Don’t Take Fuel Diversity for Granted
As U.S. production of liquefied natural gas continues to surge, America is poised to become the world’s third largest LNG exporter, trailing only Australia and the Middle East state of Qatar.
Already, huge benefits from LNG commerce are playing out around the world. Growth in LNG exports is reducing our nation’s trade deficit, and it is pumping investment worth tens of billions of dollars into Pennsylvania and other natural gas-producing states.
Thanks to the increase in LNG exports, natural gas producers in the Marcellus formation now have an additional market for their product, and what we’re seeing today is just the beginning.
In the Gulf of Mexico and mid-Atlantic, new LNG terminals are opening and others are awaiting approval from federal energy regulators.
This is reshaping the global energy picture.
Because it wants to reduce air pollution and carbon emissions, China is by far the biggest market for LNG in the world, using clean-burning natural gas to replace coal in electricity production.
LNG is also in great demand in Europe, where governments are looking for a way to reduce their reliance on Russian natural gas.
U.S. natural gas exports via pipeline to Mexico are increasing as well. In the past five years, cross-border pipeline capacity has nearly tripled to a level far greater than current LNG export capacity.
There’s a huge appetite for U.S. natural gas both at home and abroad, thanks to soaring gas production from the nation’s shale fields.
For example, in Pennsylvania, the Three Mile Island Unit One and Beavery Valley nuclear plants are in jeopardy.
If they close, there would be a huge loss of baseload power, exposing consumers to the risk of volatile gas prices.
In some markets, such as New England, the well-balanced mix of fuel sources that was a strength of the grid just a few years ago is now gone. Diversification has been replaced by a worrying over-reliance on natural gas. Should natural gas prices increase in the future, there might be no nuclear and coal plants to shield consumers.
The loss of balance is infecting other markets as well. In New York, for example, the state is pushing a rule that would effectively eliminate coal from the grid by 2020.
New York may only have two coal plants remaining, but the threat of the rule has sent electricity futures soaring. The price of power for 2021 has jumped more than 30 percent since the beginning of May.
Senior executives from four major utilities recently wrote PJM, the nation’s largest grid operator serving 65 million consumers in 13 states and the District of Columbia, begging for market reform to better value fuel diversity and existing coal and nuclear plants. Their concerns have been heard but there’s been no action.
For too many policymakers, concerns about a loss of fuel diversity are easily brushed aside by an unshakable faith in low natural gas prices and the benefits from LNG exports.
But consumers could be left out to dry – in large part because we’re stuck with an old, inflexible electricity system even as the government provides lavish support for natural gas production and LNG exports.
See the article here.
- On March 8, 2019