Natural Gas is a Climate Non-Starter, Still an Energy Innovation Policy Model

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new study by top climate scientist Ken Caldeira and tech industry leader Nathan Myhrvold provides good qualitative analysis of the character and aggressiveness of the change needed in the U.S. electricity sector to significantly cut carbon emissions. The analysis paints a black-eye on those that believe natural gas is a climate relevant “bridge-fuel” to a clean energy future. It may have been a bridge-fuel option forty years ago as part of a cohesive national energy strategy, but given our climate realities, replacing coal plants with ‘cleaner’ natural gas is a climate and energy policy non-starter in addition to it being limited in addressing our other energy challenges. Its technological development history, however, does provide a government-industry roadmap on how to drive clean energy innovation.

Historically low natural gas prices and newly discovered (and large) domestic shale gas supplies (see image)have thrown a wrench in the climate and energy policy debate.  It’s no longer as simple as making clean energy cheaper than coal and oil – the burning of which is the main culprit behind climate change. Instead, natural gas offers power producers a cheap and – on paper – lower carbon emission-producing fuel option.  With such a large domestic supply, it even supports America becoming more energy secure. Given these characteristics, many advocates frame transitioning to natural gas as a “bridge-fuel” that will hold us over until we fully transition to clean energy.

There are a number of problems with this. The biggest issue with fitting natural gas into our policy choices is its impact on decarbonizing our energy sector as quickly as possible to mitigate climate change.  A rabid academic debate is underway as to how much, if at all, natural gas is cleaner burning than coal.  Policymakers generally peg the value at 50 percent cleaner, so if we switch out aging coal plants to natural gas plants, we should see a climate benefit, right?

According to Caldeira and Myhrvold, we really won’t. When factoring in the lifecycle emissions of building and operating a natural gas plant, as well as the 100+ year lifespan of carbon dioxide in the atmosphere, switching to natural gas “would have zero effect on global temperatures by the year 2100” compared to producing coal-based power.  According to their model analysis, building out natural gas plants in lieu of coal plants would only limit temperature change by no more than ~.03°C in the next century (see figure from study)The findings add to a growing number of scientific studies pouring cold water on the hope that cheap natural gas can be exploited in the near-term to reduce carbon emissions (for example, the NCAR study hereand the IEA report here).

There’s also the issue of policy emphasis.  Without a doubt solving all of our energy challenges – climate change, energy security, and economic security – requires significant investment and support. So with limited public resources, where should we target government investments to address all three? Should ARPA-E invest portions of its limited funds towards natural gas vehicles or should it use those funds to support more breakthrough battery technologiesor advanced biofuel ideas? Should our policies encourage investments in cheap natural gas, like the recently proposed Clean Energy Standard?

For natural gas, the answers to these questions don’t lean in its favor. Not only is natural gas potentially far from being a climate solution, it’s also a questionable energy and economic security solution as well. The price of natural gas is expected to increase as peak production in many shale gas wells are already in decline as well as the impact of exporting, erasing its cost advantage compared to other fuels.  And the fuels energy security potential is not a done deal as significant innovation and investment is required to make natural gas a viable transportation fuel, thus an alternative to gasoline and imported oil. Without future climate and economic security benefits, we should be asking ourselves whether we should target public innovation support at addressing just one of our energy challenges or all three.

But even though natural gas may be far from a solution to our energy and climate challenges, it’s still a wonderful example of how to spur innovation in the energy sector.  As an independent study by the Breakthrough Institute found, the advanced natural gas technologies used today to give us shale gas – ‘fracking’ being the most discussed – were the product of decades of government support in partnership with the private sector. From the 1970’s through the 1990’s, the federal government partnered with the gas industry to develop horizontal drilling installations, hydraulic fracturing, and the mapping technologies that make shale gas even possible.

These technologies got their start in at the Morgantown Energy Research Center, which provided investments for RD&D into new natural gas drilling technologies.  From that center and subsequent government funded demonstration projects came directional drilling.  Ultimately, a private company – Mitchell Energy – commercialized the technology.  But government energy innovation policy didn’t stop there. Mitchell Energy and the Department of Energy (DOE) continued partnering, as DOE (through the Federal Labs and the Gas Research Institute) provided vital mapping R&D to understand and exploit shale gas formations. Targeted ‘non-conventional’ gas tax credits sustained development of these technologies when no market existed and a gas rate-payer surcharge was used to fund early research. Given the economic potential of these technologies, we can easily say government policies were a success (even if folks continue to put up economically ideological blinders to this fact).

These policies also offer a good guideline as to how to support next-generation clean energy technologies today. Investing in breakthrough technologies that the private sector is unwilling to invest in was a vital role of government then and is paying dividends now.  Energy Innovation Hubs, ARPA-E, and Energy Frontier Research Centers are great examples of expanding the historic public-private partnerships for natural gas to encompass low-carbon technologies as well.  And coming up with interesting ways to provide sustained funding for RD&D, like the gas rate-payer surcharge, is a conversation climate and energy advocates should be talking about today regarding a small carbon tax or oil and gas royalties.

But almost more importantly, natural gas-as-a-key-model-for-breakthrough-technology-development shows that failure and patience is needed.  Energy technologies are complex and take a lot of stakeholders and support.  They won’t appear like manna from heaven.  So while today’s cheap natural gas may be anathema to addressing our energy challenges, its development should at least be used as a roadmap for making clean technologies like advanced solar, wind, nuclear, and electric vehicles a cost and performance-competitive reality.

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About the author

Matthew Stepp is a Senior Analyst with the Information Technology and Innovation Foundation (ITIF) specializing in climate change and clean energy policy. His research interests include clean energy technology development, climate science policy development, transportation policy, and the role innovation has in economic growth.