Let’s ‘get gas right’ and exploit synergies of natural gas and renewables

The energy landscape in the United States is changing. Renewable technologies like wind and solar power are on the rise, and so is natural gas. Together, these transformative trends have led to recent reductions in U.S. greenhouse gas (GHG) outputs.

In Texas, where wind power and natural gas are thriving hand-in-hand with oil production, there is a particularly unique opportunity for exploring pathways toward decarbonization that exploit complementary synergies across energy resources. Understanding the opportunities for developing these resources in the context of a national and global energy economy transition is paramount, as all resource development has benefits and impacts.

Recent rapid expansion of shale gas (and oil) production and renewable energy development in Texas is making natural gas an increasingly important player in the transition to a lower carbon-intensive energy system. While we cannot ignore the associated concerns and risks, we also cannot ignore the potential for progress if we “get gas right.”

For example, using natural gas and renewable energy in unison is one potential pathway toward a low-carbon, resilient, and affordable power system. While the two resources were historically viewed as competitors, natural gas and renewables are increasingly recognized as complementary, not only technologically (e.g., electricity balancing) but also financially. Our work has illuminated both areas of caution and action as the nation embraces the promise of natural gas and renewables as valuable energy resources.

Concerns about natural gas development range from air quality to water quality and availability to the social license to operate. One of the primary concerns is GHG emissions.

Methane emissions account for roughly 10 percent of U.S. GHGs, and a quarter of these are attributed to the natural gas sector. The production stage of the natural gas supply chain has received particularly heightened attention. Methane matters because while it accounts for a relatively small portion of U.S. GHG emissions, the Intergovernmental Panel on Climate Change estimates that the impact of methane is 34 times greater than that of carbon dioxide over a 100-year period.

Increasing efforts to measure and control methane emissions can help reduce the environmental impact of natural gas development, and current regulatory frameworks provide incentives for investing in such reductions.

To encourage local distribution companies to replace older, possibly leaky pipelines, most states have adopted mechanisms to enable cost-recovery for pipeline modernization investments. In addition, some states directly regulate methane emissions.

The regulatory frameworks governing the numerous components of the natural gas supply chain are multi-layered, but generally they aim to reduce emissions and system leakage. Texas is one state that has already implemented regulations that directly address natural gas venting and flaring.  

Similarly, public scrutiny has also focused on the effects of natural gas development on water quality. In response, the industry has implemented mechanisms for increasing transparency and oversight through voluntary disclosure of the chemicals used throughout the hydraulic fracturing process. Many states, such as Texas, also have taken legislative action to require this disclosure, providing additional transparency.

When used in the electricity sector, natural gas is more efficient than other fossil fuels, and it provides flexibility and reliability to the grid as renewable penetration increases. Compelling business models make the synergistic use of natural gas and renewables attractive from both systems-level perspectives in bulk energy as well as in distributed applications.

Wind and solar energy have zero fuel costs (and thus no fuel price risk) yet variable generation profiles; natural gas-fired generation is characterized by fuel price volatility but is flexible and dispatchable. These complementary risk profiles create opportunities for financial risk hedging and enhanced reliability from a portfolio management perspective.

In distributed applications, expanding direct use of natural gas and renewables in homes and businesses can reduce overall energy consumption and emissions. For example, cogeneration of heat and electricity (which can be fueled by natural gas or renewable fuel) can enable participation in wholesale power markets and provision of other energy services that create electricity-based revenue streams if plant sizes and operational characteristics are optimized. Increased use of these applications also reduces energy lost throughout the generation and distribution of electricity on the wider electrical grid.

Furthermore, the combined use of natural gas and renewables in distributed applications also helps to meet evolving and heterogeneous consumer preferences. As customers demand more control and transparency in their energy use, energy services providers are increasingly focused on customer-oriented solutions.

In light of this, enabling natural gas and renewables synergies can create value for the end-use electricity customer. A key driver for natural gas and renewables synergies will be the ability to operate systems in a way that creates value for the customer—such as by providing more reliable, resilient, and affordable systems like hybrid systems.

Natural gas in conjunction with renewables can play a critical role in energy system transformation, however, a few key challenges remain. For instance, market uncertainties, technology and costs, infrastructure investment needs, and natural gas-electric market harmonization challenges create obstacles to rapid expansion of synergistic applications. But those obstacles are not insurmountable.

Cost and technology improvements can enable hybrid solutions at both the project and system-wide levels that integrate the two resources.

Joint transmission corridors, joint financing, colocation, and hybrid systems can improve project economics. Business models can capitalize on shared infrastructure investments. Increased coordination between natural gas and electricity markets can improve operational efficiency, minimize stranded capital, and maximize returns on investments. Innovative business models can capitalize on the fluctuating market conditions to harness synergy opportunities and mitigate potential adverse impacts.

Together, natural gas and renewables can contribute to a resilient and reliable electrical system that is also less carbon intensive. That potential rests on “getting gas right” and taking advantage of the synergies of natural gas and renewables. 

 

Editor's Note: The Joint Institute for Strategic Energy Analysis (JISEA) has published a series reports addressing how to “get gas right.” Published reports provide new methodological approaches to estimating natural gas-related GHGs, track trends in regulatory and voluntary industry practices, explore various electricity futures, and examine additional critical topics related to the role of natural gas in our energy economy. Learn more about JISEA and our natural gas analysis at www.jisea.org.

Douglas J. Arent, M.B.A., Ph.D. is the Executive Director of the Joint Institute for Strategic Energy Analysis. His research focuses on energy, sustainability and strategy. Arent has more than 30 years experience in sustainability research and strategy, and is a member of the National Research Council Committee to Advise on Global Change, American Academy of Arts and Sciences Steering Committee on Social Science and Energy, and non-resident Sr. Fellow of the Center for Strategic and International Studies.

Jacquelyn Pless, M.S. is a Research Economist at the Joint Institute for Strategic Energy Analysis and a Ph.D. Candidate in Energy Economics at the Colorado School of Mines. Her research combines empirical evidence and economic theory in the areas of energy and environmental economics, public economics, behavioral economics, and development economics to help inform the design of effective government policies and improve quality of life.

 

The views expressed by contributors to the Cynthia and George Mitchell Foundation's blogging initiative, "Achieving a Sustainable Texas," are those of the authors and do not necessarily represent the views of the foundation.  

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