Gloom and Sunshine
Monday, December 25, 2006 at 11:17PM The news is mixed, as usual. First, the bad news.
I just read an interesting analysis of the near future of our natural gas supply. Louis De Sousa, writing for The Oil Drum: Europe, invokes the 23 year rule. It is a straightforward concept. Graph the discovery rate for natural gas in North America. Push that graph forward in time 23 years, and you will find that is a good match for the amount of gas actually pumped out of the ground. For instance, in 1977, natural gas exploration companies drilled a bunch of wells and discovered about 24 trillion cubic feet (Tcf) of natural gas reserves. 23 years later they marketed about 22.5 Tcf of conventional natural gas. Coalbed methane and other unconventional sources added another 7 Tcf or so. Whether you look at the conventional-only production or the total, the lines are reasonably close. The problem is that the 23 year shifted discovery line drops off a cliff in 2000 and reaches about 20% of present production by 2010. Both present-day production lines are starting to follow it. Even with the addition of new unconventional sources, it looks as if we could be producing 50% of our present output by 2010. That’s an unfillable gap, and not far away.
According to the U.S. Energy Information Administration (EIA), just over half of the homes in the U.S. are heated with natural gas, and 70% of newly built homes use it. Natural gas is the fuel of choice for new power plants, and accounts for 40% of the electricity generated up here in the Northeast. It is the premiere fuel for power plants that ramp their production up to meet peak loads.
The need for heat will undoubtedly win out over the need for light and home entertainment, but it will be a Pyrrhic victory. Electricity prices, especially at times of peak use, will skyrocket. Electrical rates that vary with time of use are optional right now in many places. I doubt they will be optional for long. A natural gas shortage will quickly create a heating fuel shortage, as the 50% of households with natural gas furnaces try to switch fuels. Residential use alone was about 4.8 Tcf in 2005. (All data EIA) That is equivalent to roughly 34 billion gallons of #2 fuel oil. Compare this with a total U.S. fuel oil and diesel use in 2005 of 63 billion gallons. If half the residential natural gas users eventually switch to oil, there will be a 27% jump in fuel oil use. Fuel oil distillates account for about 20% of our total crude oil use of 21 million barrels a day, so we would have an oil demand increase of 1.13 million barrels per day, which is 1.35% of world production. Expect oil price increases just from that. As if that wasn’t bad enough, refiners, wholesalers, and retailers of fuel oil would have to adjust from supplying just over 6 billion gallons a year to residential customers to 23 billion. We can only hope that natural gas users will hang tough and conserve. Yyyyeah….
At the same time, there are a few rays of sunshine.
I have already written about the work of Nanosolar, which has developed a low cost roll printing method for producing solar cells. As of this month they have obtained manufacturing space and funding and are about to build a 430 megawatt per year production facility in San Jose, California. This plant alone will produce three times the present U.S. solar cell output. Their method could cut the price of solar panels by a factor of 5-10, making solar electricity cheaper than utility prices.
Spectrolab, a Boeing subsidiary, is weighing in with a solar cell optimized for systems that concentrate sunlight with mirrors or lenses, achieving 40% efficiency. Theoretically, this type of solar could push system costs down to $3 an installed watt, about a third of the cost today, with amortized electrical costs dropping to 8-10 cents per kilowatt-hour.
The Australian National University, with funding from Origin Energy, the largest solar installer in that country, has developed the SLIVER cell, which uses 90% less silicon than normal solar cells in use today. Again, this could cut the cost of solar electricity to below that of utility power.
Stephen Forrest, a professor at Princeton, is working with Global Photonic to improve the efficiency of organic polymer solar cells. These cells use carbon instead of silicon, and, like the technologies mentioned above, offer the promise of sub-utility electricity prices.
If just one of these four technology developers hits the jackpot, we’ll see a beautifully disruptive shift in electrical generation. It will be idiotic not to install solar power. Better yet, solar arrays produce power during the day in a bell curve that roughly matches peak power demand, mitigating the upcoming loss of cheap natural gas fueled peaking power.
So, it’s a horse race, with Natural Gas Depletion in the lead, Origin second by a length and gaining, Nanosolar third but coming on powerfully, and Spectrolab at the back with Global Photonic. I’ll spare you any further elaboration of the horse race analogy. Will we go sufficiently solar before the natural gas crunch hits? Not possible. Will 30-month natural gas futures be a good investment? Probably. Will we be able to dig ourselves part way out of the hole with cheap solar? It looks like it.
Reader Comments (2)
Hmm doom & gloom from 2006, yet yearly marketed natural gas production in 2010 was 10% more than 2000 and in 2012 it had increased by another 13%! Please see http://www.eia.gov/dnav/ng/hist/n9050us2a.htm. However, I do agree with you that an end will come but it probably won't be as soon as some think. Meanwhile we should all be doing as much as you do for renewable energy.
Fracking has saved our bacon - for now. The problem is that a fracked well is a little bucket with a big faucet. The necessary replacement rate is high. The cost is higher than the present price. Whenever the glut tapers off, it will be too soon for us.