Flags of Native American tribes from across the US and Canada line the entrance to a protest encampment near Cannon Ball, North Dakota where members of the Standing Rock Sioux Tribe and their supporters have gather to voice their opposition to the Dakota Access Pipeline (DAPL), September 3, 2016. (Photo credit ROBYN BECK/AFP/Getty Images)
The Standing Rock Sioux tribe’s protest of the Dakota Pipeline is gaining momentum. Three federal departments halted the project and promised to review the project (is that a real review or a stall tactic?). They also overruled a federal judge’s denial of the tribe’s request for an emergency injunction.
The tribe has argued that the pipeline and the construction of it will disturb sacred lands and burial grounds. The tribe is also worried about the environmental impact of the pipeline claiming it will have and impact on the tribe’s drinking water.
The tribe has attracted thousands of supporters to its protest site, including representatives of more than 200 other tribes. Their actions have evolved into demonstrations being held all over the world.
The big question is "why spend all of that money to build a pipeline to carry fossil fuel to be burnt and further pollute our planet?" Haven't we already determined that we need to quit burning fossil fuels?
This isn't even to mention the long history of destroying Native American culture and the constant breaking of promises to Native Americans. That the tribes are rallying together in this fight to save the environment is heart warming, even at this late date.
And, clearly, the utility companies involved are in it for the money. That the fossil fuels can not be burned is of no consequence to them... there's millions of dollars on the table for just building the infrastructure to move the forbidden product across the country. From their perspective, damn the environment and damn humanity, and that's the truth !!!
The tribe has argued that the pipeline and the construction of it will disturb sacred lands and burial grounds. The tribe is also worried about the environmental impact of the pipeline claiming it will have and impact on the tribe’s drinking water.
The tribe has attracted thousands of supporters to its protest site, including representatives of more than 200 other tribes. Their actions have evolved into demonstrations being held all over the world.
The big question is "why spend all of that money to build a pipeline to carry fossil fuel to be burnt and further pollute our planet?" Haven't we already determined that we need to quit burning fossil fuels?
This isn't even to mention the long history of destroying Native American culture and the constant breaking of promises to Native Americans. That the tribes are rallying together in this fight to save the environment is heart warming, even at this late date.
And, clearly, the utility companies involved are in it for the money. That the fossil fuels can not be burned is of no consequence to them... there's millions of dollars on the table for just building the infrastructure to move the forbidden product across the country. From their perspective, damn the environment and damn humanity, and that's the truth !!!
'Eyes wide open':
Despite climate risks, utilities bet big on natural gas
Scientists say the U.S. can't build much more fossil fuel infrastructure if it wants to meet the Paris climate goals. So why are utilities going all-in on gas?
from Utility Drive By Gavin Bade
For the fossil fuel industries, 2016 has been a terrible year. Amid historically low commodity prices and stricter environmental regulations, coal companies went bankrupt, oil and gas rig counts slumped, and utilities retired fossil generators like they’re going out of style.
But amid the struggles, one fossil asset class remains prized: gas pipelines. Earlier this month, oil giant Enbridge announced it would pay $28 billion for gas pipeline company Spectra, creating the largest energy infrastructure company on the continent.
Utilities are getting in on the act as well. In the last 12 months, Duke Energy unveiled plans to buy distributor Piedmont Natural Gas, Dominion announced it would buy Questar, ConEd dropped $975 million on a gas pipeline venture, and Southern Co. finalized its merger with AGL Resources.
These mergers indicate at least some perceived value in the sector, but power companies are investing directly. Dominion and Duke are working with gas companies on the giant Atlantic Coast Pipeline, utilities in the Northeast are pushing to build their own gas transportation, and regulated utility Florida Power & Light was even investing directly in Oklahoma shale gas production until the state Supreme Court struck that down in May.
The interest in gas pipelines reflects a widespread expectation that natural gas consumption is set to grow over the next few decades. In May, EIA estimated gas consumption will rise about 1% a year through 2040, increasing to 34 trillion cubic feet (Tcf) from 28 Tcf last year.
Despite climate risks, utilities bet big on natural gas
Scientists say the U.S. can't build much more fossil fuel infrastructure if it wants to meet the Paris climate goals. So why are utilities going all-in on gas?
from Utility Drive By Gavin Bade
For the fossil fuel industries, 2016 has been a terrible year. Amid historically low commodity prices and stricter environmental regulations, coal companies went bankrupt, oil and gas rig counts slumped, and utilities retired fossil generators like they’re going out of style.
But amid the struggles, one fossil asset class remains prized: gas pipelines. Earlier this month, oil giant Enbridge announced it would pay $28 billion for gas pipeline company Spectra, creating the largest energy infrastructure company on the continent.
Utilities are getting in on the act as well. In the last 12 months, Duke Energy unveiled plans to buy distributor Piedmont Natural Gas, Dominion announced it would buy Questar, ConEd dropped $975 million on a gas pipeline venture, and Southern Co. finalized its merger with AGL Resources.
These mergers indicate at least some perceived value in the sector, but power companies are investing directly. Dominion and Duke are working with gas companies on the giant Atlantic Coast Pipeline, utilities in the Northeast are pushing to build their own gas transportation, and regulated utility Florida Power & Light was even investing directly in Oklahoma shale gas production until the state Supreme Court struck that down in May.
The interest in gas pipelines reflects a widespread expectation that natural gas consumption is set to grow over the next few decades. In May, EIA estimated gas consumption will rise about 1% a year through 2040, increasing to 34 trillion cubic feet (Tcf) from 28 Tcf last year.
Demand from the electric power sector is expected to spur natural gas consumption growth through 2040. Credit: EIA
Much of that growth is expected to come from growing power sector demand. EIA expects 8 GW of gas generation capacity additions in 2016, reflecting this recent trend. From 2000 through 2015, the U.S. added 284.36 GW of gas capacity — nearly 70% of the 410.28 GW of total utility-scale capacity added to the grid.
Since 2010, renewables have outpaced gas deployments, but utilities are also running their gas plants more often due to low fuel prices and environmental rules on coal generation... Credit: EIA
Over the past five years, lower gas prices have allowed utilities to run their coal plants less often, helping the power sector reduce harmful air pollutants, including CO2, to near 1990 levels. And thanks in part to gas, even most of the 27 states challenging the Obama administration’s Clean Power Plan are in a good position to comply.
But if natural gas is helping the U.S. power sector meet its environmental goals today, its ability to do so in the future remains shrouded in doubt. In particular, climate researchers are concerned that if utilities continue investing in natural gas assets at the current rate, the power sector will not be able to meet climate goals under the Paris Climate Accord, ratified this month by more than 30 nations and expected to go into force next year.
“This sort of relentless growth in gas demand is out of sync with the nation's climate goals,” Lorne Stockman, author of a recent report on gas infrastructure from environmental group Oil Change International, told Utility Dive. “We have to start actually applying a carbon budget to our planning because if we build infrastructure today that we can't afford the emissions from in 10, 20 or 30 years, then we're essentially building infrastructure we can't afford to use to the end of its economic life.”
Utilities broadly say they take such environmental concerns into account with every plant and pipeline decision — especially today, given that many are shuttering coal plants before their previously scheduled retirement dates due to new environmental regulations. But given the lucrative nature of gas infrastructure and the perception that more of it will be needed to provide reliable electricity in the years to come, utilities of all types are forging ahead — despite any perceived risk of stranded assets or climate change impacts.
“Everybody is alertly focused on this issue [of stranded assets] and all its permutations, especially in our industry,” Joe Nipper, vice president of regulatory affairs at the American Public Power Association (APPA), a trade group for municipal utilities, told Utility Dive. “So it's eyes wide open with respect to the investments being made and respect to how things could turn out in the future … but they’re balancing that analysis and their understanding of those drivers with their obligation to serve and the need to do that in an affordable way.”
Gas infrastructure and climate goalsMost often, natural gas’s impact on the climate is reported in the present or past tense. Utilities and trade groups often talk about how gas has allowed the power sector to cut emissions, costs, or both.
“Since 2011, Duke has brought on through all our companies five new combined cycle plants and we have 3500 MW either under construction or announced,” Tom Williams, director of external relations at Duke Energy, told Utility Dive. “In addition to that we have shut down over 40 coal units and our carbon emissions are down 28% from 2005.”
But such framing papers over looming issues, environmentalists argue. Instead, they say natural gas additions should be thought of in the context of future U.S. carbon goals and how much fossil fuel can be burned until they are exceeded. According to Oil Change’s analysis, the answer is not much.
In their report, “A Bridge Too Far,” the environmental group analyzed the potential impacts of constructing 19 “first mile” pipelines needed to boost natural gas production from the Appalachian Basin. The goal was to ascertain whether the construction of these pipelines would allow enough natural gas production to blow through the U.S.’s stated goal of cutting economy-wide greenhouse gas emissions 83% by 2050. (That little-reported pledge, made by the Obama administration to the UN after the Copenhagen Accord in 2009, roughly aligns with U.S. commitments under the Paris Climate Accord, which aims to limit the global temperature rise to 2°C this century.)
“We found that the emissions from gas demand alone by 2040 would eat up the entire emissions budget from the United States,” Stockman said. “So in order to allow for this growth in gas demand we would have to stop burning oil, stop burning coal completely, and that level of gas use would still overshoot the target by 2040.”
That conclusion holds, he added, even with the Obama administration’s recently-announced regulations to cut methane emissions from the oil and gas sector 45% by 2020.
But if natural gas is helping the U.S. power sector meet its environmental goals today, its ability to do so in the future remains shrouded in doubt. In particular, climate researchers are concerned that if utilities continue investing in natural gas assets at the current rate, the power sector will not be able to meet climate goals under the Paris Climate Accord, ratified this month by more than 30 nations and expected to go into force next year.
“This sort of relentless growth in gas demand is out of sync with the nation's climate goals,” Lorne Stockman, author of a recent report on gas infrastructure from environmental group Oil Change International, told Utility Dive. “We have to start actually applying a carbon budget to our planning because if we build infrastructure today that we can't afford the emissions from in 10, 20 or 30 years, then we're essentially building infrastructure we can't afford to use to the end of its economic life.”
Utilities broadly say they take such environmental concerns into account with every plant and pipeline decision — especially today, given that many are shuttering coal plants before their previously scheduled retirement dates due to new environmental regulations. But given the lucrative nature of gas infrastructure and the perception that more of it will be needed to provide reliable electricity in the years to come, utilities of all types are forging ahead — despite any perceived risk of stranded assets or climate change impacts.
“Everybody is alertly focused on this issue [of stranded assets] and all its permutations, especially in our industry,” Joe Nipper, vice president of regulatory affairs at the American Public Power Association (APPA), a trade group for municipal utilities, told Utility Dive. “So it's eyes wide open with respect to the investments being made and respect to how things could turn out in the future … but they’re balancing that analysis and their understanding of those drivers with their obligation to serve and the need to do that in an affordable way.”
Gas infrastructure and climate goalsMost often, natural gas’s impact on the climate is reported in the present or past tense. Utilities and trade groups often talk about how gas has allowed the power sector to cut emissions, costs, or both.
“Since 2011, Duke has brought on through all our companies five new combined cycle plants and we have 3500 MW either under construction or announced,” Tom Williams, director of external relations at Duke Energy, told Utility Dive. “In addition to that we have shut down over 40 coal units and our carbon emissions are down 28% from 2005.”
But such framing papers over looming issues, environmentalists argue. Instead, they say natural gas additions should be thought of in the context of future U.S. carbon goals and how much fossil fuel can be burned until they are exceeded. According to Oil Change’s analysis, the answer is not much.
In their report, “A Bridge Too Far,” the environmental group analyzed the potential impacts of constructing 19 “first mile” pipelines needed to boost natural gas production from the Appalachian Basin. The goal was to ascertain whether the construction of these pipelines would allow enough natural gas production to blow through the U.S.’s stated goal of cutting economy-wide greenhouse gas emissions 83% by 2050. (That little-reported pledge, made by the Obama administration to the UN after the Copenhagen Accord in 2009, roughly aligns with U.S. commitments under the Paris Climate Accord, which aims to limit the global temperature rise to 2°C this century.)
“We found that the emissions from gas demand alone by 2040 would eat up the entire emissions budget from the United States,” Stockman said. “So in order to allow for this growth in gas demand we would have to stop burning oil, stop burning coal completely, and that level of gas use would still overshoot the target by 2040.”
That conclusion holds, he added, even with the Obama administration’s recently-announced regulations to cut methane emissions from the oil and gas sector 45% by 2020.
If natural gas consumption continues on current trends, GHG emissions solely from it will take up the entire U.S. carbon budget by 2040, according to Oil Change's analysis... Credit: Oil Change International
Stockman’s group is not the only group to analyze how expanding fossil fuel infrastructure will affect climate goals.
In a March 2016 study in Applied Energy, Oxford University researchers introduced the idea of a “2°C capital stock,” describing a “stock of infrastructure that implies future emissions consistent with a 50% probability of a peak global mean temperature increase of 2°C or less.”
Assuming the transportation sector and other industries are on their way to the 2° target — and they are not — researchers found that the global power sector will reach that capital stock next year.
“Our core result is that for a 50% probability of limiting warming to 2°C, assuming other sectors play their part, no new investment in fossil electricity infrastructure (without carbon capture) is feasible from 2017 at the latest,” researchers wrote, “unless energy policy leads to early stranding of polluting assets or large scale carbon capture deployment.”
Given that emissions continue to rise from other sectors, Oxford researchers wrote that we have probably actually hit that capital stock already.
If other sectors only decrease emissions following a path to 480-530 parts per million (ppm) of CO2 in the atmosphere, as opposed to the 430-480 ppm plan of the Paris Accord, “the 2°C electricity capital stock was installed in 2011,” researchers wrote. And if realized emissions from other sectors follow a pathway to above 530 ppm, “new electricity generating assets needed to be zero carbon long ago to meet the 2°C (50% probability) target.”
For utilities, the upshot of this growing body of research is that the U.S. government will likely have to take more aggressive binding action to bring the U.S. back into alignment with the Paris Accord at some point — at least, if future administrations intend to keep the promises brokered by Obama.
That's not a done deal, of course, and there's a chance that utilities may never face stronger regulations. As Michael Dobson, a former climate advisor for the Marshall Islands, recently wrote, fossil fuel companies are currently "pricing in" the possibility that Trump will win in November and "the fragile, hard-won consensus on global climate action will evaporate soon after; and that investments in oil, gas, and ... coal might not be such bad bets after all."
But barring an about-face on climate policy, meeting the U.S. goals will likely require legislative action or another round of carbon regulations, meaning gas plants and pipelines being built today could be rendered inoperable before their full lives.
“Anything we build from now on, we are either going to overshoot the mark or have to retire that stuff early in order to hit the mark,” Stockman said. “And this is very relevant in the U.S. where most of your coal plant stock is retiring anyway.”
For utilities, gas benefits often outweigh climate risksUtilities and the gas industry often bristle at framing natural gas as an environmental problem. The explosion of gas production in the last five years has enabled historic carbon reductions in the electricity sector, they rightly say.
“The United States is leading the world in the production of oil and natural gas and in the reduction of carbon emissions which are near 20-year lows,” Michael Tadeo, spokesperson for the American Petroleum Institute, wrote in a statement to Utility Dive. "Greater use of clean, affordable natural gas along with our industry’s investment in new technologies has made this possible. Moving forward, it’s critical that our nation’s leadership on these important issues continue for generations to come.”
That narrative of natural gas as an environmental champion was reiterated by officials from APPA, the National Rural Electric Cooperative Association (NRECA), the American Gas Association (AGA), as well as Duke and Xcel Energy, two major investor-owned utilities. The Edison Electric Institute, the trade group for U.S. IOUs, declined an interview request and referred Utility Dive to API, who said they could not arrange an interview but responded with a statement.
That natural gas producers are apprehensive to talk about future climate goals is not all that surprising — there’s little upside for the companies no matter how they address the question. But utility sector officials say they are aware of the issue and factor the climate and regulatory risks into every investment decision.
“The carbon footprint considerations are part of the equation,” Duke’s Williams said, “as are price and cost.”
Every other utility representative echoed Williams, but APPA’s Nipper put the situation most bluntly.
“Because policies change and other variables change, we may very well find ourselves a few decades down the road in a situation where in order to do the right thing at that point or meet policy objectives, we have some stranded natural gas assets,” he said. “We certainly had that with coal and we've learned from that experience.”
NRECA’s Head of Governmental Affairs Kirk Johnson said co-ops are also aware of the risks.
“The whole stranded asset issue is very much on our members' minds, in part because of where they are with some of their existing coal facilities and the impact the Clean Power Plan would have on that.”
Conflicting priorities Despite the risks it presents to shareholders and the environment, utilities continue to invest in gas because of its low cost and reliability.
“We don’t agree with the premise that it makes economic or, in a lot of cases, technical sense at the moment to abandon natural gas,” Nipper said, reflecting other utility comments. “We still need baseload generation, and renewables cannot provide that. We're just not there yet on the storage and other pieces of the technology framework necessary to make that happen.”
But the question of “abandoning” natural gas is besides the point, Stockman and other environmentalists say. What they’re asking is that utilities slow or halt new investments in gas infrastructure.
“Up to this point, gas has played an important role in competing against the coal industry and reducing the viability of coal,” Stockman said. “That’s great, but what we're talking about here is the future and what happens over the next two, three and four decades. I don’t think anyone builds a gas power plant or pipeline expecting to wind it down within two decades.”
Stockman and other environmental groups say there is enough fossil fuel generation on the U.S. grid to support the expansion and integration of renewable energy, though some localized regions are exceptions.
Many utilities dispute that. But even if there are alternatives to new natural gas infrastructure, investing in the resource appears quite lucrative for many power companies today.
“We are [investing in gas companies and infrastructure] because it's a growing industry,” Duke’s Williams said. “Piedmont Natural Gas, their growth rate was 8-9%. Our growth rate is 4-6%, so we bought Piedmont.”
Similar logic underlies Duke’s involvement in the Atlantic Coast Pipeline and other utilities' natural gas investments: As gas consumption increases, it will pay to own the assets and companies that deliver it. And at the same time, utilities can ensure firm supply for gas plants, avoiding fuel interruptions such as those seen during the Polar Vortex of early 2014.
“The role of gas infrastructure is getting more and more important,” said Richard Meyer, head of governmental affairs at the American Gas Association, the trade group for gas utilities. “I think it's a safe bet that the use of natural gas will continue to support a low-carbon future and that natural gas could increase in the [power] sector.”
All the investment in the gas sector implies that the environmental and stranded asset risks are outweighed in many utility analyses by perceived reliability benefits, the cost of other resources, or the simple financial upside of a gas merger. But each utility respondent denied they put the climate concerns below any other consideration.
“What I'm saying is that all those factors of near-term, medium- and long-term consequences weigh in our members' decisions on how to meet resource needs,” NRECA’s Johnson said. “We’ve got folks who need to meet, in some cases, some very near-term demand needs that they need to generate electricity for, and as they run the models, gas is the best option.”
“I would say our urgency [to cut carbon emissions] is the same as any other group,” Williams said of Duke Energy. “Environmental groups are focused on environmental footprint, and we have to focus on reliability, price and the capital costs. We don’t have the luxury to focus on just one item. We have to balance all those interests and sometimes they are competing.”
The role of gas in a low-carbon futureRegardless of whether utilities are left with stranded assets in coming decades, the question remains of what role natural gas generation will play in a future power mix — one that’s expected to contain significantly more renewables and allow for much less carbon pollution.
Some utilities are starting to model that future already. In its Colorado service territory, Xcel Energy has integrated over 60% wind energy for short periods of time and has been the largest wind energy provider in the nation for 12 years.
Far from painting gas as an environmental villain, Xcel’s Jack Ihle told Utility Dive that the utility’s renewables growth would not be possible without the utility’s natural gas generation.
“Natural gas generation is an extremely valuable if not an essential part of our integration efforts for renewable energy,” he said. “As coal phases down over time, we use it as a balancing fuel.”
Xcel will retire 25% of its coal generation between 2005 and 2018, but unlike other utilities, it has not significantly increased its gas generation in that time. While the utility has invested in new plants, its share of gas generation has stayed steady between 22% and 24%, Ihle said.
“In contrast to much of the U.S. where the natural gas generation percentages have been rising significantly, we've been pretty flat on natural gas generation and renewables are the big part filling in that gap."
Xcel still has a lot of coal generation on its system — 46% of its total capacity — meaning it has a long way to go to decarbonize and that utility leaders “view natural gas as a significant step in the right direction on a carbon trajectory.” As the utility continues to draw down coal generation, it sees gas as the only viable option to help integrate more wind — currently above 17% of its total capacity.
That narrative of gas as a renewable energy-enabler is one mentioned by each utility that Utility Dive spoke with, and is especially salient when looking at renewable energy integration up to this point. A recent study from the National Bureau of Economic Research, AGA’s Meyer pointed out, found that gas generation growth enabled more renewable energy deployment between 1990 and 2013.
“It’s really the only option available today to [deploy] at the scale to balance the renewables that we're balancing today,” Xcel’s Ihle said.
But that reality may be about to change. After the Aliso Canyon gas leak cut fuel supplies to gas generators in the Los Angeles basin earlier this year, California regulators directed utilities to speed up the deployment of large-scale energy storage. Mostly confined to utility pilots before this year, California utilities have proposed three battery large-scale battery installations since August — two 20 MW (80 MWh) facilities from SCE and a 37.5 MW (150 MWh) project from SDG&E. The earliest is scheduled to be online by the end of the year.
Projects like these give hope to energy storage advocates, many of whom dream of “a future with no gas turbines,” as SDG&E's Chief Development Officer James Avery said at an industry conference last year.
But outside California, utilities broadly view large battery projects like those as technically or economically unfeasible — and often both. Given natural gas’s track record in reducing coal burn and integrating renewables, AGA’s Meyer said it could be a mistake to pull back on investments today.
“If those [gas] investments had not been made, what would the energy mix look like today? Would we be able to substitute out coal, would be as far along in meeting our climate goals if those investments hadn’t been made?” he said. “I hesitate to say that we shouldn't make more of those investments today, fearful of what might happen.”
But environmentalists maintain that perspective is a dangerous one that ignores the fossil assets on the system today, emerging alternatives to gas power, and that the U.S. power sector has already surpassed its carbon budget under the Paris Accord.
“We've been building gas power plants like crazy for the last 10 years and I don't see anyone really sitting down and saying how many more can we build if we are really going to make this transition?” Stockman said. “We can't just kind of keep building gas with the idea that it must be better because we're retiring coal without working out where it gets us in terms of emissions."
In a March 2016 study in Applied Energy, Oxford University researchers introduced the idea of a “2°C capital stock,” describing a “stock of infrastructure that implies future emissions consistent with a 50% probability of a peak global mean temperature increase of 2°C or less.”
Assuming the transportation sector and other industries are on their way to the 2° target — and they are not — researchers found that the global power sector will reach that capital stock next year.
“Our core result is that for a 50% probability of limiting warming to 2°C, assuming other sectors play their part, no new investment in fossil electricity infrastructure (without carbon capture) is feasible from 2017 at the latest,” researchers wrote, “unless energy policy leads to early stranding of polluting assets or large scale carbon capture deployment.”
Given that emissions continue to rise from other sectors, Oxford researchers wrote that we have probably actually hit that capital stock already.
If other sectors only decrease emissions following a path to 480-530 parts per million (ppm) of CO2 in the atmosphere, as opposed to the 430-480 ppm plan of the Paris Accord, “the 2°C electricity capital stock was installed in 2011,” researchers wrote. And if realized emissions from other sectors follow a pathway to above 530 ppm, “new electricity generating assets needed to be zero carbon long ago to meet the 2°C (50% probability) target.”
For utilities, the upshot of this growing body of research is that the U.S. government will likely have to take more aggressive binding action to bring the U.S. back into alignment with the Paris Accord at some point — at least, if future administrations intend to keep the promises brokered by Obama.
That's not a done deal, of course, and there's a chance that utilities may never face stronger regulations. As Michael Dobson, a former climate advisor for the Marshall Islands, recently wrote, fossil fuel companies are currently "pricing in" the possibility that Trump will win in November and "the fragile, hard-won consensus on global climate action will evaporate soon after; and that investments in oil, gas, and ... coal might not be such bad bets after all."
But barring an about-face on climate policy, meeting the U.S. goals will likely require legislative action or another round of carbon regulations, meaning gas plants and pipelines being built today could be rendered inoperable before their full lives.
“Anything we build from now on, we are either going to overshoot the mark or have to retire that stuff early in order to hit the mark,” Stockman said. “And this is very relevant in the U.S. where most of your coal plant stock is retiring anyway.”
For utilities, gas benefits often outweigh climate risksUtilities and the gas industry often bristle at framing natural gas as an environmental problem. The explosion of gas production in the last five years has enabled historic carbon reductions in the electricity sector, they rightly say.
“The United States is leading the world in the production of oil and natural gas and in the reduction of carbon emissions which are near 20-year lows,” Michael Tadeo, spokesperson for the American Petroleum Institute, wrote in a statement to Utility Dive. "Greater use of clean, affordable natural gas along with our industry’s investment in new technologies has made this possible. Moving forward, it’s critical that our nation’s leadership on these important issues continue for generations to come.”
That narrative of natural gas as an environmental champion was reiterated by officials from APPA, the National Rural Electric Cooperative Association (NRECA), the American Gas Association (AGA), as well as Duke and Xcel Energy, two major investor-owned utilities. The Edison Electric Institute, the trade group for U.S. IOUs, declined an interview request and referred Utility Dive to API, who said they could not arrange an interview but responded with a statement.
That natural gas producers are apprehensive to talk about future climate goals is not all that surprising — there’s little upside for the companies no matter how they address the question. But utility sector officials say they are aware of the issue and factor the climate and regulatory risks into every investment decision.
“The carbon footprint considerations are part of the equation,” Duke’s Williams said, “as are price and cost.”
Every other utility representative echoed Williams, but APPA’s Nipper put the situation most bluntly.
“Because policies change and other variables change, we may very well find ourselves a few decades down the road in a situation where in order to do the right thing at that point or meet policy objectives, we have some stranded natural gas assets,” he said. “We certainly had that with coal and we've learned from that experience.”
NRECA’s Head of Governmental Affairs Kirk Johnson said co-ops are also aware of the risks.
“The whole stranded asset issue is very much on our members' minds, in part because of where they are with some of their existing coal facilities and the impact the Clean Power Plan would have on that.”
Conflicting priorities Despite the risks it presents to shareholders and the environment, utilities continue to invest in gas because of its low cost and reliability.
“We don’t agree with the premise that it makes economic or, in a lot of cases, technical sense at the moment to abandon natural gas,” Nipper said, reflecting other utility comments. “We still need baseload generation, and renewables cannot provide that. We're just not there yet on the storage and other pieces of the technology framework necessary to make that happen.”
But the question of “abandoning” natural gas is besides the point, Stockman and other environmentalists say. What they’re asking is that utilities slow or halt new investments in gas infrastructure.
“Up to this point, gas has played an important role in competing against the coal industry and reducing the viability of coal,” Stockman said. “That’s great, but what we're talking about here is the future and what happens over the next two, three and four decades. I don’t think anyone builds a gas power plant or pipeline expecting to wind it down within two decades.”
Stockman and other environmental groups say there is enough fossil fuel generation on the U.S. grid to support the expansion and integration of renewable energy, though some localized regions are exceptions.
Many utilities dispute that. But even if there are alternatives to new natural gas infrastructure, investing in the resource appears quite lucrative for many power companies today.
“We are [investing in gas companies and infrastructure] because it's a growing industry,” Duke’s Williams said. “Piedmont Natural Gas, their growth rate was 8-9%. Our growth rate is 4-6%, so we bought Piedmont.”
Similar logic underlies Duke’s involvement in the Atlantic Coast Pipeline and other utilities' natural gas investments: As gas consumption increases, it will pay to own the assets and companies that deliver it. And at the same time, utilities can ensure firm supply for gas plants, avoiding fuel interruptions such as those seen during the Polar Vortex of early 2014.
“The role of gas infrastructure is getting more and more important,” said Richard Meyer, head of governmental affairs at the American Gas Association, the trade group for gas utilities. “I think it's a safe bet that the use of natural gas will continue to support a low-carbon future and that natural gas could increase in the [power] sector.”
All the investment in the gas sector implies that the environmental and stranded asset risks are outweighed in many utility analyses by perceived reliability benefits, the cost of other resources, or the simple financial upside of a gas merger. But each utility respondent denied they put the climate concerns below any other consideration.
“What I'm saying is that all those factors of near-term, medium- and long-term consequences weigh in our members' decisions on how to meet resource needs,” NRECA’s Johnson said. “We’ve got folks who need to meet, in some cases, some very near-term demand needs that they need to generate electricity for, and as they run the models, gas is the best option.”
“I would say our urgency [to cut carbon emissions] is the same as any other group,” Williams said of Duke Energy. “Environmental groups are focused on environmental footprint, and we have to focus on reliability, price and the capital costs. We don’t have the luxury to focus on just one item. We have to balance all those interests and sometimes they are competing.”
The role of gas in a low-carbon futureRegardless of whether utilities are left with stranded assets in coming decades, the question remains of what role natural gas generation will play in a future power mix — one that’s expected to contain significantly more renewables and allow for much less carbon pollution.
Some utilities are starting to model that future already. In its Colorado service territory, Xcel Energy has integrated over 60% wind energy for short periods of time and has been the largest wind energy provider in the nation for 12 years.
Far from painting gas as an environmental villain, Xcel’s Jack Ihle told Utility Dive that the utility’s renewables growth would not be possible without the utility’s natural gas generation.
“Natural gas generation is an extremely valuable if not an essential part of our integration efforts for renewable energy,” he said. “As coal phases down over time, we use it as a balancing fuel.”
Xcel will retire 25% of its coal generation between 2005 and 2018, but unlike other utilities, it has not significantly increased its gas generation in that time. While the utility has invested in new plants, its share of gas generation has stayed steady between 22% and 24%, Ihle said.
“In contrast to much of the U.S. where the natural gas generation percentages have been rising significantly, we've been pretty flat on natural gas generation and renewables are the big part filling in that gap."
Xcel still has a lot of coal generation on its system — 46% of its total capacity — meaning it has a long way to go to decarbonize and that utility leaders “view natural gas as a significant step in the right direction on a carbon trajectory.” As the utility continues to draw down coal generation, it sees gas as the only viable option to help integrate more wind — currently above 17% of its total capacity.
That narrative of gas as a renewable energy-enabler is one mentioned by each utility that Utility Dive spoke with, and is especially salient when looking at renewable energy integration up to this point. A recent study from the National Bureau of Economic Research, AGA’s Meyer pointed out, found that gas generation growth enabled more renewable energy deployment between 1990 and 2013.
“It’s really the only option available today to [deploy] at the scale to balance the renewables that we're balancing today,” Xcel’s Ihle said.
But that reality may be about to change. After the Aliso Canyon gas leak cut fuel supplies to gas generators in the Los Angeles basin earlier this year, California regulators directed utilities to speed up the deployment of large-scale energy storage. Mostly confined to utility pilots before this year, California utilities have proposed three battery large-scale battery installations since August — two 20 MW (80 MWh) facilities from SCE and a 37.5 MW (150 MWh) project from SDG&E. The earliest is scheduled to be online by the end of the year.
Projects like these give hope to energy storage advocates, many of whom dream of “a future with no gas turbines,” as SDG&E's Chief Development Officer James Avery said at an industry conference last year.
But outside California, utilities broadly view large battery projects like those as technically or economically unfeasible — and often both. Given natural gas’s track record in reducing coal burn and integrating renewables, AGA’s Meyer said it could be a mistake to pull back on investments today.
“If those [gas] investments had not been made, what would the energy mix look like today? Would we be able to substitute out coal, would be as far along in meeting our climate goals if those investments hadn’t been made?” he said. “I hesitate to say that we shouldn't make more of those investments today, fearful of what might happen.”
But environmentalists maintain that perspective is a dangerous one that ignores the fossil assets on the system today, emerging alternatives to gas power, and that the U.S. power sector has already surpassed its carbon budget under the Paris Accord.
“We've been building gas power plants like crazy for the last 10 years and I don't see anyone really sitting down and saying how many more can we build if we are really going to make this transition?” Stockman said. “We can't just kind of keep building gas with the idea that it must be better because we're retiring coal without working out where it gets us in terms of emissions."
Riders from the Standing Rock, Rosebud, and Lower Brule Lakota reservations came together on horseback to push back a police line that had formed between a group of protesters and the entrance to the Dakota Access Pipeline construction site. Daniella Zalcman
Here are photos of injustice at work, the police state, 'law enforcement',
doing what it does, protecting and serving the corporate elite...
doing what it does, protecting and serving the corporate elite...
A protester is arrested for standing on the outer layer of barricades that separate the protest site from the police line and construction zone on Monday morning. Daniella Zalcman
