Last Thursday, NECEC and Mass High Tech released the first of three transcripts from the December meeting of the Energy Leaders Breakfast Club. This week, we continue the conversation with a discussion on the future of natural gas.
The Energy Leaders Breakfast Club conversation does not reflect the views or positions of the New England Clean Energy Council or Mass High Tech. The Breakfast Club is designed to be a dialog and attempts to include representatives from different parts of the region’s clean energy cluster to get a range of perspectives in order to enhance awareness, communication, and collaboration. The opinions expressed here are those of the individuals involved and not those of the Clean Energy Council or Mass High Tech.
Energy Leaders Breakfast Club
1.2 The Future of Natural Gas
Jim Cabot: So again I was just down in DC with the American Council of Renewable Energy and you know, it’s funny, natural gas prices last year was all anyone could talk about. It wasn’t as prevalent this year. I think folks working in renewables have accepted low gas prices as the new reality. The good news is that there was more optimism about the ability to compete in this environment—a sign that renewable prices have made significant gains.
Mitch Tyson: I think there’s an opportunity there for us to be thoughtful about natural gas and its role in a transition to a carbon free or at least carbon light energy framework.. But I think right now we’re at a moment of great uncertainty with regard to natural gas. Let’s wait and see where natural gas prices come out. There still is a lot of uncertainty.
Bilal Zuberi: I mean there’s a lot of discussions around the natural gas space and what’s going to happen. Right now it’s sitting at 350 dollars and it’s probably if you look at the best estimate it will go up to 500, 550 but not higher than that. But that’s still a pretty significant delta. What won’t happen is it going back to $10 to $12 There’s a lot of debate around whether we are going to be becoming natural exporters of shale gas. Well, there’s shale gas actually in a lot of different geographies around the world. They just haven’t been extracted yet. So the big question is not so much how much shale gas will be available and how low the price will remain at. But the question is what are all the industries that are energy intensive that can switch over to natural gas without having availability of the kind of capital that will be required to do that. As a country we moved our entire petrochemical infrastructure out of the country. And bringing that back is a) a five to ten year program, it doesn’t happen overnight and two) it requires a lot of investment. Again, to do even that you need long term thinking. You can’t do that with one year thinking.
Mitch Tyson: Well you have to because a petrochemical plant is a 30-year project, right? And you’ve got to have some line of sight to what cost and access is going to be and pricing and externalities. So it drives us to thinking about a broader energy policy.
Peter Rothstein: And there’s been a lot of discussions about how natural gas costs have come way down which makes it so cheap. But if you compare new natural gas combine cycle power plants against new renewables, they’re pretty much on par. And if you include all the infrastructure to create a new facility – both should be part of that mix but that means long-term investing perspective as opposed to short-term fuel costs.
Susan Hunt Stevens: I have to say, at least from the consumer insight perspective, that natural gas is getting a very bad name because, among the environmentalists and consumers, fracking is a big deal. And the ground water contamination associated with fracking. You’ve got Bill McKibben, one of the leading environmentalists, willing to go and get arrested over the climate impact of this around the White House. And so people who should be supporting a transition away from oil aren’t loving what’s going to happen if natural gas becomes a major source of energy.
Mitch Tyson: And that surprises me, though, because if you think about natural gas and renewables, at least at this point, they should actually be friends. I understand the argument that if natural gas prices are lower than that makes it a tougher hurdle for renewable energy to be economically viable , standing against it. Fine. We should have a tough hurdle. But in the meantime we’re mostly dependent upon renewables which have some level of intermittency and storage and natural gas can help level it out. And natural gas is a heck of a lot cleaner than other fossil alternatives.
Susan Hunt Stevens: From a climate and greenhouse gas emissions standpoint, I believe there are growing concerns about that the impact of extreme extraction methods. It could prove that it is actually worse for the climate, not to mention concerns about groundwater and air quality.
Jim Cabot: Remember we’re heavily invested in gas generation in this part of the country. When that rolled out, a lot of that was driven by regulators pushing for environmental benefits. I remember businesses resisting pretty heavily at the time over concern about potentially high power rates. Well, now look what’s happening as we’re the beneficiaries of low fuel prices. I think we need to learn from that lesson as we invest in energy assets that use free fuel.
Marcie Black: So it seems to me that until we get batteries that can handle levelizing the renewable energy intermittency natural gas is, like Mitch said, a perfect fit to marry with renewables even though it’s the better of the worst.
Mitch Tyson: Retiring the coal plants and replacing them with natural gas is absolutely beneficial on multiple dimensions and needs to be part of the mix. We’ve talked about needing to have a portfolio. The other piece that needs to be part of the portfolio that’s having a big impact on reducing bills and reducing peak is demand response. In effect, demand as another fuel, it’s having a big impact on reducing peak use.
Bilal Zuberi: This is a big issue because we will keep hearing it through the next year. If there’s one issue in 2012 that’s going to probably get a lot of focus from the venture capital industry and a lot of entrepreneurs, as well as create friction between the clean tech industry and other industries, this is going to be it. Because there are a lot of reasons one has to fall in love with natural gas today. And then obviously this industry is traditionally an offshoot of the oil and gas industry, right. And they’ve played a very careless role so far with the whole fracking issue and with other issues they think of as non-issues and that are not.
Peter Rothstein: Especially in election cycles and these rapidly changing news cycles, there’s such a pull to simplify the message, simplify the story and in energy it’s not one answer. Natural gas isn’t the answer. It is part of the mix and we really do need to have a portfolio and have consistent structures so that we’re investing over the long term. And [consumers] need to understand not only all the different sources, but there are job impacts. All the efficiency programs, the renewal programs are leading to both jobs for deployment, but also it’s helping to incent an innovation economy that’s inventing the next set of solutions because they see the market adoption opportunities down the road.
Bilal Zuberi: I mean we have a policy that’s established based on who the supporters are and what kind of lobbyists they can employ. And everyone has their own lobby. So you have coal that’s working against natural gas right now. It’s very interesting. There are going to be multiple gigawatts of coal power plants that will be coming offline. And people are really questioning what’s going to take up its place.
Rob Day: There’s an interesting little microcosm of this up in Salem where there is one of the country’s dirtiest and least efficient power plants. It burns coal and oil actually. I actually see it out my window every day. And so there’s already been a decision made by the owner to shut it down. And in fact I think it got, that decision got delayed because they were hoping to see some climate regulations come into effect so that they would be able to get some additional time to benefit off of the credits. But basically the thing’s been cost ineffective for a while. It hasn’t made any economic sense to the owners for a while. So they’re shutting it down as of 2014. And the big question is what’s going to replace it. It’s right there on the Salem harbor. Are they going to replace it with natural gas turbines, because it’s got a lot of the electricity infrastructure needed for that? There are a lot of folks saying “No, we should turn it into new waterfront retail,” and stuff like that. It will be interesting to see how that all plays out. But the big thing for me is that the owner already decided to shut it down. It just didn’t make sense. And that’s because we’re enjoying this low cost natural gas environment and because of these other cost savings that we’ve seen where the prices have come down in the region.
Present at the December breakfast club:
Peter Rothstein, President, New England Clean Energy Council
Mitch Tyson, Tyson Associates, New England Clean Energy Council Co-Founder and Energy Leaders Breakfast Club Chair
Jim Cabot, Senior Vice President, Rasky Baerlein Strategic Communications
Rob Day, partner, Black Coral Capital
Marcie Black, CTO, Bandgap Engineering Inc.
Jim Matheson, General Partner, Flagship Ventures
Bilal Zuberi, Principal, General Catalyst Partners
