IMPLICATIONS OF LOW NATURAL GAS PRICES FOR LIFE CYCLE GREENHOUSE
GAS EMISSIONS IN THE U.S. ELECTRICITY SECTOR
Aranya Venkatesh, Carnegie Mellon University, aranya@cmu.edu
Paulina Jaramillo, Carnegie Mellon University, pjaramil@andrew.cmu.edu
W. Michael Griffin, Carnegie Mellon University, wmichaelgriffin@cmu.edu
H. Scott Matthews, Carnegie Mellon University, hsm@cmu.edu
Overview
Increasing domestic supply and low prices have encouraged the increase of natural gas utilization in the
United States electricity sector. Natural gas can offset coal for power generation, reducing emissions such
as greenhouse gases, sulfur and nitrogen oxides. In quantifying the benefit of offsetting coal by using
natural gas, life cycle assessment (LCA) studies have shown up to 50% reductions in life cycle greenhouse
gas (GHG) emissions can be expected. However, these studies predominantly use limited system boundaries
that contain single individual coal and natural gas power plants. They do not consider (regional) fleets of
power plants that are dispatched on the basis of their short-run marginal costs. External incentives, such as
mandated coal plant retirement or low natural gas prices (compared to coal), are required if natural gas is to
displace coal. In this study simplified economic dispatch models (representing existing power plants in a
given region) are developed for three U.S. regions – ERCOT, MISO and PJM. These models, along with
historical load data are used to determine how natural gas utilization will increase in the short-term due to
changes in natural gas price. The associated changes in fuel mix and life cycle GHG emissions are
estimated. Results indicate that life cycle GHG emissions may, at best, decrease by 5-15% as a result of low
natural gas prices, compared to almost 50% reductions estimated by previous LCAs. This study thus
provides more reasonable estimates of potential reductions in GHG emissions from using natural gas
instead of coal in the electricity sector in the short-term.
Methods
The ERCOT, MISO, and PJM areas were selected for the analsysis, since a significant fraction of electricity
in these areas was generated by coal plants in 2007. While these areas had substantial natural gas capacity
in 2007, much of this capacity was underutilized. This suggests that there are short-term opportunities in
these areas to move away from coal-fired generation by using existing natural gas capacity. The three areas
were selected for this analysis based on this understanding, and since they are some of the largest in the
U.S. (above 70 GW) in generating capacity. Using the approach outlined in Newcomer et al.[1], [2] and
Blumsack et al.[3], simplified economic dispatch models were developed for the base case. Consistent with
these studies, heat rates from eGRID [4] and regionally applicable fuel prices were used to estimate shortrun marginal costs and associated supply curves, which determine the order in which power plants in a
given area are dispatched to meet electricity load. The 2010 hourly load data for ERCOT, MISO and PJM
were used to represent future electricity demand in the short-term. The generating units brought online to
meet hourly load were selected based on the supply curve. The average quantities of CO2 emissions from
generating units were esimated. Greenhouse gas (GHG) emissions from the upstream life cycle stages of
natural gas, coal and fuel oil were added to the CO2 emisisons . To understand the implications of variations
in natural gas price, U.S. average electric sector delivered natural gas price was varied between $1.5 per
MMBtu and $5.5 per MMBtu, while the marginal costs of the other types of electricity generation were kept
constant (Scenario 1).
Results
Results indicate that when natural gas price is above the base case price of $4.5 per MMBtu, overall life
cycle GHG emissions increase by less than 2%, as shown in Figure 1. When natural gas prices fall to an
average delivered price of $3.5 and $2.5 per MMBtu, more natural gas is used than in the base case, and
offsets coal. This consequently reduces life cycle GHG emissions and at a price of $2.5/MMBtu, reductions
can be as high as 12% ERCOT. When the natural gas price falls to $1.5 per MMBtu, generation from
natural gas plants displaces some additional coal and further reduces emissions. The reductions are limited,
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however, by minimum generation limits of coal plants so that we do not see reductions beyond 15% in any
of the scenarios.
Figure 1. Annual reduction in life cycle GHG emissions due to change in natural gas price, as outlined in
Scenario 1. Error bars represent 90% confidence interval of change in life cycle GHG emissions.
Conclusions
At an average delivered natural gas price of $1.5 per MMBtu, natural gas consumption increases by 14-24% of the
total natural gas used in the electricity sector in 2010 and about 4-8% of total U.S. natural gas consumption. Such
increased use in natural gas reyslt in reudctions in GHG emissions of up to 15% . At a U.S. average electric sector
delivered natural gas price of $3.5 per MMBtu, as projected for 2012-13 by EIA’s Short-Term Energy Outlook,
natural gas consumption for electricity increases by 1-3%. At this price, life cycle GHG emissions would decrease by
less than 5% in each of the three areas. Thus, emissions reductions associated with a move toward natural gas for
power generation, will likely be less than suggested in traditional LCAs since these studies do not include the
complexity of the power grids and their operational decisions, but rather compare coal and natural gas plants on a per
kWh basis. The results of this study provide a reasonable estimate of potential GHG emissions reductions from using
natural gas instead of coal in the electricity sector in the short-term. In order to achieve the reductions estimated by
traditional life cycle studies, there needs to be a significant transformation of the power plant fleet so that coal plants
are retired and new gas plants are constructed. It is unlikely, however, that any of these systems would completely
decommission all coal plants.
References
[1]
A. Newcomer, S. A. Blumsack, J. Apt, L. B. Lave, and M. G. Morgan, “Short Run Effects of a Price on
Carbon Dioxide Emissions from Electric Generators,” Environmental Science & Technology, vol. 42, no. 9,
pp. 3139-3144, 2008.
[2]
A. Newcomer and J. Apt, “Near-Term Implications of a Ban on New Coal-Fired Power Plants in the United
States,” Environmental Science & Technology, vol. 43, no. 11, pp. 3995-4001, Jun. 2009.
[3]
S. Blumsack, C. Samaras, and P. Hines, “Long-term electric system investments to support Plug-in Hybrid
Electric Vehicles,” in 2008 IEEE Power and Energy Society General Meeting - Conversion and Delivery of
Electrical Energy in the 21st Century, 2008, pp. 1-6.
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[4]
U.S. Environmental Protection Agency, “eGRID Emissions & Generation Resource Integrated Database.”
[Online]. Available: http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html. [Accessed: 2011].
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