July 12, 2010 -
Before joining Power Engineering, I wrote about oil and gas. For the last few years, the hot topic in O&G has been shale plays. Plays like the Barnett, Marcellus, and Haynesville are hotter than Lebron's switch to the Heat. Acquisition prices for such plays are soaring into the billions.
But when it comes to the power industry, I'm learning that shale plays are virtually useless -- at least for now. Like a treasure stored in an impenetrable vault, shale plays have need for much development both on the midstream O&G side, as well as the power operations side. To start with, pipelines to transfer the natural gas from the plays to plants are virtually non-existent. In addition, even if a smooth transport system were developed, coal-fired power plants can't be easily retrofitted to burn gas.
Last week, the American Public Power Association (APPA) released a new natural gas report: Implications of Greater Reliance on Natural Gas for Electricity Generation. Among the findings, Aspen Environmental Group, who conducted the research, uncovered "no instances of coal plant retrofits to natural gas." Not only is switching all coal-fired generation to natural gas impossible due to insufficient natural gas supply, but the entire plant infrastructure would have to be wiped clean.
"It would be more feasible and cost-effective to construct new natural gas units or to dispatch excess capacity at existing natural gas units than to convert a coal plant because of technical and economic factors." -GAO, “Implications of Switching from Coal to Natural Gas,” GAO-08-601R, May 1, 2008. Found at:
http://www.gao.gov/new.items/d08601r.pdf
Not only does retrofitting a coal-fired plant to natural gas seem impossible, but such a retrofit would also leave certain areas with insufficient system resources. It would take four to six months to complete all of the retrofits, and that would lead to a number of brownouts or blackouts.
And let's not forget about air permits. While some would say the EPA shows favoritism towards natural gas-fired facilities, at least three air permit issues would still exist:
1) Patriculate matter (PM). If the natural gas-fired unit is larger than the coal-fired unit that it replaced or is in operation even more (which it most likely would be), the particulate emissions may be even higher for the gas unit.
2) The National Ambient Air Quality Standard (NAAQS) for nitrogen dioxide (NO2). This rule implimented a new 1-hour standard for ambient NO2 at 100 parts per billion. The concern is that background ambient NO2 levels would be determined by monitors placed near highways. "This will force urban areas into nonattainment and trigger more stringent permitting requirements for NGCCs," according to the APPA report.
3)CO₂. It's the great air regulation mystery floating around these days (no pun intended). How will CO₂ be regulated? As long as the Clean Air Act regulates CO₂ and Greenhouse Gases (GHGs), Best Available Control Technology (BACT) requirements at power plants will require some type of controls on CO₂ emissions.
Oh, and one more regulation to keep in mind for the future: the regulation of hydrochloric acid (HCI). EPA plans to regulate HCI from smaller combustion units under the Industrial and Commerical Boiler Maximum Available Control Technology (MACT) requirement. EPA has not yet proposed any HCI limit for natural gas-fired utilities, but future compliance obligations should be assumed.
While shale plays may seem like a hidden treasure for the oil and gas industry, it's going to be a long road before these natural gas resources would start to be of value to the power industry. Retrofits for switching from coal to natural gas seem to be out of the question; therefore, it would be years before most plants could/would switch to natural gas-fired. And even still, EPA would have emissions regulations on natural gas-fired plants.
Are shale plays a vaulted treasure that the power industry should leave vaulted, or are they worth all the trouble?
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