Navigant Research Blog

Costs of Fossil Fuel Use on Society Much Higher Than Expected

— November 11, 2016

Electric Vehicle 2According to a new report from the American Lung Association (ALA), if the climate and health costs of gasoline-powered vehicles were accounted for, the average 16-gallon gasoline tank fill-up would cost an additional $18.42 for consumers (that’s on top of the average price of $35.68, raising the total price to around $54). The ALA estimates that these health expenses account for $11.82 per tank and $6.55 for climate costs. Because these costs are not being accounted for, the public is essentially subsidizing the use of gasoline-powered vehicles through higher healthcare costs and an increased need for climate adaptation efforts.

Carbon Tax and Transport Technology Solutions

While the possibility of a carbon tax being instituted in the United States is highly unlikely in the near term, several other countries around the world have begun to mandate these programs in order to assign a dollar value cost to fossil fuel use that affects public health. Canada announced last month that a national carbon price will be implemented in 2018. The Canadian government has proposed a minimum price of C$10 ($7.50) per ton of carbon pollution in 2018, rising by C$10 each year to a maximum of C$50 ($37) per ton by 2022.

Advanced transportation technologies also offer an opportunity to reduce the health and climate impacts of personal vehicles. While EV adoption continues to be a modest portion of overall vehicle sales, there are some encouraging signs for growth when considering studies on consumer behavior and the enormous interest. According to PlugInsights Research, once drivers have bought or leased an EV, 97% do not go back to gasoline-powered vehicles.

The survey indicates that once drivers have experienced the benefits of EVs, such as reduced operation and maintenance costs, they are extremely unlikely to return to combustion engines. There are also currently over 400,000 reservations for the Tesla Model 3, which looks to be the first mass-market EV designed to drastically increase the number of EV adopters. As suggested by the survey, high Model 3 sales could play a significant role in getting more consumers engaged and committed to the electric driving experience. Additionally, new transport solutions such as Hyperloop One’s high-speed tubes could drastically reduce the need for personal vehicles and help cut down on the health and climate impacts of cars.

 

If $9 Billion of Renewable Energy Is Curtailed in 2030, What Opportunities Will Emerge? Part 2

— October 4, 2016

Cyber Security MonitoringThe first part of this blog covered the growing trend of renewables curtailment. This second post will cover the solutions that are turning curtailment from a problem into an opportunity.

Many solutions have been proposed to address the integration of renewables into the energy sector. The first two, transmission upgrades and storage technologies, tend to get a lot of media attention. However, these can be seen as “necessary but not sufficient” options in the race to integrate renewables. Flexible gas generation technologies will also play a growing role in the grid of the future.

Transmission upgrades connect renewables to more loads and diversify generation resources. Germany, with 26% of its generation coming from intermittent sources in 2015, has been building out transmission to connect the windy south of the country to the industrial north. As in many global markets, transmission expansion is subject to NIMBYism, and in Germany’s case is being forced underground, which is more expensive. California, with 14% of its generation from intermittent sources in 2015, may be expanding its independent system operator (ISO) into a regional organization across the climatologically diverse Western Interconnection, though the decision has been delayed for further review. And China, generating just around 3% of its electricity from wind in 2015, still curtailed billions of dollars of wind power in recent years and is quickly pushing to interconnect it with load.

Storage technologies are growing quickly, as well. Hydroelectric storage is a cheap and clean technology that nonetheless sometimes battles drought-related, environmental, and even methane emissions concerns. Batteries, including lithium ion and other types, are rightly making news as costs fall and policies like incentives and storage mandates drive the market toward rapid growth. These and related storage technologies, including compressed air storage, are growing quickly and will become a major part of our electric grids.

Flexible Solutions

Flexible gas-based generation solutions tend to get less media attention but will also be crucially important in the flexibility of the grid.

  • A 2016 National Renewable Energy Laboratory (NREL) report suggested that for California to accommodate 50% of its generation coming from solar PV, a wide range of changes would need to take place. Notably, flexible thermal generators and combined heat and power (CHP) plants were mentioned as a key necessity, even if the amount of energy storage is boosted by more than 10 times what is outlined in the current mandate.
  • A 2015 report by the Union of Concerned Scientists on California’s grid states that under a 50% Renewable Portfolio Standard (RPS) scenario, curtailment could be cut from 4.8% to 3.2% if natural gas resources are able to turn down to half-power.
  • A 2015 report points out that Denmark was able to generate 39% of its electricity from wind thanks in large part to flexible district energy CHP resources. These district energy systems are in some way the core of Denmark’s grid and are expected to become electricity consumers rather than producers during times of high wind generation.
  • A 2016 report funded by the German government suggests that power-to-heat will be more important than batteries in balancing that country’s grid in the future.

Most of these reports suggest that fossil-based sources will fuel this generation, though carbon-neutral biogas and hydrogen are taking strides to catch up too. These gas-based technologies have the dual benefit of boosting grid flexibility while (in most cases) decarbonizing heating, an area of growing concern. As a complement to the transmission and battery storage changes making headlines, these sources are set to become key contributors in the grid of the future.

 

Rail Looks to Move the LNG Market

— September 13, 2016

Pipeline (2)The natural gas market in North America continues to have oversupply issues and a much lower price than other regional markets. Natural gas producers in Canada, Alaska, and other parts of the United States that are looking for new outlets for gas deposits may soon see new sales thanks to an old form of transportation—rail.

For the first time in decades, liquefied natural gas (LNG) is being used to power locomotives in the United States, and trains will soon begin delivering LNG by tanker for the first time. In June, the Florida East Coast Railway (FECR) began the first line in nearly 20 years to operate an LNG-diesel duel fuel train in the United States. The train runs between Jacksonville and Miami, and the company intends on converting all of its locomotives to dual-fuel setups.

Displacing Diesel

FECR is currently sourcing its engines from General Electric. Also offering LNG conversion kits to railway operators are manufacturers Energy Conversion, Inc. and EMD. Railroad operator BNSF is also testing LNG locomotives. The use of LNG in locomotives first began in the 1980s by Burlington Northern Railroad, but after several trials, engine conversion efforts lost steam, until efforts to put them back online returned just a few years ago.

The potential market for LNG as a rail fuel is considerable as diesel fuel consumed in the top 7 major freight railroads was about 7% (3.6 billion gallons) of the U.S. total diesel fuel consumption in 2012, according to the US Energy Information Administration (EIA). Supplying engines with LNG fuel while in operation requires the addition or modification of an LNG tender car. LNG tender manufacturers in North America include Westport Innovations of British Columbia and Chart Industries. The EIA expects that switching to cheaper LNG will more than repay the cost of converting the engine and tender car that holds the fuel.

Alternative to Pipelines

Rail is also being proposed as an alternative distribution mechanism to sometimes-contentious gas pipelines. The Alaska Railroad Corp. (ARRC) became the first rail agency to obtain approval from the Federal Railroad Authority (FRA) to transport LNG by rail tanker in October 2015. Transportation of LNG from where it is produced to interior markets in Alaska is likely to begin soon, and Union Pacific Railroad has similarly applied for permission to transport LNG in the lower 48. Specially designed LNG tanker cars are needed to store the fuel during transport, and new designs are currently in use in Japan and in Europe, where companies VTG and Chart Industries are collaborating.

LNG and oil pipelines continue to face opposition for their potential to endanger the environment that they pass through, so transporting LNG by rail could be a less objectionable method of distribution. Switching from diesel to natural gas also has environmental benefits. According to the EIA, natural gas produces 27.4% less CO2 than diesel when being burned.

Utilizing the railways for both delivery and consumption of LNG has inherent synergies, especially if the refueling depots and processing plants can be located near rail terminals. Until this market matures, some natural gas producers in Canada struggling to find options for exporting the abundance of natural gas are moving into the United States and Mexico in order to maintain growth.

 

Should We Worry About Carbon Dioxide Emissions From Natural Gas Surpassing Coal?

— September 13, 2016

Smoke StacksAccording to the US Energy Information Administration, in 2016, CO2 emissions from natural gas are expected to surpass coal emissions in the United States for the first time since 1972. As CO2 emissions from natural gas increase due to growing natural gas consumption in the energy sector, major concerns have developed among environmental groups and others about natural gas becoming a threat to climate change. However, to generate the same amount of power, natural gas emits only 55% of the CO2 compared to coal. As natural gas displaces coal, CO2 emissions that could have come from coal will be cut by half. As long as the growth of natural gas is at the expense of coal consumption, it will help the fight against climate change.

It would be ideal if both natural gas and coal could be replaced with renewable energy such as solar and wind. However, when the sun doesn’t shine and wind doesn’t blow, electricity still needs to be generated. Even with cutting edge technology on energy storage, demand-side management, and energy efficiency, the need for stable electricity generation from reliable sources cannot be fully eliminated. Natural gas is by far the best option for such a reliable source due to its affordability and abundance in the United States. Besides the benefit of fewer  emissions, the price of natural gas is also competitive with coal. The United States is also the largest natural gas producer in the world thanks to the boom of shale gas. In general, as more renewable generation capacity will be added than fossil fuel capacity this year (and likely in the next few years), natural gas is essential as a backstop for grid operators to address the intermittency of renewable energy.

The Problem of Methane Leakage

Nevertheless, natural gas is not perfect. The methane leakage problem could seriously undermine the climate benefit of natural gas. At the same time, the US Environmental Protection Agency is making crucial progress in setting regulations on restricting methane leakage. With proper regulatory incentives and continuing technology improvement, the effects of methane leakage can be contained to make natural gas a viable complement to a lower carbon future.

 

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