Thanks to a 50 percent increase in U.S. natural gas production since 1997, prices have plummeted. Natural gas prices in the United States are the lowest in the world. Not only has cheap gas reduced the cost of home heating and electricity for millions of Americans, but it also has pumped new life into the nation’s economy, particularly manufacturing in the mid-Atlantic region.
But how long will the boon last? Natural gas has a history of sudden swings in price that have been a source of consumer woes, with a history of gas-reliant industries sometimes being forced to shut down factories and relocate overseas. The stampede to natural gas and belief that solar and wind power could meet energy needs — and the subsequent rolling blackouts in California in the summer of 2000 — came and went with near total impunity for those responsible.
Are we repeating the same mistakes? Haven’t we learned from previous energy crises?
Because America’s energy future always has an element of uncertainty, such as cyberattacks against pipelines or the risk of trade battles spilling into natural gas production, there needs to be prudent insurance against the possibility that something could go terribly wrong. That’s why we have maintained a diverse mix of energy sources to reduce the nation’s vulnerability to energy shortages.
Yet demand for gas has reached record levels. Several large states — California, Texas, Massachusetts and Florida — are more than 70 percent dependent on natural gas for electricity production. Nationally, natural gas has become the No. 1 power source. The surge in gas production has buoyed the economy and gas-producing states are reaping the benefits from increased revenue. Industries are using large amounts of natural gas, and exports of U.S. liquefied natural gas (LNG) to Asia and Europe are increasing fast. As of last year, the United States had a 4 percent share of global LNG exports. The International Energy Agency says that’s poised to grow to 20 percent by 2023. That’s a huge jump in a short period of time.
Until our government confronts the dramatic shift to natural gas — and the loss of huge amounts of coal and nuclear generating capacity — the potential for serious economic problems won’t abate. Unlike domestic gasoline prices that are tied to the world price of crude oil, natural gas isn’t priced on a global market. But that could change as global demand for gas grows, pushing up natural gas prices to world levels.
This is why it is important to keep coal and nuclear plants operating. Since 2010, electricity companies have retired or decided to retire 115,000 megawatts of coal capacity — and an additional 17,000 megawatts are expected to be retired by 2022. Half of the nation’s nuclear fleet of about 100 plants is financially distressed due to competition from cheap gas and subsidized wind power. Once all or most of this coal and nuclear power is gone, the country will lose its hedge against a future rise in gas prices.
The Trump administration is aware of this extremely risky situation. Secretary of Energy Rick Perry is preparing a plan to save financially ailing coal and nuclear plants and create an electricity generating reserve for electric grid reliability. The administration is right to ensure that our most important baseload sources of electricity are rightly valued.
See the article here.
- On July 9, 2018