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Fossil Fuels and Energy Policy: Understanding the New Natural Gas Economy

How gas supply and price disruptions now outweigh oil imports as the nation's real energy problem.
Fortnightly Magazine - November 15 2000

one practical solution to growing regional shortages of power that have led to unacceptable periodic fly-ups in spot-market prices to levels of $250 to $1,000 per megawatt-hour and even higher. It is the construction by 2020 of a total of as much as 300 GW of gas-fired simple combustion turbine systems to meet peak and some intermediate load requirements and of highly efficient (up to 60 percent) combined-cycle, combustion/steam turbine systems for intermediate and baseload requirements.

This new capacity may require up to 7 Tcf of additional annual gas supply, compared to current annual consumption of about 22 Tcf. Such an increase entirely is feasible, although not at the $2 to $3 per million Btu wellhead price levels in constant dollars projected over the next 15 to 20 years until quite recently. The challenge is to ensure that this supply will materialize at prices that still make gas the logical fuel for new generating capacity and replacement of any existing coal-fired capacity, which cannot meet tightening environmental standards at acceptable costs.

1 "Natural Gas Productive Capacity for the Lower 48 States 1985 through 1997," Energy Information Administration, Document No. DOE/EIA-0542(97), December 1996.

2 "Advance Summary, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves-1999 Annual Report," Energy Information Administration, Document No. DOE/EIA-0216(99) Advance Summary, September 2000.

3 "Monthly Energy Review," Energy Information Administration, Document No. DOE/EIA-0035(2000/09), September 2000. ("Monthly Energy Review," EIA.)

4 "Natural Gas Week," Vol. 16, No. 41, p. 13, Oct. 9, 2000.

5 "Annual Energy Outlook 2000," Energy Information Administration, Document No. DOE/EIA-0383(2000), December 1999. ("Annual Energy Outlook 2000," EIA.)

6 "Monthly Energy Review," EIA.

7 Linden, Henry R., "Fuel for Thought: Some Questions on the Future of Gas-Fired Generation," Public Utilities Fortnightly, Vol. 37, No. 22, pp. 26-35, December 1999.

8 "Annual Energy Outlook 2000," EIA. "Annual Energy Outlook 1999," Energy Information Administration, Document No. DOE/EIA-0383(99), December 1998.

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