Magazine | April 8, 2013, Issue

Letters

Natural Gas Will Meet Markets, Too

As a 25-year veteran of the electric-power industry (first as a contractor, then as a utility employee), I found Jerry Taylor and Peter Van Doren’s “Coal Meets Markets” (February 25) interesting — but slightly tinged with the rose-colored view that the natural-gas industry has been promoting.

They claim that 97 gigawatts of generating capacity were added between 2007 and 2011. However, due to the massive tax credits ($22 per megawatt-hour) for the first ten years of operation of a wind farm, the installation of generating capacity has recently been skewed toward wind turbines. According to the American Wind Energy Association, wind turbines represent 35 percent of all installed generating capacity over the past five years. Unfortunately, because the wind does not blow continuously, installed capacity on a wind turbine does not equate to actual generating capability. On average, if you relied on a single wind turbine to light your house, nothing would happen six out of ten times you tried to turn on the lights.

Also, natural-gas prices are sure to rise, for several reasons. They are much lower than oil prices, and oil and natural gas are interchangeable in many cases. The price for gas will rise as the demand for it does. Prices for liquefied natural gas are quite high in Europe and Asia, which will demand less-expensive liquefied natural gas from America, again raising prices. And natural-gas prices are very sensitive to supply-and-demand balances: During the last natural-gas glut, power companies spent billions installing gas-turbine generators all over the country, and many of these ended up being abandoned when the increased demand drove up natural-gas prices.

According to the American Association of Petroleum Geologists, the actual cost of raw gas production in most U.S. shale fields is higher than the current price for natural gas. The number of gas-drilling rigs has decreased recently, while the number of oil-drilling rigs has increased because of the current low natural-gas prices and high oil prices. In addition, the length of production of a shale-gas field is apparently relatively short — which can lead people to be overoptimistic.

In the end, the retirement of old coal-fired units is good, but we can’t count on natural gas to “power the future.” America needs to have a mix of power sources to choose from, and those sources need to be reliable 24/7.

Jerry Taylor and Peter Van Doren reply: Your point about how installed capacity for renewable-energy facilities does not easily translate into reliable power generation is well taken. Most of the installed capacity that came online from 2007 to 2011, however, was gas-fired.

You are also right to worry about price forecasts, which are notoriously difficult to manage in energy markets. If past is prologue, we should certainly take predictions about gas, oil, and coal prices with a heavy block of salt.

Those with the most to gain (and lose), however, are betting heavily on relatively modest gas-price increases over the foreseeable time horizons. They may be wrong, of course, but we are in no better position to judge. It should be noted that the bulk of today’s coal-fired generating capacity isn’t going anywhere, suggesting — perhaps — that some are hedging their bets.

William A. Jensen

Principal Engineering Analyst, NextEra Energy, Point Beach Nuclear Plant

Two Rivers, Wis.

 

Jerry Taylor and Peter Van Doren reply:  Your point about how installed capacity for renewable-energy facilities does not easily translate into reliable power generation is well taken. Most of the installed capacity that came online from 2007 to 2011, however, was gas-fired.

You are also right to worry about price forecasts, which are notoriously difficult to manage in energy markets. If past is prologue, we should certainly take predictions about gas, oil, and coal prices with a heavy block of salt.

Those with the most to gain (and lose), however, are betting heavily on relatively modest gas-price increases over the foreseeable time horizons. They may be wrong, of course, but we are in no better position to judge. It should be noted that the bulk of today’s coal-fired generating capacity isn’t going anywhere, suggesting—perhaps—that some are hedging their bets.

NR Staff — Members of the National Review editorial and operational teams are included under the umbrella “NR Staff.”

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