What happens when a major innovation in the way energy is produced and used might not be good for consumers or the environment? David Crane, president and chief executive of Princeton-based NRG Energy, warns that a new technological breakthrough could have a profound effect on the nation's energy mix.
Crane's company is the largest competitive power generator in the United States, producing electricity in 16 states with everything from nuclear and fossil-fuel power plants to solar arrays. He said at an energy conference organized by The Wall Street Journal that natural gas is wiping out the coal industry and is wiping out the nuclear industry faster than anyone anticipated.
Then he dropped a bombshell.
"When the natural-gas industry grows up, it's going to realize that they don't need the power industry's transmission and distribution system. They have a better distribution system – the gas pipeline into your house.
"All the natural-gas industry needs is a gizmo in the basement of your house to convert your natural gas into electricity. I have no doubt that within the next 12 to 24 months there's going to be a technological breakthrough."
Today the shift to natural gas in electricity generation is out-of-control, and consumers are going to suffer as a result. If you want to see the price of natural gas rise significantly, replace all coal and nuclear plants with natural gas over the next 30 years. We would wind up with a single fuel for electricity production just as we have one fuel for transportation. Consumers would regret it.
California obtains more than half its electricity from natural-gas plants. A few years ago, electricity prices in California skyrocketed during a summer heat wave after gas prices spiked to $14 per million BTUs. The same happened in Texas, another state heavily reliant on natural gas. This winter electricity prices in New England soared due to a shortage of gas-pipeline and storage capacity.
Nationally, since 1997, gas use for electricity production has grown 135 percent. The domestic price of natural gas has doubled in the past year. But prices for gas - which accounts for nearly one-third of electricity production and heats half of U.S. homes - are likely to keep rising. One reason is that as many as 15 producers of domestic natural gas have applied to the Department of Energy for licenses to export natural gas to higher-priced markets in Europe and Asia. Already, some gas from the Marcellus Shale in Pennsylvania is being exported to eastern Canada.
There are also environmental risks from the use of natural gas in power plants, which emit enormous quantities of carbon dioxide. The production of shale gas relies on a combination of hydraulic fracturing and horizontal drilling to reach gas deposits deep underground. The biggest problem is methane, which is the largest component of natural gas and 25 times more potent than carbon dioxide at trapping heat in the atmosphere. Methane emissions from racking, venting and flaring of gas and pipeline leaks and other sources are so problematic that they might cancel out the benefits of switching from coal to natural gas.
The question going forward is whether more government funds will be earmarked for energy research and development. Advances in nuclear power and renewable energy sources would help maintain energy diversity. Small modular reactors built in a factory for a fraction of the cost of large nuclear plants could make a real difference in this country and globally. As we expand the use of intermittent renewable sources of electricity - especially solar and wind - base-load nuclear power will be needed to "firm" renewable sources when they are not available.
There is great potential is batteries and other types of energy storage for electric vehicles and solar and wind power. But federal spending on energy R&D has declined to around $3.5 billion a year - less than half the amount budgeted in the 1980s.
Sen. Lisa Murkowski, R-Alaska, head of the Energy and Natural Resources Committee, has introduced a bill to remove energy R&D from politics by establishing an energy trust fund to be financed with revenue from oil and gas production. President Barack Obama proposed a similar plan in his State of the Union address. The idea has merit.
Our energy challenges are serious and urgent. The consequences of our increased reliance on natural gas for electricity production are something we can't afford to ignore. Prudence calls for early action at the federal and state levels to restrain its use.
James McGovern, of Ocean Township, is an energy consultant to government and industry.