Gas utilities and state commissions must work together to help preserve rates of return, encourage conservation, and lower customers’ bills.
A National Gasification Strategy
Presenting a program to stimulate robust coal-gasification technology deployment at low federal cost.
- Number 20, "The Wabash River Repowering Project-an Update," Sept. 2000, p. 4).
- The performance and economics of the Shell gasification system are described in a paper presented by Shell at the 2004 Gasification Technology Conference in Washington, D.C. See H.V. van der Ploeg, T. Chhoa, P.L. Zuideveld, The Shell Coal Gasification Process for the U.S. Industry , Oct. 2004.
Coal: America's Great Resource
For two decades (1980-1999), annual average wellhead natural gas prices in the United States remained between $1.5/MMBtu to $2.6/MMBtu. 1 However, natural gas prices spiked in late 2000 above $9/MMBtu and began a steady climb again in 2002 that has resulted in average delivered prices in the $6-$7/MMBtu range ( see Figure 3 ).2
Over the next 20 years, U.S. natural gas demand is expected to grow by almost 40 percent, but production from on- and off-shore wells in the lower 48 states is expected to increase only 5 percent. Net imports from Canada and Mexico are expected to decline slightly as those countries consume more for their own use. 3 Consequently, the average delivered price of natural gas is predicted to remain above $5.50/MMBtu through 2025, and 96 percent of the incremental supply needed to meet growing U.S. demand is forecast to come from overseas LNG imports (72 percent) and Alaska (24 percent) (see Figure 4). The continuation of historically high natural gas prices and the potential for U.S. dependence on overseas imports for needed supply also are cause for concern.
The pressure to increase natural gas supplies is being driven largely by growth in demand for natural gas from the electric power sector. More than 200,000 MW of new natural-gas generating capacity came on line between 1990 and 2004 (85 percent of all new capacity), and 180,000 MW came on line between 2000 and 2004 (96 percent of all new capacity) 4 (see Figure 5). Natural-gas demand in the electric power sector is projected to far outpace demand growth in other sectors, becoming the largest natural gas consuming sector by 2015 ( see Figure 6 ).
Price trends driven by the combination of production constraints and demand growth are adversely affecting investors and consumers looking to natural gas as the clean, affordable answer to U.S. energy needs. Skyrocketing prices have undermined the economic viability of natural-gas generating stations built in competitive markets, hurt consumers dependent on natural gas to heat their homes, and are adversely affecting the U.S. economy and economic competitiveness. 5 The chemical industry, which is the largest industrial consumer of natural gas in the United States, estimates it has lost $50 billion in business to foreign competition and more than 90,000 jobs since 2000 due to high natural gas prices. 6 Similarly, the fertilizer industry, where 70 to 90 percent of the cost of producing ammonia for fertilizer is the cost of natural gas, reported in 2003 that 11 ammonia plants representing 21 percent of U.S. capacity already had been closed, that only 50 percent of the remaining U.S. capacity was operating, and that two major U.S. fertilizer producers had already filed for