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David Hone
Climate Change Adviser, Shell Group

David Hone

David Hone is the climate change adviser for the Shell Group and vice chairman of the International Emissions Trading Association. He also works closely with the World Business Council for Sustainable Development.

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The role of gas to 2020

One of the key balances in any approach to managing emissions across an economy are the respective roles of coal and natural gas. This will almost certainly be true in the U.S. as well. Today, some 2 billion MWHrs per annum of electricity is generated from coal, with just under 1 billion from natural gas. Together they make up nearly three quarters of U.S. electricity production. In the process of generating that electricity, the coal plants release about 1.6 billion tonnes of CO2 per annum and the natural gas plants some 380 million tonnes (Sources: EIA and IEA). Based on those figures, natural gas is about twice as CO2 efficient when compared to coal for electricity generation in the U.S. today.

Existing U.S. coal plants also have a very distinct age profile, with nearly a third (100 GW) operating before 1970 and the bulk built between 1970 and 1985 (Source: EIA). This may mean considerable retirement over the coming 10-15 years coinciding with the period that the US is looking to begin reducing emissions. The age profile might also mean that there is little justification retro-fitting carbon capture and storage (CCS) to many existing facilities, with CCS new builds being the preferred route.

The above sets up a scenario where older coal fired power stations retire in the relatively near future and are likely replaced by natural gas, at least in the short term as "Coal + CCS" matures and can become a large scale generating option again in the 2020's and beyond. The necessary natural gas capacity in fact already exists, given that U.S. nameplate capacity is over 400 GW (Source: EIA), but the actual average load requirement is about a third of this. Of course this capacity is important for peak load management, so it is not necessarily a given that it is simply "available". However, much has been built in recent years.

One question that remains is the availability of natural gas. Whilse coal is largely domestic, the marginal ton of natural gas is imported. But that is changing as well. More domestic natural gas production and continued positive results from "tight gas" exploration and production is shifting the supply-demand picture.

The remaining ingredient to get this all to come together is a carbon price, sufficient to justify the closure of some of the older coal fired power stations and underpin a switch to natural gas. In addition, a carbon price will drive further development of CCS which will be an important element in new coal capacity in the 2020's. What is clear, is that maximizing gas usage in power generation now should make the largest and most cost-effective contribution to meeting the US 2020 target. Gas will continue to play a role as the 2050 goal looms, with CCS for gas increasingly playing a role.

Replacing 100 GW of current coal capacity with natural gas could result in an emissions drop in the U.S. of some 400 million tons per annum -- a significant part of the job required between now and 2020.

By David Hone  |  May 25, 2010; 7:09 PM ET Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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