Fuel for Thought: Some Questions on the Future of Gas-Fired Generation
cogeneration, of 5.3 Tcf between 1996 and 2015, and 6.1 Tcf between 1996 and 2020.[Fn.16] This projection includes generation by independent power producers (IPPs) and exempt wholesale generators (EWGs). GRI projects a corresponding increase of 4.3 quadrillion Btu (quads), or about 4.2 Tcf, excluding industrial and commercial cogeneration (see Table 5).[Fn.17]
My independent assessment of increased gas consumption between 1996 and 2015 for all power generation uses based on EIA data for capacity changes, shown in Table 6,[Fn.18] projects 7.2 quads, or about 7.0 Tcf. Thus, it already appears that the consensus projection of 31 Tcf natural gas demand in 2015 is too low. Obviously, any significant replacement of the 305 GW of existing coal-fired capacity with natural gas-fired, combined-cycle plants would increase this amount substantially. This possibility has generated all the talk about a 30-Tcf gas market by 2010 and a potential 40-Tcf market by 2020. The Lower-48 resource base (including proved reserves) of more than 2000 Tcf, plus the growing Canadian import potential, are quite capable of supporting such goals, but it is yet to be seen if they can be achieved at prices projected by EIA and GRI (see Table 7).
Based on the rapid ongoing advances in exploration and production technologies, my view is that they can, although obviously there will be continuing price volatility. In this context, it is important to note that the break-even price of natural gas for power generated in combined-cycle baseload plants with power generated in advanced clean coal technology plants, such as the integrated coal gasification-combined cycle technology now being commercialized, is over $5 per million Btu.[Fn.19]
To quantify the potential demand for natural gas, let us assume we want to replace all of the 304.7 GW of 1997 U.S. coal-fired capacity that operated at 67.3 percent load factor and a heat rate (HHV) of 10,300 Btu per kilowatt-hour[Fn.20, 21] with combined-cycle plants operating at the same load factor and at a heat rate of 6,300 Btu per kilowatt-hour. This replacement would require an additional 11 Tcf of natural gas per year and would reduce annual carbon emissions in the form of CO2 from 471 MtC to 162 MtC, or by 309 MtC. Such a reduction represents 57 percent of the required 538 MtC cut in emissions below the projected 1,790 MtC level in 2010 required under the Kyoto Protocol.[Fn.22]
To do that by 2010 obviously is virtually impossible. Aside from the huge increase in gas demand and the associated increases in pipeline capacity, it would require a capital investment of roughly $140 billion in combined-cycle capacity. It is quite clear, however, that a substantial portion of this conversion likely will take place as projected by EIA and at least hypothesized by GRI, but over a longer timeframe. Certainly, just about all new capacity for intermediate and baseload power supply will be gas-fired, combined-cycle systems and new peaking capacity will be gas-fired, simple-cycle turbines. However, EIA still sees coal-fired, steam-electric capacity increasing from 305 GW to 333 GW from 1996 to 2020, but without any allowance for possible impacts of the Kyoto