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Energy Realities Facing the United States

Energy Realities Facing the United States. Frank Clemente Ph.D. Senior Professor of Social Science & Energy Policy Penn State University fac226@psu.edu. 1. 1. 2. Five Basic Premises. Worldwide growth in energy demand is unprecedented and will continue for decades

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Energy Realities Facing the United States

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  1. Energy Realities Facing the United States Frank Clemente Ph.D. Senior Professor of Social Science & Energy Policy Penn State University fac226@psu.edu 1 1

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  3. Five Basic Premises Worldwide growth in energy demand is unprecedented and will continue for decades Coal is the only energy source able to meet this demand in terms of scale, time, reliability, cost and versatility Coal conversion to electricity, liquid fuel and NG equivalents can greatly alleviate supply problems Carbon capture and storage (CCS) is the technological pathway to the full potential of coal The U.S. should rapidly develop CCS and make it available, affordable and deployable to the global community –this is the moral energy issue of our time 3 3

  4. Two Different Worlds “There is no such thing as clean coal” – National Resources Defense Council. When asked how China would ever meet the growing demand for electricity, liquid fuel and NG, Du Minghua, Director of the Beijing Research Institute replied: “Coal is the solution to all three”. 4 4

  5. “China is an example for the developing world” IEA, 2007 5

  6. India’s Rapidly Emerging Demand for Electricity Removal of poverty is the greater immediate imperative than global warming” P. Ghosh, Secretary of the Environment, India Millions of People in India Toil in An Bleak World 6

  7. Coal is India’s only Energy Advantage “Coal is expected to be the mainstay of power generation in the years to come” India’s 11th Five Year Plan (2007-2012) India’s Share of the World’s Energy Reserves 7

  8. The Power of Coal: If India Did Not Use More Coal To meet projected demand, and replace projected incremental coal based electricity generation, India would have to obtain more than 13 Tcf of NG, build 210 nuclear power plants or construct the equivalent of 400 Hoover Dams 1,770 1,736 1,586 1,509

  9. Steady Drumbeat Of Electricity Demand Across the World Note: Over 2 billion people do not have adequate access to electricity and 1.6 billion have none at all 9 9 9

  10. The World Is Turning to Coal China built more coal generation in 2007 than Britain built in its history 10 Source: Data Derived from Platt’s Proprietary Database, 2008

  11. Modernization – The Rise of the Automobile In 2002, there were 812 million vehicles. By 2030 there will be 2.1 billion. Source (Dargay and Gately 2006) 11 11

  12. Everything, Everywhere, All the Time:Increases needed by 2030 to meet demand Nuclear power 38% Oil production 43% Renewable energy 61% NG production 64% Coal production 74% 12

  13. The Reality of Energy Supply : U.S. Oil and North American NG Production have both Peaked 13 13 13

  14. WHERE WILL THE ELECTRICITY COME FROM IN THE UNITED STATES? 14 14

  15. Rising Tide of Electricity Demand in U.S. Any plan for new generation must account for the pressure of steadily growing demand for electricity

  16. The Danger of Relying on NG for Electricity NG has 4 times the price and 20 times the price volatility of coal Using NG for electricity drives up the price of both electricity and NG for families and businesses. North American NG production may have peaked. Thus, LNG imports from risky sources (e.g. Russia, Iran) must balance supply. 16 16

  17. Some States Highly Dependent on NG for Power

  18. This Second “ Dash to Gas” is Real, Risky and Expensive Source, Platts, 2007 *Note: The Platts survey is the most recent available but does not include many recently proposed NG Plants or many recently cancelled coal plants 18

  19. Depletion Sets the Context: Wanted: A New Texas Every Year (6 TCF) Sources: EIA; EOG; CIBC World Markets 19 19 19

  20. The U.S. Bets On A Brave New World Where new supply is projected to come from 2006-2019 Where new NG supply came from 1993 - 2006 “North America is setting itself to import LNG in large quantities” (IEA, 2007) 20 20 20 • Source: EIA

  21. More Global NG Consumption Means Competition: Billions of New Kids on the Block “The U.S. is the market of last resort for LNG… we will get the gas Europe and Asia don’t need” -Goldman Sachs, 2008 Increases in NG Consumption 2005-2030 Source: EIA, International Energy Outlook, 2008

  22. If Aubrey McClendon is Correct, The U. S. Faces Significantly Higher Electric Rates “U.S. natural gas producers can increase supplies by 5 percent a year…there is plenty of natural gas to burn to make electricity” “We think gas prices stay in the $9-$11 range…aggressive 35% to 40% first year declines are going to kick in” “An average of $10 is a pretty good price” But NG prices have averaged only $6.22 over the past 5 years and electric rates have still increased 27%. $10 NG will dramatically increase the cost of NG for electricity as well as the cost of NG for families and business.

  23. What $10 NG Would Mean to American Consumers? - $70 Billion Dollars More in Costs “An average of $10 is a pretty good price” Aubrey McClendon, CEO, Chesapeake Energy, July, 2008

  24. Show Me The Gas: Failed Optimism has surrounded NG In 2000---U.S production would significantly increase and lead to $2.58 NG in 2008 In 2004---LNG imports would significantly increase and lead to $ 3.67 NG in 2008 In 2008---LNG and shale gas will increase and lead to low cost NG But NG prices are still twice as high as predicted just 4 years ago 24

  25. Systematic Bias: Since 2000, EIA has: • Overestimated NG production in 23 of 28 forecasts • Underestimated NG used for generation in 27 of 28 forecasts • Underestimated price of NG to generators in 27 of 28 forecasts See our article in Public Utilities Fortnightly, July, 2007 25

  26. If Boone Pickens is Correct and we are at Peak Oil –The long run price of NG/LNG “Natural gas prices are anchored in a long-term relationship with crude oil prices” Stephen Brown, Federal Reserve Bank of Dallas, 2007 Price of W TI Oil in Dollars per Barrel Source: "The Relationship Between Crude Oil and Natural Gas Prices," Hartley et. al, Rice University, 2007

  27. Coal Is the Cornerstone Of Electricity Generation In The U.S. 27 27 27

  28. The Scale Needed to Replace Coal in the U.S. • NUCLEAR: 250 more reactors • NATURAL GAS: 17 more Trillion Cubic Feet • HYDRO: 500 facilities size of Hoover Dam. The reality of physics is that electricity cannot be stored in large quantities – an inevitable constraint on solar and wind generation. 28 28

  29. Nuclear Power: Four bottlenecks will significantly delay the construction of new nuclear power plants in the United States High Level Waste management, transportation and storage Entrenched Opposition at both national and local levels Supply chain issues (a) availability and cost of fuel, (b) scientific expertise and skilled labor (c) global competition for nuclear grade components 4. Societal inertia, litigation and bureaucratic creep –we have not built a nuclear plant for decades.

  30. Bottleneck: Competition with the rest of the world for nuclear grade components, fuel and expertise –we are behind the curve and falling New Reactors which will come online by 2015 Source: World Nuclear Association

  31. “Will Weather Provide Reliable Electricity?” Energy Policy journal, August,2008: Findings from UK wind analysis Wind output can be very low at the moment of maximum demand. Expect power swings of 70% within 12 hours This volatility will cause backup NG plants to go on and offline frequently, reducing efficiency and reliability These reductions will lead to increases in the cost of electricity and offset environmental benefits

  32. ERCOT: Electric Reliability Council of Texas: Cautions on Wind Generation • Refers to self as “National Grid of Texas” • “Wind intermittent and not dispatchable” • “Wind output from West Texas does not correspond to peak demand” “There was a substantial difference between what we were getting from wind generators and what was reported in our look ahead studies” ERCOT VP on voltage sag in February, 2008 32 32

  33. When California’s Daily Peak exceeded 45,000 MW, in no case did wind provide more than 325 MW despite rated capacity of 2500 MW. Wind Generation’s Performance During 2006 California Heat Wave * Adapted and estimated from Dixon, U.S. DOE (2006) 33 33 33

  34. California map

  35. Lest We Forget : US Coal Reserves vs. Oil and NG Reserves Source: EIA, 2008 35 35 35

  36. The Location Of Stranded Oil Recoverable Through CO2 – EOR * With State of the Art technologies, Texas has over 35 billion barrels of recoverable oil Billion Barrels * Excludes Alaska and Offshore

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