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Fuel for Thought: Some Questions on the Future of Gas-Fired Generation
of electric utilities, although the new, high-efficiency aeroderivative turbines also can be economical sources of intermediate and even baseload power. But the advanced combined-cycle turbine systems, with their high efficiencies and relatively low first cost and their low pollutant and carbon dioxide emissions, now dominate the new generation market.
Combined-cycle turbines increasingly are built as merchant plants by independent power producers (i.e., without long-term contracts for energy and capacity) because of their ability to generate baseload power profitably at about 3 cents per kilowatt-hour from $2.50 per million Btu natural gas.[Fn.12] They emit one-third as much carbon dioxide per unit of power production as coal-fired steam-electric plants, cost roughly one-third as much as new coal-fired plants, and emit negligible amounts of sulfur oxides. Their nitrogen oxide emissions can be controlled to meet the most stringent regulations of the Environmental Protection Agency. In contrast with the relatively static cogeneration outlook, the Energy Information Administration (EIA) projects that combined-cycle capacity will increase from 15.4 GW in 1996 to 211.5 GW in 2020, and combustion turbine/diesel capacity from 70.1 GW to 186.7 GW.[Fn.13]
Coal, Nuclear and Kyoto: What Impacts?
There is no question that advances in gas-fired distributed and modular generation technologies have moved the economic null-point between the pipe and the wire closer to the power user. However, as noted before, shifting economies of scale to ever-smaller generation capacities do have limits set by rising costs of fuel supplies and of equipment, installation and electric grid connection costs per unit of output. Total market penetration of gas-fired distributed and modular generation also will be limited by how much natural gas will be available for power production at costs competitive with other sources. This situation is elastic since it is hard to predict how environmental pressures will impact existing coal-fired capacity and conceivably could stabilize and even increase nuclear capacity.
Emissions Reductions. For example, of total U.S. emissions of 1,480 million metric tons of carbon (MtC) in the form of carbon dioxide (CO2) in 1997, 471 MtC, or 32 percent, came from coal-fired power plants.[Fn.14] Any credible effort to comply with the Kyoto Protocol requirements for the United States to lower its 2008 to 2012 greenhouse gas emissions 7 percent below 1990 levels would have to include a major shutdown of coal-fired plants. Such plants, whose present variable generation cost is only 1.5 cent to 2.5 cents per kilowatt-hour, would need to be replaced with natural gas-fired, combined-cycle turbines.
Repowering is another option. Such compliance also would be facilitated by keeping in operation most of the zero-carbon-emission nuclear fleet, whose variable generation cost also is just 1.5 cent to 2.5 cents per kilowatt-hour. Nevertheless, EIA projects a decline in U.S. nuclear capacity from 100.7 GW in 1996, to 56.4 GW in 2015 and 48.9 GW in 2020.[Fn.15] What a substantial reduction in existing coal-fired and nuclear capacity would do to natural gas and power prices is difficult to predict.
The Gas Response. As shown in Table 4, even without considering Kyoto Protocol compliance, EIA projects an increase in natural gas use for power generation, excluding