In late July, the natural gas industry mourned the passing of George P. Mitchell, who pioneered key technologies applied to natural gas extraction, which today are changing global energy markets. Mitchell – his vision, ingenuity and commitment – is a prime example of the ability for research and subsequent deployment of lessons learned to transform an industry, create economic value and ultimately shape the course of history.
In the area of Oklahoma that I was privileged to represent for 14 years in the U.S. House of Representatives sits the city of Duncan and a high-tech research facility where Halliburton was working on perfecting the process of hydraulic fracturing in the 1980s. It was Mitchell who risked all he had on a process combining hydraulic fracturing and horizontal drilling to successfully produce natural gas from less conventional hydrocarbon reservoirs.
Few believed it was possible. However, programs guided by the Gas Research Institute (GRI) and supported by a pipeline surcharge, the U.S. Department of Energy and some federal tax credits added to the consistent advancement of critical downhole assessment and extraction technologies. Mr. Mitchell provided the crucible to make the opportunity efficient and economical. Ultimately, his vision unlocked an abundance of this domestic, low-carbon energy source.
The American Gas Association, which represents more than 200 natural gas utilities, believes this North American energy endowment can be developed in a responsible and sustainable manner, so that the full benefits of this clean energy source can be realized for all Americans. Further technological developments will help improve resource extraction efficiency, mitigate environmental and community effects of natural gas production, and continue to increase the efficiency of natural gas use in homes, businesses and communities across the country.
Working alongside renewables and energy efficiency, our domestic abundance of natural gas provides an incredible opportunity to deliver essential energy and satisfy significant new demand at affordable prices well into the future. There is additional room for wise and efficient growth of natural gas consumption in today’s domestic energy market, including significant potential for demand in residential, commercial, industrial and transportation sectors over the long-term. Integrating these possibilities with a smarter energy grid and energy management tools will enable communities to deliver energy more reliably and help consumers use energy more efficiently.
Several experts in the electric power sector have recently written about the potential for disruptive change. In a recent report – Beyond the Math: Preparing for disruption and innovation in the U.S. electric power industry, released by the Deloitte Center for Energy Solutions, the authors state that for the first time since the commercialization of electricity in the 19th century there is a confluence of factors that have raised the possibility of a disruptive change in the retail electric business model.
New energy technologies that are shifting the value chain from a one-way flow of energy and information to a two-way flow together with more efficient and reliable decentralized energy production closer to the point of consumption are a few of the factors pointing to the possibility of disruptive change.
Combined Heat And Power
Combined heat and power (CHP) is well-established technology that has been effectively used for decentralized energy production for decades. CHP is the efficient, simultaneous on-site production of useful heat and electricity using an engine or turbine fueled with clean natural gas or other fuels like biomass. By reducing purchases of grid electricity and utilizing heat that would otherwise be wasted, CHP saves consumers money and reduces the environmental footprint of energy production.
Greater deployment of CHP can increase economic competitiveness and enhance the resiliency of the energy infrastructure. During Superstorm Sandy, in places where the electric power system fell, many of the buildings with lights still shining were using combined heat and power systems. Natural gas is the fuel of choice for CHP. Today, natural gas fuels 71% of the installed CHP capacity, requiring approximately 4.5 Tcf of natural gas or about 18% of annual natural gas demand.
Properly designed and installed CHP systems can boost our economy by providing clean, affordable energy for commercial, industrial and institutional facilities. The construction and installation of these systems also creates jobs here at home. The Department of Energy last year determined that the addition of 40 gigawatts of CHP, a 50% increase, would spur $40-80 billion in new capital investments in plants and facilities and save American manufacturers and businesses $10 billion per year in energy costs. It would also save the equivalent of 1% of all energy used each year in the U.S., and reduce CO-2 emissions by the same amount as taking 25 million cars off the road.
While the potential for additional deployment in the U.S. is significant, CHP project development in recent years has stalled. Regulatory barriers, policy uncertainty and market conditions increase project risk and must be addressed. Now is the time. The significant growth in North American natural gas supplies has lowered natural gas prices and increased price stability, both of which add support to CHP project economics. Better economics together with the benefits CHP systems provide to users and the nation has created support from a broad group of stakeholders, from industry to policymakers, interested in working together to develop new and innovative ways for expanding CHP deployment.
Yet challenges remain. Critical issues to address include the high first cost of CHP systems, standards for safely interconnecting CHP systems to the electric grid, and regulatory mechanisms that fairly compensate electric utilities when facilities with CHP utilize the electric grid to receive and export electricity. Likely many of the solutions will need to be developed at the state level where local conditions require tailored solutions. Already, some states have made progress in developing innovative programs to address these issues, while others are still early in the process. Continued development will require direct involvement of state policymakers and regulators, consumer advocates, industry, and local gas and electric utilities.
Natural gas as a transportation fuel is poised for growth spurred by technological advancements. On average, natural gas is 52% less expensive than an equivalent gallon of gasoline and 62% less than diesel. The cost alone is driving businesses into the market and using natural gas instead of gasoline or diesel to power vehicles reduces our nation’s dependence on foreign energy sources while decreasing greenhouse gas emissions.
There are tremendous gains being made converting fleet vehicles to natural gas. UPS announced plans to expand its fleet of 18-wheel vehicles running on LNG to 800 by the end of 2014. This will make UPS the largest private fleet of Class 8 heavy duty vehicles in the United States. AT&T first began to introduce NGVs into its company fleet in 2008 and now has 5,200 natural gas vans on the road, representing 7% of its fleet. AT&T has also announced it will invest an additional $350 million to replace 8,000 more gasoline-powered vehicles with natural gas over the next five years. Waste Management has announced that it will transition its entire national fleet of 18,000 vehicles to natural gas over the next five years.
Replacing 100,000 18-wheelers with those powered by natural gas would immediately cut our consumption of diesel fuel up to 2 billion gallons per year. There are great strides being made in the manufacturing of truck engines. The Cummins Westport ISX12 G natural gas engine has been greatly anticipated in the market. Cummings has indicated that it is built for heavy-duty use as well as regional-haul trucking and tout that it operates on 100% natural gas – compressed, liquefied, and even renewable.
Natural gas producers and utilities are working together to build refueling stations throughout the country and spur advances in home refueling technology. The U.S. Department of Energy’s Advanced Research Projects Agency – Energy (ARPA-E) is funding 13 cutting-edge research projects that received a total of $30 million to find new ways of harnessing America’s abundant natural gas supplies for cars and other light-duty vehicles.
Known as Methane Opportunities for Vehicular Energy (MOVE), the program includes grants to develop natural gas compressors that can efficiently fuel a natural gas vehicle at home. This would provide the 65 million American customers who already have natural gas service with an affordable and efficient way to refuel their natural gas vehicles at their home or business. We believe that at the right price point the ability to refuel at home will be transformative for the passenger vehicle market.
ARPA-E is also funding research into natural gas storage tanks for passenger vehicles. In order to power cars as far as gasoline can, natural gas must be stored at high pressures. Natural gas storage tanks are generally large and thick-walled in order to help withstand these high pressures. These tanks can be accommodated in buses and trucks, but streamlined designs and low-cost materials for storage tanks improves the practicality of natural gas, as a transportation fuel, for passenger cars. Awardees for the entire ARPA-E MOVE program include General Electric, Ford Motor Co., Gas Technology Institute, Oregon State University, and Texas A&M University.
Affordable and efficient natural gas is the foundation fuel for our nation’s clean and secure energy future. This abundant resource provides one-fourth of our energy needs today, but with these technological advances we can transform the way we live and make progress toward our national goals of boosting our economy, improving our environment and increasing our energy security. America’s natural gas utilities will continue to provide safe and reliable service to our customers while building the 21st century infrastructure necessary to serve the nation’s energy needs into the future.
The spirit of American innovation that we saw in George Mitchell continues as the natural gas industry invests in critical technologies that could – like Mitchell did – spur another energy revolution.