Electricity: A Crisis Is Coming?

[raja]

I had always assumed that the US had plenty of coal, so electric power for our home would be relatively cheap compared with skyrocketing petroleum costs. However, I was surprised to read the following in a magazine put out by the Tennessee electric power service:

A Crisis Is Coming
Tennessee Today, Manager's Viewpoint
The Tennessee Magazine

In the next decade, US consumers will be significantly exposed to rising and volatile electricity prices beyond anything experienced to date. We already have experienced such volatility at the gas pumps and with home heating due to jumps in the prices of oil and natural gas, but we've been fortunate -- and downright lucky -- when it comes to electricity.

The problem that's beginning to emerge is the sizable and significant need for baseload generation combined with the nationwide halting of approval and construction of coal-fired generation plants due to a perceived need to reduce carbon emissions. At the same time, nuclear power plants are slow to be built, and now the nation is turning to natural gas, the last remaining option, to meed the overall need in the next decade.

However, natural gas prices are rising dramatically -- 93% since August 2007, well beyong historic averages. As more electricity is produced with gas, consumers will start to experience price shocks on their electric bills and in the marketplace, where many products and their components are manufactured using natural gas.

Nearly all experts say that America no longer has enough domestic natural gas to support its current growth needs. Canada, our largest international exporter, is lowering its export projections because it needs the gas for its own growth. This will likely leave the US dependent on imported liquified natural gas to meet electricity demand over the next decade. Unfortunately, the largest natural gas reserves are located overseas in some of the world's most politically unstable areas.

Increasing dependence on natural gas will fundamentally shift the energy picture for the US and create new economic strains. For example, the US will have to compete for gas in the volatile global market. As a result, rising and unstable natural gas costs will hi electricity bills immediately.

A few weeks ago, we purchased a grid-tied solar power system, which will take 25 years to pay off, IF kW electricity costs double. We were betting on big inflation and believed this would turn out to be a profitable decision. After reading the article above . . . we feel more confident in our decision . . . .

[Chris]

Re: Electricity: A Crisis Is Coming?

I recall Matt Simmons talking about how this energy problem would be ignored by the politicos up until it was far too late for something to be done. Which reminds me, I must buy some more stock in candle makers.

[GRG55]

Re: Electricity: A Crisis Is Coming?

I had always assumed that the US had plenty of coal, so electric power for our home would be relatively cheap compared with skyrocketing petroleum costs. However, I was surprised to read the following in a magazine put out by the Tennessee electric power service:

A few weeks ago, we purchased a grid-tied solar power system, which will take 25 years to pay off, IF kW electricity costs double. We were betting on big inflation and believed this would turn out to be a profitable decision. After reading the article above . . . we feel more confident in our decision . . . .

No reason to be surprised about where coal-fired power is headed. An example of why from last year. Once again, note the tone and language being used..."human rights abuses"??...(highlights mine)

Glades County Group Joins FPL Coal Power Protest



"Save It Now Glades" Joins Miami Protest

Monday, January 29, 2007

MOORE HAVEN, FLORIDA -- Environmental & social justice activists from across Florida and the South, including "Save It Now Glades" will this week protest the "Coaltrans Americas" 2007 annual international coal industry convention in Miami, Florida. The Coaltrans convention, happening on January 31st and February 1st in Key Biscayne's Ritz-Carlton resort, will bring business leaders and government officials from the energy, utilities, banking, transportation, and insurance sectors together in Miami from throughout the Americas.

The purpose of this Coaltrans "International Networking Event for the North & South American Coal Markets" event is to promote coal development throughout the Western Hemisphere. Activist groups will rally to present loud & visible creative protest actions that will: urge investors to pursue clean energy development instead of coal; demand that coal producers immediately cease environmental destruction including "mountain-top removal" coal-mining and global warming pollution; and highlight the urgent crisis of human rights abuses and violent exploitation committed by the coal industry on rural and indigenous communities, and mineworkers, throughout the Americas.

The environmental coalition says major coal industry decision-makers & representatives attending the "Coaltrans Americas" convention are responsible for human rights violations against coalfield communities and mineworkers, as well as high levels of greenhouse gas emissions, air pollution leading to an epidemic of children suffering asthma, and massive expanses of irreplaceable land destroyed by mining. "Despite the fact that global warming is accelerating every day, over 150 new coal power plants are now planned to be built in the United States," including one in Florida's Everglades, the proposed coal power plant in Glades County, Florida. They say, "Local, regional and worldwide grassroots opposition to these irresponsible, deadly practices of the coal industry is intense and growing, from the Everglades and Appalachia in the southern US to Colombia and Venezuela in South America. A diverse alliance of local Miami and regional Southern activists will – for the first time – protest the annual Coaltrans Americas convention, in order to raise public awareness about the problems with coal and give voice to a common demand for rapid society-wide transitioning away from harmful, unsustainable coal use & towards clean, renewable energy sources."

What's hilarious is that FPL is one of the largest wind turbine utilities in the USA, but since everyone expects the lights to work when they flick the switch, wind or no wind, every watt of wind generated electricity has be be backed up with some other, reliable, form of generation.

As the article states, natural gas is the only current realistic option (other than massive conservation) given all the constraints being placed on development of new coal, nuclear and hydro-dam and long distance transmission-line projects in the USA. The problem with natural gas is it is the most "just in time" major fuel. If the price drops the drilling stops, the production starts falling almost immediately, the imbalance is corrected and the price rises = volatility. For the nimble trader there's a good investment play developing that should endure for a few years to come.

[phirang]

Re: Electricity: A Crisis Is Coming?

If Floridians care so much about power issues, they can just turn off the A/C...

NG is so great because you can ramp up in 10 minutes!!! It's the ultimate peaking fuel.

GRG: I tell my friends who cover renewables that diesel is "the world's greatest battery". Only downside is it takes a few million years to recharge:eek:.

[GRG55]

Re: Electricity: A Crisis Is Coming?

If Floridians care so much about power issues, they can just turn off the A/C...

NG is so great because you can ramp up in 10 minutes!!! It's the ultimate peaking fuel.

GRG: I tell my friends who cover renewables that diesel is "the world's greatest battery". Only downside is it takes a few million years to recharge:eek:.

Nat gas is a great solution for peaking as you say, but the problem with natural gas is when the spark-spread goes negative. Peak facilities use short term and sometimes spot gas because they only run part time, and it's not possible to predict in advance exactly when the heat wave or cold snaps will occur. When the spark-spread is negative (nat gas costs are more than the value of the electricity that can be sold) then no power is made.

jk posted something about a brown out earlier this week; presumably due to the heat wave in the East?

[metalman]

Re: Electricity: A Crisis Is Coming?

Nat gas is a great solution for peaking as you say, but the problem with natural gas is when the spark-spread goes negative. Peak facilities use short term and sometimes spot gas because they only run part time, and it's not possible to predict in advance exactly when the heat wave or cold snaps will occur. When the spark-spread is negative (nat gas costs are more than the value of the electricity that can be sold) then no power is made.

jk posted something about a brown out earlier this week; presumably due to the heat wave in the East?

too much division of labor, i say. i mean, how am i supposed to invest in this energy stuff if i can't understand the concept of 'When the spark-spread is negative (nat gas costs are more than the value of the electricity that can be sold) then no power is made'??? :eek:

let's face it. we live on a very complicated world and no one can comprehend enough of it to know where it's going.

[GRG55]

Re: Electricity: A Crisis Is Coming?

too much division of labor, i say. i mean, how am i supposed to invest in this energy stuff if i can't understand the concept of 'When the spark-spread is negative (nat gas costs are more than the value of the electricity that can be sold) then no power is made'??? :eek:

let's face it. we live on a very complicated world and no one can comprehend enough of it to know where it's going.

Don't buy the electricity producers, buy the natural gas producers instead. IMO nat gas is the only viable, scalable, source of new power generation in North America. Cleanest of the fossil fuels in the eyes of the climate change lobby (not perfect, but much less CO2 than coal). Can be built on small scale so avoids issues of expanding transmission lines from a central generating site by being closer to end users than big coal, hydro, nuclear, etc.

Also best back-up for wind farms as gas fired can be brought on-line fairly quickly when the wind dies and the power demand doesn't.

Pick your favourites, track them through what may be a broad based stock downturn as recession fears are realized, then load up. It's not sexy like solar or fuel cells, but it's the real world way to keep the lights on.

[metalman]

Re: Electricity: A Crisis Is Coming?

Don't buy the electricity producers, buy the natural gas producers instead. IMO nat gas is the only viable, scalable, source of new power generation in North America. Cleanest of the fossil fuels in the eyes of the climate change lobby (not perfect, but much less CO2 than coal). Can be built on small scale so avoids issues of expanding transmission lines from a central generating site by being closer to end users than big coal, hydro, nuclear, etc.

Also best back-up for wind farms as gas fired can be brought on-line fairly quickly when the wind dies and the power demand doesn't.

Pick your favourites, track them through what may be a broad based stock downturn as recession fears are realized, then load up. It's not sexy like solar or fuel cells, but it's the real world way to keep the lights on.

that's money. thanks.

[YoplaitLight]

Re: Electricity: A Crisis Is Coming?

What do people think of Natural Gas Services Group (NGS) as a natural gas play? The company summary on Y! Finance is as follows:

"Natural Gas Services Group, Inc. provides horsepower compression equipment to the natural gas industry in the United States. It also fabricates, manufactures, rents, and sells natural gas compressors and related equipment and provides maintenance services to compressors. The company primarily offers natural gas compressors on rental basis. In addition, Natural Gas Services Group manufactures a proprietary line of compressor frames, cylinders, and parts. Further, it designs, fabricates, sells, installs, and service flare stacks, and related ignition and control devices for onshore and offshore incineration of gas compounds, such as hydrogen sulfide, carbon dioxide, natural gas, and liquefied petroleum gases."

The old saw is that the people who made money in the gold rush were not the miners but the guys who sold the picks. Is NGS an analogous play for a future natural gas rush? Any other nat. gas equipment makers come to mind?

[GRG55]

Re: Electricity: A Crisis Is Coming?

What do people think of Natural Gas Services Group (NGS) as a natural gas play? The company summary on Y! Finance is as follows:

"Natural Gas Services Group, Inc. provides horsepower compression equipment to the natural gas industry in the United States. It also fabricates, manufactures, rents, and sells natural gas compressors and related equipment and provides maintenance services to compressors. The company primarily offers natural gas compressors on rental basis. In addition, Natural Gas Services Group manufactures a proprietary line of compressor frames, cylinders, and parts. Further, it designs, fabricates, sells, installs, and service flare stacks, and related ignition and control devices for onshore and offshore incineration of gas compounds, such as hydrogen sulfide, carbon dioxide, natural gas, and liquefied petroleum gases."

The old saw is that the people who made money in the gold rush were not the miners but the guys who sold the picks. Is NGS an analogous play for a future natural gas rush? Any other nat. gas equipment makers come to mind?

The picks and shovels analogue is certainly worth keeping in mind, and over the past few years certain petroleum service sector companies, such as the drillers, have performed well.

I don't have any comment on the specific company, but factors such as barriers to entry into the segment, ability for the company/sector to expand capacity, ability to pass increasing input costs (steel, labour) on to customers, corporate balance sheet, etc all come into assessing any particular company. Also, be aware that assessing its competitive position can be complicated by the fact that at least one of its major competitors is privately held.

[nitroglycol]

Re: Electricity: A Crisis Is Coming?

What's hilarious is that FPL is one of the largest wind turbine utilities in the USA, but since everyone expects the lights to work when they flick the switch, wind or no wind, every watt of wind generated electricity has be be backed up with some other, reliable, form of generation.

As the article states, natural gas is the only current realistic option (other than massive conservation) given all the constraints being placed on development of new coal, nuclear and hydro-dam and long distance transmission-line projects in the USA.

I'm not sure it's the only option. One thing that I've heard touted as an option is the use of existing hydroelectric facilities to store energy. By closing the spillways when the sun is shining/wind is blowing, you accumulate extra head which can then be tapped at a later time. Of course there are problems with this (you might flood more land than was originally flooded by the hydro project), and it won't work in places that don't have significant hydroelectric capacity, but in places like Manitoba and Quebec it seems like a no-brainer.

And massive conservation? We'll probably need to adopt that too, like it or not.

[Wild Style]

Re: Electricity: A Crisis Is Coming?

Wouldn't better urban planning help out in this as well? Building sprawled out suburbs just isn't efficient be it for water/power distribution or commuting. I wonder if many suburbs will still exist after all this is said and done. I just can't imagine cities continuing to look and grow as they have been. Here in Fort Lauderdale I could see them tearing down some of the western 'burbs (once abandonment picks up), maybe do hydroponic farming so we don't have to ship food in from so darn far.

[GRG55]

Re: Electricity: A Crisis Is Coming?

I'm not sure it's the only option. One thing that I've heard touted as an option is the use of existing hydroelectric facilities to store energy. By closing the spillways when the sun is shining/wind is blowing, you accumulate extra head which can then be tapped at a later time. Of course there are problems with this (you might flood more land than was originally flooded by the hydro project), and it won't work in places that don't have significant hydroelectric capacity, but in places like Manitoba and Quebec it seems like a no-brainer.

And massive conservation? We'll probably need to adopt that too, like it or not.

Good point. To a point...

Except for "run-of-river", all hydro projects work by storing potential energy in the form of water head behind the dam. Hydro dams are actually massive water management projects, and factors like seasonal precipitation, upstream & downstream agricultural water demand, fishery requirements, and the maximum head the dam itself is designed to contain often take priority over electricity generation. In other words there are limits to the amount and timing of the water that can be stored, independent of the wind and sun. Not all the water that is released from the dam goes down the penstock.

But no doubt there are opportunities to change/improve hydro-dam water management practises by introducing the new variable of solar/wind generation on the grid in those areas where hydro is already available, and total power demand is not increasing quickly (otherwise the utility will need both the hydro and the wind/solar power capacity at the same time).

Also of note is that most of the climate change literature views hydro-electricity as a CO2 free, renewable form of energy (but good luck getting approval to dam any more rivers...), so displacing it with solar or wind might be viewed as simply swapping one form of "climate friendly" energy with another?

The majority of new wind turbine installations will need to be backed up by something else. Other than conservation, I do not see any alternative to gas-fired power stations for that purpose in the near to medium term.

[c1ue]

Re: Electricity: A Crisis Is Coming?

Don't buy the electricity producers, buy the natural gas producers instead. IMO nat gas is the only viable, scalable, source of new power generation in North America.

GRG,

I've read somewhere that North America is fairly deficient in natural gas.

If this is true, doesn't this put a bit of risk into investing in natural gas producers targetting North America use?

[GRG55]

Re: Electricity: A Crisis Is Coming?

GRG,

I've read somewhere that North America is fairly deficient in natural gas.

If this is true, doesn't this put a bit of risk into investing in natural gas producers targetting North America use?

I don't understand the question c1ue.

If N/A is deficient in natural gas isn't that a reason to own the companies that have high quality, unhedged reserves of it in the ground in N/A?