Energy & Technology

“Energy independence” is a slogan. Our real goal should be energy security

I recently responded to a question on the National Journal blog, "How close is the United States to reaching the elusive goal of energy independence?"

You can read more on the original blog post and other responses here.

Here is my response:

Oil

Oil Basics

Environmental Impact

Market

Prices

Opportunities

Resources

Quick Facts

  • In the United States, petroleum is the largest energy source, accounting for 36 percent of all energy consumed in 2011 with the transportation sector accounting for over two-thirds of U.S. petroleum consumption.
  • Correspondingly, petroleum is one of the largest sources of U.S. greenhouse gas emissions, accounting for around 32.3 percent of total U.S. greenhouse gas emissions in 2011.
  • Globally, petroleum supplies 32.5 percent of global energy use and was responsible for 35.3 percent of global carbon dioxide emissions in 2011.
  • The crude oil market is a global market.  The United States has 1.9 percent of the world’s proved oil reserves, produces 13.7 percent of the world’s oil supply, and constitutes 20.7 percent of the world’s oil demand.

U.S. demand peaked in 2005 at 20.8 million barrels per day (b/d) and declined to 18.9 million b/d in 2013. Assuming current policites, consumption is expected to remain below the 2005 level until 2040.

Oil Basics

Crude oil is an organic compound composed of hydrogen and carbon (i.e., a hydrocarbon).  The hydrogen provides us with energy and the carbon is generally a waste product that is emitted into the air upon combustion.  In order to be useful, crude oil must be refined through distillation and chemical processes. The refining process separates the hydrocarbon chains into different petroleum products. In addition to gasoline, some of the most common products are:

• Petroleum gas – like methane, butane and propane used for heating and cooking

• Kerosene – fuel for jet engines, tractors and some heaters

• Naphtha or Ligroin – an intermediate product used to make gasoline

• Gas oil or diesel distillate – diesel fuel and heating oil

• Lubricants – motor oil, and grease

• Residuals Products – coke, asphalt/tar, waxes

A typical 42 gallon barrel of crude oil (Figure 1) yields around 45 gallons of petroleum products; the 3-gallon refinery gain is due to the fact that the refined products have a lower density than crude oil.
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Figure 1. Products Made from a Barrel of Crude Oil


Source: U.S. Energy Information Administration, “Oil: Crude and Petroleum Products Explained.” 2012

Globally, transportation accounts for 62.3 percent of petroleum consumption.  The remaining uses are non-energy related, including lubricants and asphalt production and use (16.8 percent); agriculture, commercial and public services, residential, and non-specified other (12 percent); and industry (8.9 percent).  In the United States, transportation accounts for over two-thirds of U.S. petroleum consumption, with the remainder used by the industrial (25.1 percent), residential and commercial (4.5 percent), and electric power sector (0.6 percent).

 Figure 2. U.S. Petroleum Consumption by Sector (2013)


Source: U.S. Department of Energy, “Total Energy: Monthly Energy Review. Tables 3.7a, b and c.” August 4, 2014.

 

As shown in Figure 3, light-duty vehicles – cars and pickup trucks – account for 58.6 percent of transportation petroleum consumption with the rest used by medium- and heavy-duty trucks (22 percent), airplanes (8 percent), and water transport, such as ships (4.5 percent).

Figure 3. U.S. Consumption of Transportation Energy, Petroleum (2012)


Source: U.S. Department of Energy, “Transportation Energy Data Book.” Table 2.6. July 31, 2014.

Petroleum, or crude oil, is formed from organic matter deposited millions of years ago.  As the organic material decomposed, it mixed with other material like sand and silt and eventually formed sedimentary layers.  Over time, heat and pressure from overlying rock layers in certain places forced the this organic material to move until it was trapped beneath less porous rock where it accumulated in what is known as oil reservoirs. 

Generally, conventional oil resources refer to those that are most accessible and easiest to produce.  Unconventional resources are less accessible and more difficult to produce.  Examples of unconventional resources include shale oil, oil sands, and deep underwater resources.  As known conventional supplies diminish and the price of oil rises, we are increasingly shifting to unconventional resources, and what was once unconventional is today becoming conventional. Note that the term “proven reserves” implies that the estimated quantities are deemed recoverable with reasonable certainty under existing economic and operating conditions.
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Environmental Impact

The combustion of petroleum emits a variety of pollutants – such as carbon dioxide, carbon monoxide, sulfur dioxide, nitrogen oxides, volatile organic compounds, and particulate matter.  These pollutants are directly and indirectly linked to climate change, acid rain, and public health issues. As one of three fossil fuels, oil has less carbon content than coal, but more than natural gas.  According to the U.S. Environmental Protection Agency’s 2014 U.S. Greenhouse Gas Inventory Report, CO2 emissions from petroleum accounted for 32.7 percent of total U.S. greenhouse gas emissions in 2012, ahead of coal (24.5 percent) and natural gas (20.8 percent).  The transportation sector accounted for 79.8 percent of these CO2 emissions and the industrial sector (including refining) accounted for 12.5 percent.  Within the transportation sector, gasoline and diesel contributed 88.1 percent of the CO2 emissions, 63.1 percent and 25 percent respectively.  Petroleum refineries are one of the largest energy consumers in the industrial sector, accounting for about 2.7 percent of total U.S. GHG emission in 2012.
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Market

Historically, the world oil market has been dominated by national oil companies, particularly through the exercise of market power by the Organization of Petroleum Exporting Countries.  OPEC has 12 member countries: six in the Middle East, four in Africa and two in South America.  OPEC accounts for around 73 percent of the world’s proven oil reserves.

Table 1. Top 20 Countries’ Crude Oil Reserves (Billion Barrels)

1Venezuela*18.1%297.6
2Saudi Arabia*16.3%267.9
3Canada10.5%173.1
4Iran*9.4%154.6
5Iraq*8.6%141.4
6Kuwait*6.3%104.0
7United Arab Emirates*5.9%97.8
8Russia4.9%80.0
9Libya*2.9%48.0
10Nigeria*2.3%37.2
11United States1.9%30.5
12Kazakhstan1.8%30.0
13Qatar*1.5%25.4
14China1.4%23.7
15Brazil0.8%13.2
16Algeria*0.7%12.2
17Angola*0.6%10.5
18Mexico0.6%10.3
19Ecuador*0.5%8.2
20Azerbaijan0.4%7.0
 OPEC Total73.2%1204.7
 Total95.5%1572.5
 World Total100.0%1646.0
*OPEC Country
Source: U.S. Energy Information Administration, International Energy Statistics, 2013

In recent years, global oil production and reserve estimates have become more geographically diversified with unconventional oil such as Canadian oil sands playing an increasingly important role.  A shift is also taking place in global demand patterns, with consumption in Asia now exceeding consumption in North America.  Over the last 30 years, global petroleum consumption has increased by 26 percent, and reserves have increased by 109 percent.  Asian demand has surged by nearly 15 million barrels per day (Figure 4).  The U.S. share of world oil demand, and consequently its market leverage, is declining as the rest of the world increases its demand.

Figure 4. World Petroleum Consumption by Region, 1980 – 2010


Source: U.S. Energy Information Administration, International Energy Statistics

 

U.S. domestic crude production is up because of tight oil – extraction of conventional light crude using the unconventional drilling technique known as hydraulic fracturing – and other unconventional supplies. In hydraulic fracturing, or “fracking” wells are drilled vertically and then turned horizontally to run within shale formations. A slurry of sand, water, and chemicals, together referred to as hydraulic fluid, is then injected into the well to increase pressure and break apart the shale so that the oil is released. Additionally, carbon dioxide injected into oil wells, known as carbon dioxide enhanced oil recovery, is helping to sustain oil production in otherwise declining oil fields and currently accounts for 6 percent of U.S. oil production; this practice is constrained by limited supplies of carbon dioxide.

At the same time, U.S. petroleum demand has fallen steadily since it peaked in 2005.  Demand is not expected to exceed 2005 levels until after 2040, if at all, largely because of two key domestic policies: (1) renewable fuel standards requiring the displacement of petroleum-based gasoline with biofuels, and (2) new fuel economy standards for light-, medium-, and heavy-duty vehicles.
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Prices

Oil prices have historically been volatile and this is likely to continue due to supply disruptions motivated by world politics and shifts in global supply and demand.  Because the oil market is global, any significant conventional oil find anywhere in the world or any technological breakthrough with regard to the recovery of unconventional oil sources that has the ability to meaningfully augment global supply, has the potential to push oil prices down.  The prospects of finding a large conventional oil field within the United States are low, but off-shore (non-conventional) deep-water drilling in the Gulf of Mexico as well as on-land and off-shore regions in Northern Alaska hold the greatest potential.  With a small amount of proven reserves relative to the global quantity, the United States is a price-taker.  However, dramatic changes in U.S. consumption, as evidenced by the economic downturn in 2009 can affect world oil prices.

Figure 5. Crude Oil Spot Prices 1995 - 2014


Source: U.S. Energy Information Administration, Petroleum Data

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Opportunities

By reducing its demand for oil, the United States can make itself more resilient to oil price shocks, and by increasing domestic production, the United States can reduce its trade deficit.  The United States has numerous options for further reducing its oil demand, including additional tightening of fuel economy standards and shifting to alternative fuels (see our 2011 report: Reducing Greenhouse Gases from U.S. Transportation).   Also, an estimated 35-50 billion barrels of economically recoverable oil could be produced in the United States using currently available enhanced oil recovery technologies and practices, or potentially more than twice the country’s proven reserves; enhanced oil recovery using carbon capture is the only domestic oil supply option that also decreases GHG emissions.
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Resources

Center Resources (Publications, blogs, BELC companies, Techbook entries)

External Resources (datasets, publications, websites); should be as recent as possible

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Coal

Coal Basics

Coal Mining

Environmental Impact of Coal

Market

Market Dynamics

Outlook

Resources

Quick Facts

  • In the United States, coal is the third largest primary energy source, accounting for 18 percent of all energy consumed in 2012 with the electric power sector accounting for 91 percent of U.S. coal consumption.
  • Coal is still a major source of energy for U.S. electricity generation, but its role is declining in favor of natural gas and other energy sources due to low natural gas prices, state renewable energy standards and environmental regulations.
  • With the highest carbon content of all the fossil fuels, carbon dioxide emissions from coal combustion represented 24.5 percent of total U.S. greenhouse gas emissions in 2012.
  • Globally, coal is one of the most widely distributed energy resources with recoverable reserves in nearly 70 countries.  The U.S., China, and India are the top producers and consumers of coal.  Worldwide, coal supplies 29.7 percent of energy use and is responsible for 44 percent of global CO2 emissions.
  • Most of the coal produced is consumed in the country in which it was mined. International trade accounts for only 16 percent of coal consumption worldwide; this share is expected to increase to 17 percent over the next 25 years.
  • Compared to natural gas, the price of coal for electric power plants in the United States has remained relatively stable since the 1980s and expected to remain so over the next 25 years.
  • Under potential climate policies, the development and success of low-emission technologies such as carbon capture and storage or other pollution control devices will be key in order to reduce the impact of continued to coal use.

Coal Basics

In 2012, 91 percent of coal consumed in the U.S. was used for 37 percent of total U.S. electric power generation. The remaining 8 percent was consumed for industrial purposes, including steel and cement manufacturing. Worldwide, electric power generation was also the largest consumer of coal. In 2011, the electricity sector consumed 62 percent, while global industrial coal consumption was approximately 33 percent.  The remaining 5 percent was used in the commercial and residential sectors.

Coal is a brownish to black sedimentary rock; it is formed under high temperature and pressure from plants and other organic matter that lived millions of years ago through a geologic process known as coalification.  There are four main types of coal, classified according to the amount of available heat energy. The amount of carbon, hydrogen, and oxygen in the coal are the main factors that determine the amount of heat released during combustion. The carbon content determines the amount of CO2 emissions from each type of coal.

Table 1: Types of Coal and its Uses

Type

Description

Usage

Carbon Content

Heating Value

Location of Deposits

% US Production (2010)

Anthracite

Black and brittle with a glassy appearance; usually the oldest type; sometimes called “hard coal”

Electric power, some space heating, industrial uses

86-97%

Nearly 15,000 BTUs per pound

Northeast PA

0.16%

Bituminous

Softer than anthracite and sometimes called “soft coal”; low moisture content; 100 to 300 million years old

Most common type used for electric power, production of coke for steel industry

45-86%

10,500- 14,500 BTUs per pound

East of the Mississippi; WV, KY and PA are top producers

45.14%

Sub-bituminous

Harder and darker than lignite; dates back at least 100 million years; lower sulfur content than bituminous coal

Electric power, industrial uses

35-45%

8,300-13,000 BTUs per pound

West of the Mississippi; Wyoming is the top producer

47.48%

Lignite

Soft, crumbly and light-colored; relatively young; high moisture and ash content

Electric power, production of synthetic gas and liquids

25-35%

4,000- 8,300 BTUs per pound

Mainly in Texas and North Dakota

7.21%

 Source: U.S. Energy Information Agency, “Coal Explained,” 2012

Bituminous coal is the most abundant type of coal in the United States and it is divided into two sub-types, according to end use. The first, steam or thermal coal, is used mainly for electricity generation, while the second, coking or metallurgical coal, is used in steel production.  As a general rule, bituminous coal with its higher heat content coal is more desirable for electric power generation. Sub-bituminous coal from Wyoming’s Powder River Basin has a much lower sulfur content, which makes it an attractive fuel option because of regulatory limits on sulfur dioxide emissions.
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Coal Mining

Depending on the geology of the coal formation, there are two main methods of extracting coal, surface and underground. Surface mining is used when coal is deposited less than 200 feet below the surface, while underground mines are suitable for coal formations several hundred feet below the earth. The recovery ratio of a coal deposit can be more than 90 percent for surface mines, while less than 40 percent for underground mines.

After the coal is mined, it is sent to a preparation plant for minimal processing and then transported to end-users through rail, barge, and/or truck. In the United States, rail is the primary mode of transportation for long-haul shipments of coal.  Nearly all the coal mined in Wyoming, for instance, is sent via rail directly to power plants in the eastern United States. Trucks are used mainly for short hauls from mines to nearby electricity and industrial plants.
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Environmental Impact of Coal

A large number of environmental problems are associated with the production and combustion of coal. One significant impact is acid mine drainage, where acidic run-off is formed through a chemical reaction between water and sulfur-bearing rocks. This run-off contaminates creeks and rivers, and, because it diffuses easily, can be difficult to contain.  Another significant impact is the practice of mountaintop mining. As the tops of mountains are removed to reveal coal seams, the sediment and waste becomes valley fill, impacting water quality and resulting in the loss of headwater ecosystems, or the species and environmental processes that are native to river sources.  The U.S. Environmental Protection Agency uses the best-available science and incorporates feedback from the public and key stakeholders to provide guidance to protect water quality and people’s health regarding abandoned mines and mountaintop removal mining, among other things.

In terms of greenhouse gases, mining can result in the direct release of methane (which has a global warming potential 23 times higher than CO2, but only persists in the atmosphere for 12 – 17 years), particularly from underground mines. In 2012, methane emissions from U.S. coal mining were 0.9 percent of overall U.S. greenhouse gas emissions. The EPA estimates that coal mine methane contributes 8 – 10 percent of human-made methane emissions worldwide.

Table 2: Global Methane Emissions from Coal Mining

 

Methane Emissions

Coal Production

Country

Rank

Emissions Volume

Rank

Surface mining %

Underground mining %

 

 

MMTCO2e

Billion m3

 

 

 

China

1

135.7

8.7

1

10

90

USA

2

55.3

3.5

2

67

23

Ukraine

3

26.3

1.7

11

1

99

Russia

4

26.2

1.6

5

56

44

Australia

5

21.8

1.4

4

80

20 (NSW 59)

India

6

19.5

1.2

3

85

15

Source: U.S. Environmental Protection Agency, 2005

Carbon dioxide emissions from coal combustion for electric power and industry were responsible for 24.5 percent of total U.S. greenhouse gas emissions in 2012.  Moreover, combustion emits common air pollutants, such as sulfur dioxide, nitrogen oxides, particulate matter, and mercury as well as other heavy metals.  These air pollutants have adverse effects on both public health and the environment.  Consequently, many but not all coal plants use a variety of technologies, such as scrubbers, to reduce most of the pollutants from combustion emissions.  Some governments and companies are developing carbon capture and storage technologies that will capture, transport and store CO2 emissions underground.  For more information, see Climate Techbook: Carbon Capture and Storage.

Additionally, coal combustion residuals, commonly referred to as coal ash, contain a broad range of metals, including arsenic, selenium and cadmium; however, the EPA considers the amounts of chemicals leached from these residuals to be non-hazardous.  Coal combustion residuals are one of the largest waste streams generated in the United States, and must be managed to prevent environmental impacts such as the Kingston, Tennessee spill in 2008.  Finally, considerable water usage for coal-fired power generation can stress aquifers and watersheds, and in many instances, water must be cooled to near ambient levels before being returned to the surroundings to protect ecosystems.
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Market

Supply

The U.S. Energy Information Administration estimated global coal reserves at 980 billion short tons in 2011. At current consumption rates, these reserves are expected to last 113 years.  The BP Statistical Review of World Energy gives similar numbers for global reserves.

Figure 1: McKelvy Diagram for Coal or Gas Resources


Source: McKelvy, V.E. 1972. “Mineral Resource Estimates and Public Policy.” American Scientist 60 (1): 32-40

Although coal deposits are distributed throughout the world, they are concentrated in the United States, Russia, China, and Australia.

Figure 2: Recoverable Coal Reserves by Country


Source: U.S. Energy Information Administration, “International Energy Statistics: Coal,” 2011

For the United States, estimated recoverable reserves were 257 billion short tons as of January 1, 2013. Of this, recoverable reserves at producing mines were 18.7 billion tons; this reflects the working inventory at producing (active) mines.

Figure 3: Coal-Bearing Areas in the United States


Source: National Energy Technology Laboratory, 1983. 

Domestic coal reserves are concentrated in several regions of the country. The majority of the estimated reserves are bituminous (53.1 percent), mainly found east of the Mississippi River. The next most common, sub-bituminous (36.6 percent) is found primary west of the Mississippi.  Lignite deposits, which account for 8.8 percent of estimated reserves, are found in Montana, Texas, and North Dakota.  Anthracite reserves are only about 1.5 percent and are concentrated in northeastern Pennsylvania.

Production

In 2012, world coal production was 8,695 million short tons.  China, the United States, and India are the top three coal producers. Since 1985, China has surpassed the United States in annual coal production.  In 2012, China produced 4,025 million short tons of coal, nearly 4 times the amount of coal produced in the United States.

Since 1990, domestic coal production has ranged from a low of 945 million short tons in 1993 to a high of 1,171 million short tons in 2008. Coal production in 2012 has fallen around 13 percent from its 2008 peak. The recent lower trend obscures the fact that in some areas of the country, production has gone down even as it has gone up in other regions.  In the Interior and Western regions, production increased, while production in the Appalachian Region continued to decrease, remaining at a near 50-year low.  The top five coal producing states are:

  • Wyoming (39 percent of U.S. total) is part of the Western region, producing 89 percent of the total amount of sub-bituminous coal in the United States.
  • West Virginia (12 percent of U.S. total) is in the Appalachian region and produces only bituminous coal.
  • Kentucky (9 percent) is split into two regions, both of which produce only bituminous coal.
  • Pennsylvania (5 percent) is in the Appalachian region and the country's only producer of anthracite.
  • Montana (5 percent) is in the Western region and produces only sub-bituminous coal.

There were approximately 1,229 mines in operation in the United States in 2012. The majority of these mines (60 percent) were surface mines and responsible for 66 percent of domestic coal production in 2012. Surface mining is much more prevalent in the western United States, where about 90 percent of the coal is extracted from surface mines.

Demand

Approximately 8,449 million short tons of coal were used worldwide in 2012. Three quarters of the world's coal is consumed by the top five users – China, United States, India, Germany, and Russia.  As a region, Asia uses almost two thirds of global coal supplies.  Coal usage accounts for approximately 29 percent of world energy consumption. Industrial consumers are responsible for about 33 percent of coal consumption worldwide, while the electricity sector uses about 62 percent.

In 2012, total coal consumption in the United States was 889.2 million short tons, which represented a decrease of approximately 21 percent from 2007. The electric power sector is the main driver of domestic coal consumption. Coal use (figure 5) has been declining due to a number of factors. First, the recession, which began in late 2007, reduced overall economic activity and the demand for coal in the electricity and industrial sector fell.  In 2009, the economy began to grow again, albeit slowly. During this period, very low natural gas prices (which are expected to continue until at least the end of this decade), coupled with under-utilized generating capacity at efficient combined cycle power plants, made natural gas an economic fuel choice for baseload power in the U.S. electric power sector. That further eroded demand for coal.  At the same time, EPA rules affecting coal plant emissions are coming into force, contributing to coal plant retirements. Finally, state energy portfolio standards have increased the quantity of available renewable power sources; wind now makes up approximately 4 percent of the annual electric generation mix in the U.S.

Figure 4. Recent Trend in U.S. Coal Consumption, 1990 – 2012


Source: U.S. Energy Information Administration, 2013

 

Figure 5. U.S. Coal Consumption, 1949 – 2013


Source: U.S. Energy Information Administration, 2014

Over the next 25 years, the EIA predicts that China will make up more than half of the world coal consumption.  Increased use of coal in develpoping economies, including China, accounts for all of the projected growth in coal use until 2040, continuing a trend that began in the early 2000s (figure 6).  Total coal production in developing economies of 176.8 quadrillion Btu in 2040 is expected to be more than four times higher than total coal production in developed nations.

Figure 6: Global Coal Consumption and Forecast, 1980-2040


Source: U.S. Energy Information Administration, “International Energy Outlook: Coal,” 2013

Over the next 25 years, the EIA forecasts that coal use in the United States will increase 0.3 percent annually, from 2012 to 2040. Projected growth is due to increases in domestic coal consumption for use in power plants and for the production of synthetic fuels. However, the portion of electricity from coal-fired generation is predicted drop from 37 to 32 percent, due to increases in electricity generation from natural gas and renewables.  Note that total electricity generation is forecast to increase 0.8 percent annually, from 2012 to 2040.
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Market Dynamics

Trade

Most coal is consumed in the country in which it was mined, with only about 15 percent of total overall coal consumption traded internationally in 2011.  Coal trade is differentiated by the type of coal, either steam coal (used in power plants) or coking coal (used in industrial production).  Historically, trade in steam coal has increased at an average rate of 7 percent per year over the past 20 years, and for coking coal, about 2 percent annually. U.S. coal exports, chiefly Central Appalachian coal, made up 9 percent of the global export market in 2012, up from 6.9 percent in 2010.  

Table 3. Top Six Exporting and Importing Countries in 2012 (Million Short Tons)

CountryExportsShare CountryImportsShare
Indonesia421.829.8% China318.523.7%
Australia332.423.5% Japan203.515.2%
Russia150.710.7% South Korea135.710.1%
United States126.79.0% India97.27.2%
Colombia92.26.5% Taiwan71.55.3%
South Africa82.05.8% Germany53.44.0%
World1413.9  World1342.5 

 

Source: U.S. Energy Information Administration, International Energy Data, 2014

 

Because transportation costs are a large share of the total coal price, international trade in coal is split into two main regions: the Atlantic, made up of Western Europe, and the Pacific, composed of importing countries in Asia, which accounts for the majority of world coal trade.  These markets overlap when prices are high, with South Africa as a point of convergence between the two.

Figure 7: Inter-regional Coal Trade Flows (Metric Tons)


Source: World Coal Institute, The Coal Resource: A Comprehensive Overview of Coal, 2009

Indonesia is the world's largest exporter of steam coal, while Australia is the largest exporter of coking coal; most of their coal goes to Asia.  Under forecast consumption rates, international coal trade is predicted to grow at an average annual rate of 1.4 percent over the next 25 years. Because the largest increases in consumption are forecast to occur in India and China, which meet most of the increase in their coal demand with domestic supply rather than imports, the share of coal trade as a percentage of global coal consumption grows modestly to 17 percent in 2035. Australia and Indonesia are expected to continue as the leading suppliers of coal over the next 25 years, while Asia is forecast to remain the largest importer of coal.

In its International Energy Outlook 2013, the EIA projects that total annual U.S. coal exports will rise from about 83 million short tons in 2010 to 169 million short tons in 2040 (from around 8 percent to 14 percent of U.S. annual production levels), buoyed by the increase in Asian and European coal demand. Because U.S. coal export facilities are located primarily in the east, the United States is currently at a distinct geographic disadvantage relative to Australia and Indonesia. Higher transportation costs associated with shipping coal from the eastern United States to Asian markets historically has meant that U.S. coal exports cannot compete economically in that region.

With strong growth in world coal trade, favorable international prices, and declining demand for coal in the U.S. electric power sector, there has been renewed activity and investment in port capacity expansion projects to facilitate the growth of U.S. coal exports.Some projects, particularly along the coastlines of Washington and Oregon face considerable local and environmental challenges. However, a number of projects on the U.S. Gulf coast are moving ahead and will add approximately 50 million tons of additional export capacity between 2012 and 2015.

Price

The domestic price of coal is a function of supply and demand, coal type, and mining method used.  Generally, lignite is the least expensive, and anthracite the most expensive.  Surface-mined coal is usually lower in price than underground-mined.

Figure 8: U.S. Regional Coal Spot Prices


Source: Federal Energy Regulatory Commission, Market Oversight, 2013.

Transportation can be a significant portion of the delivered coal price. In 2010, transportation costs on average accounted for approximately 38 percent of the total delivered price to power plants in the United States. Compared to natural gas, the price of coal for electric power plants in the United States has remained relatively stable since the 1980s (with the notable exception of 2008, when many commodities spiked simultaneously).

Over the next 25 years, the average real minemouth price of domestic coal is expected to increase by 1.4 percent per year, from $1.98/MMBtu in 2012 to $2.96/MMBtu in 2040.   In comparison, natural gas prices are expected to increase by approximately 3.7 percent per year.
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Outlook

Because of its high-energy content, low cost per unit of energy, and abundant worldwide reserves, coal is the least-cost energy source for both developed and developing countries.  Estimated worldwide reserves, if consumed at forecast consumption levels, are expected to last 120 years. Although supplies of coal are substantial, other factors may limit its use as an energy source.

In the United States, proposed and upcoming regulations by the EPA, as well as any future action on greenhouse gas emissions, will impact coal power plants and future coal markets. For example, in July 2011, the U.S. EPA issued guidance on water quality standards from surface coal mining in the Appalachian Region.  Additionally, in February 2012 the agency published the mercury and air toxic standard rule, which is designed to reduce the emissions of harmful heavy metals as well as sulfur dioxide and fine particle pollution from power plants.   Many electric generating units are already compliant with these rules; however, existing sources will have up to four years if they need it to comply.  Also, the EPA in July 2011 issued the Cross-State Air Pollution Rule, which sets new standards for controls on power plants that cause much of the oxides from nitrogen and sulfur dioxide (which react and become ozone and fine particulate matter) that travel downwind and across state lines.  Utilities have already announced the retirement of older, inefficient and infrequently used coal power plants in response to these rules.  Additionally, in March 2012 the EPA released new performance standards for new electric power plants under the Clean Air Act.  Under the proposed standard, all new power plants would need to match the greenhouse gas emissions performance currently achieved by highly efficient natural gas combined cycle power plants, that is, emit less than 1,100 pounds of CO2 per megawatt/hour.  If implemented, this rule would effectively bar any new coal power plant from being built in the U.S. unless it implemented carbon capture and storage technology; even emissions from a state-of-the-art, integrated gasification combined cycle coal power plant are in excess of 1,600 pounds of CO2 per megawatt/hour.

Worldwide, coal use accounted for 44.3 percent of energy-related CO2 emissions in 2011. Reducing these emissions, in the context of increasing use in growing economies, will be a challenge. Development of low-carbon technologies and complementary government policies to drive the deployment of these technologies will be key factors enabling the use of coal in the future.
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Resources

Center Resources:

External Resources (datasets, publications, websites);

 

coal facts

Renewable Energy

Renewable Energy Basics

Water

Wind

Solar

Geothermal

Renewable Energy Drivers

U.S. Renewable Resource Availability

Outlook

Resources

Quick Facts

  • In the United States, renewable energy for electric power, transportation, industrial, residential and commercial purposes is the fastest-growing energy source, increasing 52 percent from 2000 to 2013 from 6.1 to 9.3 quadrillion British Thermal Units (Btus).
  • In 2013, renewable energy was responsible for 12.9 percent of net U.S. electricity generation with hydroelectric generation contributing 6.6 percent and wind generation responsible for 4.1 percent of this total.
  • Globally, renewable energy was responsible for approximately 22.1 percent of electricity generation with hydro generation accounting for 16.4 percent of the total in 2013.
  • The U.S. Energy Information Agency projects that solar power will be the fastest-growing source of renewable energy in the United States with annual growth averaging 7.5 percent in the period from 2012 to 2040.  In 2013, solar generation accounted for 1.8 percent of total renewable generation.  In 2040, this is projected to climb to 10 percent.
  • In 2013, renewable ethanol and biodiesel transportation fuels made up 21.5 percent of total U.S. renewable energy consumption, up from just 12 percent in 2006.

Renewable Energy Basics

Renewable energy comes from sources that can be regenerated or naturally replenished. The main sources of renewable energy are:

Renewable energy is used for electric power generation, space heating and cooling, and transportation fuels.  All sources of renewable energy are used to generate electric power. In addition to generating electricity, geothermal steam is used directly for heating and cooking.  Biomass and solar sources are also used for space and water heating.  Ethanol and biodiesel are the renewable transportation fuels with gaseous biomethane also fueling transport to a much lesser extent.

Renewable energy sources are considered to be zero (wind, solar, and water), low (geothermal) or neutral (biomass) with regard to greenhouse gas emissions during their operation. A neutral source has emissions that are balanced by the amount of carbon dioxide absorbed during the growing process. However, each source’s overall environmental impact depends on its overall lifecycle emissions, including manufacturing of equipment and materials, installation as well as land-use impacts.
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Water

Water power captures the energy of flowing water in rivers, streams and waves to generate electricity. Conventional hydropower plants can be built in rivers with no water storage (known as “run-of-the-river” units) or in conjunction with reservoirs that store water, which can be used on an as-needed basis. As water travels downstream, it is channeled down through a pipe or other intake structure in a dam (penstock).  The flowing water turns the blades of a turbine, generating electricity in the powerhouse, located at the base of the dam.

Figure 1. Hydroelectric Power Generation


Source: Environment Canada, 2012

Large conventional hydropower projects currently provide the majority of renewable electric power generation. With 1,000 gigawatts (GW) of global capacity, hydropower produced an estimated 3,750 terawatt hours (TWh) of total global electricity in 2013. Note that in 2013, total global electricity generation was 22,865 TWh. Hydropower operational costs are relatively low, and it generate little to no greenhouse gas emissions. The main environmental impact is to local ecosystems and habitats; a dam to create a reservoir or divert water to a hydropower plant changes the ecosystem and physical characteristic of the river.

The United States is the fourth-largest producer of hydropower after China, Canada and Brazil.  In 2011, a much wetter than average year in the U.S. Northwest, the United States generated 7.9 percent of its total electricity from hydropower. The quantity of electricity generated each year depends on the amount of precipitation that falls over a particular area.

Small hydropower, generally less than 10 megawatts (MW), and micro-hydropower (less than 1 MW) are less costly to develop and have a lower environmental impact than large conventional hydropower projects. In 2011,  the total amount of small hydro installed worldwide was 106 GW – China had the largest share at 55.3 percent, followed by India at 9 percent and the United States at 6.9 percent. Many countries have renewable energy targets that include the development of small hydro projects. In the United States, the Federal Energy Regulatory Commission (FERC) approved more than 50 project permits in 2009.

Hydrokinetic electric power, including wave and tidal power, is a form of unconventional hydropower that captures energy from waves or currents and does not require dam construction.  These technologies are in various stages of research, development and deployment. In 2011, a 254 MW tidal power plant in South Korea began operation, doubling the global capacity to 527 MW.

Low-head hydro is a commercially available source of hydrokinetic electric power that has been used in farming areas for more than 100 years.  Generally, the capacity of these devices is small, ranging from 1kW to 250kW.

Pumped storage hydropower plants use inexpensive electricity (typically overnight during periods of low demand) to pump water from a lower-lying storage reservoir to a storage reservoir located above the power house for later use during periods of peak electricity demand. Since this technology uses more electricity than it generates, it is not considered to be renewable energy.  Note that it is economical to do this since the revenues that a generator receives during times of peak electricity generation far exceed the costs that they pay to pump the water during times of low electricity demand.

Figure 2. Pumped Storage Power Generation


Source: U.S. Geological Survey, 2012

Water is one of the most widely used renewable energy sources worldwide. For more details about these technologies, see Climate Techbook: Hydropower and Hydrokinetic Electric Power.
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Wind

Wind power harnesses the energy generated by the movement of air in the earth’s atmosphere to drive electricity-generating turbines. Although people have used wind power for hundreds of years, modern turbines reflect significant technological advances over early windmills and even over turbines from just 10 or 20 years ago.  Generating electric power using wind turbines creates no greenhouse gases, but since a wind farm includes dozens or more turbines, widely-spaced, it requires thousands of acres of land. For example, Lone Star is a 200 MW wind farm located in Texas on approximately 36,000 acres.

After hydropower, wind was the next largest renewable energy source used for power generator with 318 GW of global capacity at the end of 2013, producing 2.9 percent of global electricity. Capacity is indicative of the maximum amount of electicity that can be generated when the wind is blowing at sufficient levels for a turbine. Because the wind is not always blowing, wind farms do not always produce as much as their capacity. With more than 91 MW, China had the largest installed capacity of wind generation in 2013, and the United States with 62 GW had the second-largest capacity; Texas, Iowa, California, Oklahoma and Illinois were the top five wind power producing states.

Average turbine size has been steadily increasing over the past 30 years.  Today, new onshore turbines are typically in the range of 1.5 – 3.5 MW. The largest production models, designed for off-shore use, are capable of generating more than 7.5 MW; some innovative turbine models under development are expected to generate more than 15 MW in offshore projects in the coming years. Due to higher costs and technology constraints, off-shore capacity, approximately 3 GW in 2010, is only a small share of total installed wind generation capacity. For more information on wind power, see Climate TechBook: Wind.

Figure 3. Size and Power Evolution of Wind Turbines Over Time

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Solar

Solar power harnesses the sun’s energy to produce electricity as well as solar heating and cooling. Solar energy resources are massive and widespread, and they can be harnessed anywhere that receives sunlight. The amount of solar radiation, also known as insolation, reaching the earth’s surface every hour is more than all the energy currently consumed by all human activities each year. A number of factors, including geographic location, time of day, and current weather conditions, all affect the amount of energy that can be harnessed for electricity production or heating purposes.

Solar energy can be captured for electricity production using solar photovoltaics and concentrating solar power. A solar or photovoltaic cell converts sunlight into electricity using the photoelectric effect.  Typically, photovoltaic is found on the roofs of residential and commercial buildings.  Concentrating solar power uses lenses or mirrors to concentrate sunlight into a narrow beam that heats a fluid, producing steam to drive a turbine which generates electricity. Concentrating solar power projects are larger-scale than residential or commercial PV and are often owned and operated by electric utilities.

Figure 4. Concentrating Solar Power


Source: NextEra Energy, 2012

Solar hot water heaters, typically found on the roofs of homes and apartments, provide residential hot water by using a solar collector, which absorbs solar energy, that in turn heats a conductive fluid, and transfers the heat to a water tank.  Modern collectors are designed to be functional even in cold climates and on overcast days.

Electricity generated from solar energy emits no greenhouse gases. The main environmental impacts of solar energy come from the use of some hazardous materials (arsenic and cadmium) in the manufacturing of PV and the large amount of land required, hundreds of acres, for a utility-scale solar project. For more information on solar energy, see Climate TechBook: Solar.
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Biomass

Biomass energy sources are used to generate electricity, provide direct heating and can be converted into biofuels as a direct substitute for fossil fuels used in transportation. Unlike intermittent wind and solar energy, biomass can be used continuously or according to a schedule. Biomass is derived from wood, waste, landfill gas, crops and alcohol fuels. Traditional biomass, including waste wood, charcoal and manure has been a source of energy for domestic cooking and heating throughout human history. In rural areas of the developing world, it remains the dominant fuel source.  Globally in 2010, traditional biomass accounted for about 8.5 percent of total energy consumption. The growing use of biomass has resulted in increasing international trade in biomass fuels in recent years; wood pellets, biodiesel, and ethanol are the main fuels traded internationally.

In 2013, global biomass electric power capacity stood at 88 GW. In 2011, the United States had 11.5 GW of installed biomass-fueled electric generation capacity. In the United States, most of the electricity from wood biomass is generated at lumber and paper mills using their own wood waste; in addition, wood waste is used to generate the heat for drying wood products and other manufacturing processes. Biomass waste is mostly municipal solid waste, i.e., garbage, which is burned as a fuel to run power plants. On average, a ton of garbage generates 550 to 750 kWh of electricity. Landfill gas contains methane that can be captured, processed and used to fuel power plants, manufacturing facilities, vehicles and homes. In the United States, there is currently nearly 2 GW of installed landfill gas-fired generation capacity at more than 600 projects.

In addition to landfill gas, biofuels can be synthesized from dedicated crops, trees and grasses, agricultural waste and algae feedstock; these include renewable forms of diesel, ethanol, butanol, methane and other hydrocarbons. Corn ethanol is the most widely used biofuel in the United States. Roughly 40 percent of the U.S. corn crop was diverted to the production of ethanol for gasoline in 2010, up from 20 percent in 2006. Gasoline with up to 10 percent ethanol (E10) can be used in most vehicles without further modification, while special flexible fuel vehicles can use a gasoline-ethanol blend that has up to 85 percent ethanol (E85).

Closed-loop biomass ,where power is generated using feedstocks grown specifically for the purpose of energy production, is generally considered to be carbon dioxide neutral because the carbon dioxide emitted during combustion of the fuel was previously captured during the growth of the feedstock. While biomass can avoid the use of fossil fuels, the net effect of biopower and biofuels on greenhouse gas emissions will depend on full lifecycle emissions for the biomass source, how it is used, and indirect land-use effects. For more information, see Climate Techbook: Biofuels and Biopower. Overall, however, biomass energy can have varying impacts on the environment.  Wood biomass, for example, contains sulfur and nitrogen, which yield air pollutants sulfur dioxide and nitrogen oxides, though in much lower quantities than coal combustion.
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Geothermal

Traditional geothermal energy exploits naturally occurring high temperatures, located relatively close to the surface of the earth in some areas, to generate electric power and for direct uses such as heating and cooking. Geothermal areas are generally located near tectonic plate boundaries, where there are earthquakes and volcanoes.  In some places, hot springs and geysers naturally rise to the surface. These have been used for bathing, cooking and heating for centuries.  At least 78 countries used direct geothermal power in 2011.

Generating geothermal electric power typically involves the drilling of well, perhaps a mile or two in depth, in search of rock temperatures in the range of 300 to 700°F.  Water is pumped down this well, where it is reheated by hot rocks. It travels through natural fissures and rises up a second well as steam, which can be used to spin a turbine and generate electricity or it can be used for heating or other purposes. Note that drilling a suitable injection well is by no means a certain task; several wells may have to be drilled before a suitable one is in place and the size of the resource cannot be confirmed until after the drilling takes place. Additionally, some water is lost to evaporation in this process, so new water is added to maintain the continuous flow of steam. Like biopower and unlike intermittent wind and solar power, geothermal electricity can be used continuously.  Note that very small quantities of carbon dioxide trapped below the earth’s surface are released during this process.

Figure 5. Geothermal Power Station


Source: BBC Science

Globally, geothermal provided an estimated 205 TWh in 2011, one third in the form of electricity (with an estimated 11.2 GW of capacity) and the remaining two-thirds in the form of heat. Note that in 2009, total global electricity generation was 18,979 TWh. In 2011, the 16.7 billion kWh of geothermal electricity generated in the United States constituted 8.6 percent of the non-hydroelectric, renewable electricity generation, but only 0.4 percent of total electricity generation. The same year, five states generated electricity from geothermal energy , California, Hawaii, Idaho, Nevada and Utah. Of these, California accounted for 80 percent of this generation. For more information, see Climate TechBook: Geothermal.

Enhanced geothermal systems use advanced, often experimental drilling and fluid injection techniques to augment and expand the availability of geothermal resources. They are being studied by the U.S. Department of Energy.  For more on this topic (see Climate TechBook: Enhanced Geothermal Systems).
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Figure 6. Global Average Annual Growth Rates of Renewable Energy Capacity and Biofuels Production, 2006 – 2011


Source: Renewable Energy Policy Network for the 21st Century (REN21), 2012

Renewable Energy Drivers

There are several factors that determine which renewable technologies are adopted. These include market drivers (cost, diversity, proximity to demand or transmission, resource availability, and others), policy decisions (tax credits and renewable portfolio standards) as well as specific regulations. At least 118 countries, more than half of which are developing, had renewable energy targets in place in 2012, and at least 109 countries had renewable power policies.

U.S. Electricity Sector

All renewable energy sources are used to generate electric power. When selecting new electricity capacity additions utility planners often look at levelized costs as a convenient summary measure of the overall competitiveness of different technologies. Total system levelized costs here (Figure 7) do not include policy-related factors like tax credits, and assumptions about future fuel prices and financing costs in particular can significantly affect these cost projections. Also, dispatchable technologies, i.e., those that can be controlled by an operator, are more desirable than non-dispatchable or intermittent technologies.

Table 1. U.S. Average Levelized Costs (2010 $/MWh) for Plants Entering Service in 2017

Plant Type

Capacity Factor (%)

Levelized Capital Cost

Fixed O&M

Variable O&M (Including fuel)

Transmission Investment

Total System Levelized Cost

Dispatchable Technologies

Conventional Coal

85

64.9

4

27.5

1.2

97.7

Advanced Coal

85

74.1

6.6

29.1

1.2

110.9

Advanced Coal with Carbon Capture & Storage (CCS)

85

91.8

9.3

36.4

1.2

138.8

Natural Gas Fired

 

 

 

 

 

 

Conventional Combined Cycle (CC)

87

17.2

1.9

45.8

1.2

66.1

Advanced CC

87

17.5

1.9

42.4

1.2

63.1

Advanced CC with CCS

87

34.3

4

50.6

1.2

90.1

Conventional Combustion Turbine (CT)

30

45.3

2.7

76.4

3.6

127.9

Advanced CT

30

31

2.6

64.7

3.6

101.8

Advanced Nuclear

90

87.5

11.3

11.6

1.1

111.4

Geothermal

91

75.1

11.9

9.6

1.5

98.2

Biomass

83

56

13.8

44.3

1.3

115.4

Non-Dispatchable Technologies

Wind

33

82.5

9.8

0

3.8

96

Solar PV

25

140.7

7.7

0

4.3

152.7

Solar Thermal

20

195.6

40.1

0

6.3

242

Hydro

53

76.9

4

6

2.1

88.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: U.S. Energy Information Agency Annual Energy Outlook. June 2012

In the absence of policy mandates and incentives, a utility planner would be inclined to select the least-cost, dispatchable generation technology, which today is a natural gas-fired combined cycle.  Additionally, planners often consider the mix or diversity of the generation under their control, so as to minimize exposure to any one particular technology. Also, planners must consider the environmental impacts and regulatory rules, e.g. land and water use, ecosystems, wild-life impacts and pollution mitigation.

An renewable portfollio standard is a state mandate, which specifies that electric utilities deliver a certain amount of electricity from renewable or alternative energy sources by a given date. State standards range from modest to ambitious, and qualifying energy sources vary. Some states also include "carve-outs" (requirements that a certain percentage of the portfolio be generated from a specific energy source, such as solar power) or other incentives to encourage the development of particular resources. Although climate change may not be the prime motivation behind these standards, the use of renewable or alternative energy can deliver significant greenhouse gas reductions. Increasing a state’s use of renewable energy brings other benefits as well, including job creation, energy security, and cleaner air. Most states allow utilities to comply with the renewable portfolio standard through tradeable credits.  These credits can be sold in addition to the electricity generated to gain additional revenues for the utilities.

In states where a renewable portfolio standard exists, utilities must consider renewable technologies that satisfy this requirement. Cost is typically a key driver of the selected technology, but intermittency and resource availability have to be taken into account. In the case of wind, it is a lower-cost renewable technology, but it is intermittent, i.e., the wind is not always blowing hard enough to generate electricity. Moreover, many onshore locations in the United States (Figure 8), particularly in the east and south are not well-suited for wind generation. In these areas, many counties have biomass resources (Figure 10) greater than 55,000 tons/year. Since biomass is not an intermittent resource (Figure 7), it might be an attractive option to meet a renewable portfolio standard requirement. Note that roughly 25,000 to 45,000 tons of biomass is needed to support 5 MW of generation for one year at 70 percent utilization rate (~30,000 MWh/year), depending on the condition and type of biomass. Note also that wind’s intermittency issue can be lessened to an extent by grid connecting individual wind farms from many geographically diverse areas, so if the wind is not blowing in one area, it is likely blowing in others.

At the federal level, there are two tax credits that have served to encourage the adoption of renewable energy sources: the production tax credit and the investment tax credit.  First enacted in 1992 and subsequently amended, the production tax credit is a corporate tax credit available to a wide range of renewable technologies including wind, landfill gas, geothermal and small hydroelectric.  For wind, geothermal and closed-loop biomass, the utility receives a 2.2 ¢/kWh ($22/MWh) credit for all electricity generated during the first 10 years of operation.  For wind, with an average total system levelized cost of $96/MWh (Figure 7), the production tax credit represents a 23 percent cost reduction. The investment tax credit is earned when qualifying equipment, including solar hot water, photovoltaics, small wind turbines, is placed into service. The credit functions to reduce installation costs and shorten the payback time of these technologies. In addition to these federal incentives, states offer added incentives, making renewables even easier to implement from a cost perspective.

U.S. Transportation Sector

Biofuels have been gaining attention as a way to lessen dependence on petroleum-based fuels and reduce greenhouse gas emissions. To that end, the United States has adopted a renewable fuel standard.

The Energy Policy Act of 2005 created a Renewable Fuel Standard in the United States that required 2.78 percent of gasoline consumed in the U.S. in 2006 to be renewable fuel. With the Energy Independence and Security Act of 2007, Congress created a new Renewable Fuel Standard, which increased the required volumes of renewable fuel to 36 billion gallons by 2022 or about 7 percent of expected annual gasoline and diesel consumption above a business-as-usual scenario. For more information, see the C2ES overview: Renewable Fuel Standard.
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U.S. Renewable Resource Availability

Renewable resource availability and location are key considerations in the adoption of renewable energy sources.

Idaho National Laboratory recently estimated that there is approximately 83 GW of mostly small hydropower available in the U.S. Pacific Northwest. While the DOE found that the untapped generation potential at existing dams in the United States that were designed for purposes other than power production, i.e., water supply and inland navigation represents 12 GW, roughly 15 percent of the current hydropower capacity.

The following maps from the DOE National Renewable Energy Laboratory depict the relative availability of renewable energy resources throughout the United States.

  • Wind resources (Figure 7) are abundant in the Great Plains, Iowa, Minnesota, along the spine of Apalachian Mountains, in the Western Mountains and many off-shore locations.
  • Solar photovoltaic (Figure 8) and concentrating solar power resources are the highest in the desert Southwest and diminish in intensity in a northward direction.
  • The best biomass resources (Figure 9) are in the upper central plains (corn) and forests of the Pacific Northwest.
  • Traditional geothermal resources (Figure 10) are concentrated in the Western United States.

Figure 7. U.S. Wind Resource Map


Source: U.S. National Renewable Energy Laboratories, 2009.

 

Figure 8. U.S. Photovoltaic Solar Resources


Source: U.S. National Renewable Energy Laboratories, 2008.

Figure 9. U.S. Biomass Resource


Source: U.S. National Renewable Energy Laboratories, 2008

Figure 10. U.S. Geothermal Resource


Source: U.S. National Renewable Energy Laboratories, 2008

Globally, 16.7 percent of world energy came from renewable sources in 2010. A little more than one half of this was from traditional biomass sources used in residential heating and cooking in developing countries. In 2010, renewable energy accounted for 8 percent of total U.S. energy use (8 quadrillion Btu out of a total of 97.8 quadrillion Btu). In the United States, renewable energy is used across economic sectors (Figure 11).

Figure 11. U.S. Sector Demand for Renewable Energy


Source: U.S. Energy Information Administration, 2011.

Renewable energy sources made up 12.7 percent of total electricity generation in 2011; hydro, wind and biomass made up the majority of U.S. renewable electricity generation (Figure 13). In the industrial sector, biomass makes up 99 percent of the renewable energy use with more than 60 percent derived from biomass wood, 32 percent from biofuels, and nearly 8 percent from biomass waste.

Figure 12. U.S. Renewable Electricity Generation (2011)


Source: U.S. Energy Information Administration, 2012.

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Outlook

World energy consumption is expected to grow 53 percent to 770 quadrillion Btus from 2008 to 2035 with most of this growth coming from developing countries (Figure 14). Renewables are projected to be the fastest-growing source of energy with consumption of hydroelectricity and other renewables set to increase 2.9 percent per year worldwide over the same time period.

Figure 13. Projected Total Global Energy Consumption


Source: U.S. Energy Information Administration, International Energy Outlook 2011

Renewable energy’s share of global electricity generation is forecast to increase from 19 percent to 23 percent;  hydroelectric power is expected to contribute 55 percent of added renewable generation and wind is expected to contribute 27 percent. Large hydro projects are being constructed and planned in China, Canada and Brazil among others. According to the International Energy Agency, the development and market deployment of renewable energy technologies will depend heavily on government policies to make renewable energy cost-competitive.

In the United States over the next 25 years, renewable energy consumption, excluding ethanol, is expected to grow at an average annual rate of 1.6 percent, higher than the overall growth rate in energy consumption (0.3 percent per year), under a business-as-usual scenario. E85 (ethanol transportation fuel) is expected to be the fastest growing renewable energy type, growing at an average annual rate of 27 percent over the same period, but it starts from a very low base. For renewable electricity sources, solar is expected to grow the most rapidly, followed by wood and other biomass. Uncertainty about federal tax credits, fuel prices and economic growth will influence the pace of renewable energy source development.

Resources

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Additional Resources

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Natural Gas

Basics

Environmental Impact

Natural Gas Market

Natural Gas Delivery and Storage

Natural Gas Demand

Natural Gas Trade

Outlook

Resources

Quick Facts

  • Natural gas plays an important role in nearly every sector of the U.S. economy, constituting 27 percent of primary energy consumption (second only to oil) and slightly more than 27 percent of electricity generation in 2013.
  • Combustion of natural gas emits about half as much carbon dioxide as coal and 30 percent less than oil, and far fewer pollutants, per unit of energy delivered.
  • Natural gas combustion is responsible for approximately 21 percent of U.S. greenhouse gas emissions annually; venting and other fugitive methane releases from natural gas systems produced around 2 percent of total emissions.
  • Globally, natural gas combustion accounted for 20.2 percent of the world’s CO2 emissions from fossil fuels in 2011.
  • The United States has enough natural gas to last nearly 85 years at current consumption rates (about 26.0 trillion cubic feet (Tcf) per year); the U.S. Energy Information Administration estimates technically recoverable reserves in excess of 2,200 Tcf.

Natural Gas Basics

Figure 1. Geological Formations Bearing Natural Gas

Natural gas is a naturally occurring fossil fuel consisting primarily of methane and small amounts of impurities such as carbon dioxide. It may also contain heavier liquids (also known as natural gas liquids) that can be processed into valuable byproducts including ethane, propane, butane and pentane.  As illustrated in the above graphic, natural gas is found in several different types of geologic formations.  Historically, natural gas has been conventionally extracted from large reservoirs and often produced in conjunction with oil.  Technological advances in the areas of horizontal drilling and hydraulic fracturing have made it easier and cheaper to obtain gas from smaller unconventional sources including non-porous sand (tight sands), coal seams (coal bed methane) and most recently from very fine grained sedimentary rock called shale (shale gas), known in the industry as shale plays.

Shale gas extraction differs significantly from the conventional extraction methods. Wells are drilled vertically and then turned horizontally to run within shale formations. A slurry of sand, water, and chemicals, together referred to as hydraulic fluid, is then injected into the well to increase pressure and break apart the shale so that the gas is released. This technique is known as hydraulic fracturing or “fracking.”

An assessment of 137 shale gas basins in 41 countries suggest that shale gas resources, which have recently provided a major boost to U.S. natural gas production, are also available in other world regions. The 2013 study reported 6.634 Tcf of technically recoverable shale gas resources in 41 foreign countries, compared with 665 Tcf in the United States.

Figure 2. Global Natural Gas Basins

Natural gas is used extensively in the United States, for generating electricity, for space and water heating in residential and commercial buildings, and as industrial feedstock, providing the base ingredient for such varied products as plastic, fertilizer, anti-freeze and fabrics.

Figure 3. U.S. Natural Gas Consumption by Sector


Source: U.S. Energy Information Administration 2013

In the residential buildings sector, almost 95 percent of natural gas is used for space and water heating, with cooking and clothes drying making up the remainder. In the commercial buildings sector, space and water heating comprise the majority of natural gas use (63 percent), but other uses – including cogeneration (the use of natural gas to generate electricity and useful heat), also known as combined heat and power – compose one-third of natural gas usage. Chemicals and petroleum products, which includes refining, account for the largest shares of natural gas consumption in energy industries.
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Environmental Impact

Compared to other fossil fuels, natural gas is considered relatively “clean” because when it is burned it releases fewer harmful pollutants. Compared to coal or oil, natural gas combustion releases smaller quantities of particulate matter, nitrogen oxides, and sulfur dioxide. The combustion of natural gas also emits about half as much carbon dioxide as coal.  However, methane itself is a potent GHG, more than 20 times more powerful in terms of its heat-trapping ability than CO2, though it is shorter lived in the atmosphere.  Sources of methane emissions include landfills and coal mines as well as digestion by cows and other ruminant animals. Emissions from equipment leaks, process venting and disposal of waste gas streams are known as fugitive emissions.

Table 1: Fossil Fuel Emissions Levels (Pounds per Billion Btu of Energy Input)

Pollutant

Natural Gas

Oil

Coal

Carbon Dioxide

117,000

164,000

208,000

Carbon Monoxide

40

33

208

Nitrogen Oxides

92

448

457

Sulfur Dioxide

1

1,122

2,591

Particulates

7

84

2,744

Mercury

0.000

0.007

0.01

Source: U.S. Energy Information Administration, Natural Gas Issues and Trends (1998)

Currently, natural gas combustion-related emissions account for about 21 percent of total U.S. greenhouse gas emissions, while fugitive methane releases from natural gas systems (production, processing, transmission, storage, and distribution) represent 2 percent of the total. Globally, natural gas combustion accounted for 20.2 percent of the world’s CO2 emissions in 2011.
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Natural Gas Market

Supply
 

Reserves

Since 2000, U.S. proved reserves of natural gas have increased more than 80 percent, driven mostly by shale gas advancements. As a result, in 2013 the United States had the fourth largest proved reserves of natural gas in the world, at 308 Tcf. Russia had the largest reserves at 1,688 Tcf, followed by Iran at 1,187 Tcf, and Qatar at 890 Tcf.

As at the end of 2012, the Potential Gas Committee estimated that the total assessed U.S. shale gas resource was 1,073 Tcf. This represented approximately 48 percent of the United States' total traditional gas resource of 2,225 Tcf. Total technically recoverable resources, which also include coalbed gas resource of 158 Tcf, were 2,384 Tcf. This represents an increase of around 25 percent from the previous assessment in 2010.

Natural Gas Production

Total domestic dry natural gas production in 2013 was 24.3 Tcf. This figure represents the remainder from a total gross withdrawal of 30.2 Tcf of product, after venting and flaring, removal of non-hydrocarbon gases such as CO2, removal of natural gas liquids and other losses.  From 2007 to 2012, shale gas production grew at an annual rate of nearly 52 percent.  Natural gas is produced in 33 states and in the Gulf of Mexico. According to the EIA, Texas, the Gulf of Mexico, Pennsylvania, Wyoming, Louisiana, Oklahoma, Colorado and New Mexico account for 83.3 percent of U.S. production in 2012.  The geography of U.S. natural gas production is changing with an increasing percentage of production coming from other states like Pennsylvania and Arkansas. From 2010 to 2012, natural gas production increased fourfold in Pennsylvania; the state was responsible for more than 9 percent of U.S. production in 2012.

Development of fracking technology has created the present boom in natural gas production. This technology was initially funded in the 1970s through the U.S. Department of Energy and with more than 20 years of federal tax credits (1980 – 2002).
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Figure 4. U.S. Shale Plays

Natural Gas Delivery and Storage

The U.S. natural gas pipeline network is a highly integrated transmission and distribution grid that can transport natural gas to and from nearly any location in the contiguous 48 states.  Interstate and intrastate pipelines deliver natural gas to local distribution companies, directly to some large industrial end users and electricity generators, and to interconnections with other pipelines.  The network consists of more than 210 pipeline systems with nearly 306,000 miles of pipe, and 1,400 compressor stations that maintain network pressure and assure continuous forward movement of supplies.  To support the seasonal peaking demand of natural gas, there are 414 underground natural gas storage facilities in the pipeline network for additional winter heating demand.  There are three types of underground storage facilities: depleted natural gas or oil fields, aquifers and salt caverns.   Additionally, there are 49 locations where natural gas can be imported or exported at the Canadian and Mexican borders. In response to earlier expectations of natural gas import needs, there are eight liquefied natural gas (LNG) import facilities in the United States, which are now underused.  With the recent increase in domestic natural gas production, the U.S. Federal Energy Regulatory Commission (FERC) has authorized three export terminals. One terminal in Sabine, LA is under construction and is expected to begin operations before 2017, while the others in Hackberry, LA and Freeport, TX are not yet under construction. There are dozens of other proposed and potential terminals that are in various stages of the permitting process.
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Natural Gas Demand

Consumption

Natural gas consumption made up a little more than 24 percent of total global energy use in 2013.  The EIA estimated that world natural gas demand climbed to 120 Tcf in 2012, up 3.1 percent from 2011. According to the International Energy Agency, electric power generation remains the main driver behind global natural gas demand growth.

Natural gas use constituted about 27 percent of total U.S. primary energy consumption in 2013.  Total U.S. natural gas consumption grew from 23.3 Tcf in 2000 to 26.0 Tcf in 2013.  A decline in annual consumption in the industrial sector during this earlier portion of this period has almost been erased, while growth in the electric power sector continues - this sector grew at an annual average rate of 3.5 percent.

Figure 5. U.S. Natural Gas Consumption by Sector, 2000 – 2013 (Tcf)


Source: U.S. Energy Information Administration

In 2013, natural gas fueled 27.4 percent of total U.S. electricity generation. From 2000 to 2013, natural gas electricity generation grew at a faster rate than total electricity generation (4.9 percent per year versus 0.5 percent per year). This growth can be attributed to a number of factors, including low natural gas prices in the early part of the decade.  Additionally, gas-fired plants are relatively easy to construct, have lower emissions compared to other fossil fuels, and have lower capital costs and shorter construction times compared to coal power plants.  More information about natural gas fired electricity generation can be found on the Center’s Natural Gas Techbook page.

Market Dynamics

The market for natural gas is similar to other commodities. Generally, when demand goes up, producers respond with increased exploration, drilling and production. However, significant supply increases do not happen overnight.  It takes time to study the geology, acquire leases, drill wells and connect to pipelines (or build new pipelines). This expansion can take many months or years.  As a result, there is often a lag in bringing new supply to market, which can cause price volatility and spikes.  Conversely, oversupply (or expectations of low price), result in less exploration.  Even with a lower price, many producers are reluctant to halt extraction due to the geologic characteristics of wells that make it difficult to stop and restart production.  In addition, since gas is often produced along with oil or natural gas liquids, stopping the flow of natural gas means stopping the flow of oil and natural gas liquids, which may not make financial sense. Another market driver is that gas is often sold on a contractual basis, and a producer may be legally bound to produce a specific quantity of natural gas.

Natural gas markets across the world are segmented, that is, natural gas pipeline systems connect distinct regions of the world, for example, the United States is connected to Canada and Mexico while the United Kingdom is connected to the North Sea and Europe.  Natural gas prices are determined within these regional markets based on the available regional supply and demand patterns.  A general upward trend in world natural gas prices began in the early 2000s as demand for the product began to exceed supply.  Following the global recession of 2008 – 2009 a fairly wide spread in world natural gas prices developed (Figure 6).

Figure 6: World Natural Gas Prices (USD/MMBtu)


Source: BP, Historical Energy Data Workbook, Natural Gas Prices (2014)

Prices in the U.S. and Canadian markets have plummeted due to the abundant supply of North American shale gas.  Asian markets have seen higher gas prices due to increasing demand in China, South Korea and Japan.  Europe has also seen higher prices as a result of increased demand as well as periodic Russian supply disruptions from 2005 – 2009.

Supply and demand responses, the seasonal nature of demand (residential winter heating or summer cooling through increased electric power generation requirements), or cold weather and hurricane-driven supply disruptions, have all contributed to natural gas price volatility in the United States in the last decade (Figure 7).  In 2001, several years of declining productive capacity and increasing demand resulted in a sharp winter price spike.  Prices spiked again in 2005 in the wake of hurricanes Rita and Katrina, which temporarily curtailed supplies from the Gulf of Mexico.  Prices remained high relative to historic norms, peaking along with other energy commodities in 2008.  Since then, average annual wellhead prices in the U.S. have gone down.  Two factors – an abundance of shale gas and the slow pace of economic recovery following the recession – have contributed to sustained low prices.
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Figure 7: U.S. Natural Gas Monthly Average Wellhead Prices (USD/MMBtu)


Source: U.S. Energy Information Administration

Natural Gas Trade

While most of the world’s gas supply is transported regionally via pipeline, global gas trade has accelerated with the growing use of liquefied natural gas.  To maximize the quantity of natural gas that can be transported, the gas is liquefied at an export facility.  First, the liquefaction process involves the removal of certain components, such as dust, acid gases, helium, water, and heavy hydrocarbons. Then, the natural gas is condensed into a liquid by cooling it to approximately -162°C (-260 °F).  Liquefied natural gas (LNG) takes up 1/600th the volume of natural gas in the gaseous state.  Once liquefied, the LNG can be transported by tanker and regasified for use in other markets at an LNG import terminal.  Between 2005 and 2011, the liquefied natural gas market grew by more than 70 percent, but the volume of LNG trade has been relatively flat for the past 3 years (2011 to 2013) at around 240 million metric tons (MT) (approximately 11 Tcf). In 2013, Japan was responsible for 37 percent of global LNG imports; its nuclear fleet has been temporarily shutdown as a result of the Fukushima disaster, and it is relying much more heavily on natural gas for its energy consumption. Global gas liquefaction capacity was 290.7 MT in 2013, and is expected to increase more than 100 MT by 2018 with Australia adding 62 MT and poised to become the world's largest exporter.

With surplus domestic supply and substantially higher prices in other regional markets, several U.S. companies have applied to the relevant agencies for permission to export liquefied natural gas with Houston-based Cheniere Energy being the first company to win approval for its Sabine Pass facility in 2012, followed by Freeport LNG and Cameron LNG.

Prospects for U.S. liquefied natural gas exports depend significantly on the cost-competitiveness of U.S. liquefaction projects relative to those at other locations.  Over much of the last decade, lower supply expectations and higher, volatile prices prompted new investments in U.S. natural gas import and storage infrastructure.  Since 2000, North America’s import capacity has expanded from approximately 2.3 Bcf/day to 22.7 Bcf/day, around 35 percent of the United States’ average daily requirement.  Yet as of 2009, U.S. consumption of imported liquefied natural gas was less than 0.3 Bcf/day, leaving most of this capacity unused. The ability to use and repurpose existing U.S. import infrastructure—pipelines, processing plants, storage and loading facilities—will help reduce total costs relative to new facilities.  While liquefied natural gas makes up a small portion of U.S. imports, it is important in other parts of the world. The majority of the gas trade in the Asia Pacific region is in the form of LNG imports to Japan, South Korea, China, India and Taiwan from Qatar, Malaysia, Australia, and Indonesia (Figure 8).
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Figure 8: Major International Natural Gas Trade Flows (Billion Cubic Meters)


Source: BP Statistical Review of World Energy 2014

Outlook

According to the EIA’s International Energy Outlook, natural gas is expected to be the world’s fastest growing fossil fuel, with consumption increasing at an average rate of 1.5 percent per year to 2040.  Growth in natural gas is expected to occur in every region and is most concentrated in developing countries, where demand increases more than twice as fast as in developed countries.

In the United States, shale gas production is expected to more than double over the next 25 years (Figure 9), and production of natural gas is expected to exceed consumption before 2020.  As a consequence, the EIA in its 2014 Annual Energy Outlook Reference Scenario expects U.S. natural gas prices to remain below $5/MMBtu through at least the early 2020s.

Figure 9. U.S. Natural Gas Production, 1990 – 2040 (Tcf)


Source: U.S. Energy Information Administration, Annual Energy Outlook 2014

EIA’s International Energy Outlook 2013 projects world LNG trade to nearly double from 2010 to 2040, and the United States is expected to become a net exporter of LNG in 2016.

The forecast of an abundance of domestic natural gas, coupled with recent regulatory actions taken by the U.S. Environmental Protection Agency (EPA) with regard to the electric power sector (Mercury rule, Cross-State Air Pollution Rule,  and New Source Performance Standard for CO2 from new power plants) have led to natural gas becoming the dominant choice for planned electricity generating capacity. Moreover, the abundance of natural gas has somewhat mitigated industrial concerns about using the fuel as a feedstock to manufacture products such as plastics and fertilizers.

The rapid growth of shale gas has also increased scrutiny of the potential environmental and health effects of hydraulic fracturing. As a result, several states have taken action either to regulate hydraulic fracturing or to issue a temporary moratorium while they explore the issue further. In addition to state action, the U.S. Department of Interior proposed new rules for regulating natural gas drilling on federal lands in 2012, and the EPA has undertaken a Hydraulic Fracturing Study Plan to study the relationship between hydraulic fracturing and drinking water.
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Innovative financing program helps South Carolina homeowners save money through energy efficiency retrofits

Promoted in Energy Efficiency section: 
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An innovative energy-financing program has helped customers of South Carolina rural electric cooperatives to undertake energy efficiency retrofits for their homes, substantially reducing their energy use and saving money. 

Through on-bill financing (OBF), customers pay back the cost of the retrofit through monthly installments on their electricity bill. This strategy helps to expand access to costly energy retrofits to low-income residents and makes the financial benefits immediately apparent. If monthly energy savings are greater than or equal to the loan repayment, then OBF will be “bill neutral” and result in the same or lower monthly electricity bills . In addition, the financial obligation of OBF is tied to the electricity meter of each house and can be passed on to subsequent owners and residents; thus, customers only pay for the energy retrofits for as long as they live there. 

A preliminary review of South Carolina’s pilot program, called “Help my House,” found that the 125 participating households are projected to save an average of $400 each year after loan repayments. Energy use could be reduced by thirty-five percent, or approximately 11,000 kilowatt-hours each year. The retrofits, which included improvements to insulation, sealing, and heating, ventilation, and air-conditioning (HVAC) systems, cost an average of $7,200, with projected simple payback periods of 5.86 years. In addition, ninety-six percent of participants reported satisfaction with the efficiency installations and rated their homes as more comfortable after the retrofit.

The program was launched in 2011 by the Central Electric Power Cooperative, which supplies wholesale electricity to 20 rural South Carolina electric cooperatives, and the Electric Cooperatives of South Carolina, the co-ops’ marketing and policy partner, with support from the Environmental and Energy Study Institute. A full-scale OBF energy-efficiency program implemented by South Carolina cooperatives could save an estimated $270 million per year in electricity costs and create more than 7,000 jobs after 20 years, according to an analysis by Coastal Carolina University.

South Carolina utilities were authorized to offer OBF through the passage of Senate Bill 1096 in 2010. The bill eliminated the need for credit checks by tying the financial obligation to the meter rather than to the individual borrower, and allowed utilities to disconnect power if loan repayments are not made. Utilities in 22 other states offer OBF, with supporting state legislation in Illinois, Hawaii, Oregon, California, Kentucky, Georgia, Michigan, and New York.

In addition, “Help my House” was funded by a $740,000 loan from the U.S. Department of Agriculture’s (USDA) Rural Utility Service (RUS), which supports the development of electric, water, and telecommunications services in rural regions. This was the first time RUS funded an energy efficiency initiative, but more cooperatives around the country may follow South Carolina’s example. On July 17 USDA proposed a rule that would create a new RUS program to provide up to $250 million in loans for energy efficiency improvements. The proposed Energy Efficiency and Conservation Loan Program would allow rural electric cooperatives to provide energy efficiency retrofits, including those funded by OBF programs, audits, renewable energy systems, and more. 

For more information: 

Help My House Pilot Program – Summary Report

Environmental and Energy Study Institute – Fact Sheet

 

Get in the Game

Thirteen percent of Americans say they follow science; 65 percent say they follow sports.
 
Representatives of Major League Baseball, the National Football League, the National Hockey League and NASCAR gathered at the White House yesterday for a half-day conference on “Greening the Games.” The panelists talked about the fact that sports stadiums and arenas across the United States are cultural icons – think Fenway Park, Wrigley Field, the Superdome – and that they offer an extraordinary opportunity for an education in sustainability.

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