer for GE Power Digital, in an interview at the company's San Ramon campus.”

Advantages to this are that the often under-utilized gas peaker plants can be better utilized and optimized giving them better economics. Storage advocates claim building new gas peaker plants could become stranded assets. While lower storage costs do make an economic case against building new gas peaker plants, digitalizing existing ones makes even better economic sense.

The near-instantaneous response time gives batteries an advantage and the gas peakers take several minutes to fire up. However, with good predictive software it can be known in advance when they will be needed. Small storage can be added to existing peaker plants for near-instantaneous response times giving the plants the minutes needed to come on-line. Sanyal pointed out that storage by itself is better for certain applications like storing peak mid-day solar generation for evening use.

Small and often under-utilized gas peaker plants are utilized around the world as necessary back-up for intermittent and unpredictable solar and wind generation. Digitalizing them and equipping them with small battery storage allows them to have the response-time of utility-scale battery storage and improves their economics by increasing their utilization and capacity factors. The batteries serve as a ‘ramping resource,’ allowing the gas peaker plant to be responsive to short-time (5-15 min) power demands. Overall, this makes grid integration of renewables cheaper for utilities by providing flexibility. One might see it as a symbiosis of sorts. AES Energy Storage notes that 1 MW of battery storage provides 2 MW of flexibility. However, with digital hybrid gas plants a smaller amount of storage can provide even more flexibility.

Also mentioned in the article is another factor – incentives. Renewable standards and goals as well as energy efficiency standards incentivize batteries and other storage for utilities. This gives storage by itself an advantage in some areas. Utilities will need to compare their incentivized savings from adding storage to the savings from more optimized digital gas plants. This will likely be the competitive aspect.

GE and SoCal Edison just turned on this spring two of these hybrid electric gas turbine plants in California. They are small at 50 MW. The batteries can provide up to 10 MW and 4 MWh of power. They set these up in a hurry to help deal with the Aliso Canyon gas storage field being off-line. What is fascinating is that these fully digital/automated hybrid plants are complementary – the limitation of batteries is that they can only run for a short time before needing to be recharged while the limitations of the gas plants are that they need a little time to start up (even though they are considered ‘quick-start’ compared to older gas plants or even slower to start coal plants). The digitally controlled hybridization with coordinated control systems overcomes both limitations for seamless operation. SCE also noted that digital controls and associated equipment can drastically reduce water consumption and fuel consumption thus reducing pollution and greenhouse gas emissions as well. This is cutting edge technology at the grid edge!

References:

GE Digital Gas Plants vs. Utility-Scale Batteries – by Julian Spector, in Green Tech Media, Aug. 3, 2017

The Emerging Boom in Utility-Wide Asset Analytics – by Jeff St. John, in Green Tech Media, Feb. 21, 2014

Inside GE and SoCal Edison’s First-of-a-Kind Hybrid Peaker Plant with Batteries and Gas Turbines – by Jeff St. John, in Green Tech Media, April 18, 2017