10 December 2014

A global natural gas boom alone won't slow climate change

H-Holger Rogner

The ongoing shale gas revolution in the United States, dubbed a “game changer” by many experts, is the result of a surge of innovation that is extracting huge amounts of natural gas from shale deposits once thought to be inaccessible. It has reversed a decade of declining domestic gas production and brought enormous economic benefits to American consumers and businesses: natural gas prices that dropped by two-thirds within 12 months after widespread fracking began and have risen only slightly since then, hundreds of thousands of new jobs, a renaissance of investment in new manufacturing capacities, and improved energy security. The rise of shale gas has had an environmental benefit as well—greatly reduced carbon dioxide emissions, because generating electricity by burning natural gas emits less than half as much carbon dioxide as burning coal.

The US success story has stimulated the interest of numerous countries around the world. After all, shale is the most abundant form of sedimentary rock on Earth. Global energy assessments report quantities of shale gas several times that of “conventional” gas—which can be extracted with standard drilling alone. Although the extent of the US experience is unlikely to be replicated elsewhere, and US estimates of economically recoverable quantities remain a matter of debate, shale gas has the potential to become a widely accessible global fuel.

What would that mean for Earth’s climate? A study that my colleagues and I recently conducted suggests that abundant, cheap natural gas would lead to substantial reductions in coal use. But without a price on carbon emissions, gas could also edge out nuclear and renewable energy—increasing overall emissions.

Unconventional gas. Shale gas belongs to the category known as “unconventional” gas resources. Conventional gas is trapped in porous sediments covered by an impermeable cap rock. Drilled wells relieve the natural pressure, which produces a steady flow of gas in commercial quantities. Unconventional gas deposits have much lower porosity and permeability, and drilling alone is insufficient to generate commercial flow rates. Gas flow requires artificial pathways within the rock formation.

Unconventional gas extraction is technically more challenging and economically less attractive, unless, of course, innovation overcomes the challenges. In the case of shale gas, innovation came in the form of horizontal drilling and hydraulic fracturing, also known as fracking: Water, sand, and chemicals injected into horizontal boreholes at very high pressure fracture the shale rocks and release the gas.

Some of the other categories of unconventional gas—tight gas, coal bed methane, aquifer gas, and gas hydrates—dwarf shale gas in magnitude. Gas hydrates, in particular, exist in unfathomable quantities that could fuel global energy needs for centuries to come. Gas hydrates are crystalline, ice-like substances consisting of water and gas molecules held within a cage-like structure. They are found under sediments on the ocean floors and in Arctic permafrost sediments.

To date, gas hydrates and other unconventional gas resources are technically inaccessible and probably will remain so for quite some time given the large volumes of conventional gas and the increasing availability of shale gas. But the constellation that brought about the shale gas revolution—dwindling production, high prices, and energy security concerns—could result in a similar surge of innovation that then unlocks the much larger non-shale unconventional gas resources.

Blessing or curse? Experts have both welcomed and rued the prospect of abundant natural gas. Where gas replaces coal, it provides a potent and low-cost climate mitigation strategy. Two-thirds of the US reductions in carbon dioxide emissions since 2005 are attributable to fuel-switching, and one-third to growth in low-carbon generation especially renewable technologies such as wind and solar energy. Unconventional gas, proponents argue, can act as a “bridge” fuel, curbing emissions while non-fossil energy sources such as renewables and nuclear energy are ramped up.

The curse? Abundant gas gives fossil fuels a new lease on life. Cheap gas may replace coal in many industrial applications, especially electricity generation, or even penetrate markets traditionally served by oil, such as transportation. But a global gas boom wouldn’t stop there. Economic rationale suggests that gas would also encroach on investments in renewable energy, nuclear energy, and energy efficiency. At today’s prices of $4 to $5 per million British thermal units, gas-fired electricity holds a definite competitive advantage over new nuclear construction and unsubsidized renewables. Indeed, only four out of more than two dozen applications for new nuclear power plants have begun construction after receiving a federal license to do so. Two dozen other nuclear plant applications have been withdrawn, suspended, or are still under review. All four reactors are being constructed in deregulated electricity markets where the risks of cost overruns can be passed on to ratepayers.

Cheap gas has even put the economic viability of some existing nuclear plants in doubt, especially plants operating in competitive markets where utilities cannot recover costs through regulated cost-of-service rates. Despite being licensed to operate until 2033, Dominion's Kewaunee Power Station in Wisconsin was forced to close in May 2013 solely due to economics. This is somewhat surprising, as one of nuclear energy’s traditional advantages is its low operating cost. Ten additional nuclear plants are considered to be at risk of closure, all but one located in deregulated states. While cheap gas is not the only culprit eroding the profitability of nuclear energy, it is the straw that is breaking the camel’s back.

Moreover, if cheap gas provides an easier route to a lower-carbon economy than high-cost renewables and nuclear power, it could become a destination fuel. But natural gas is still a fossil fuel that emits carbon dioxide. A much higher share of natural gas in the energy mix would eventually raise emissions again, especially if gas not only displaces coal but also non-fossil energy sources. Moreover, methane, the chief component of natural gas, is itself a heat-trapping greenhouse gas with 25 times the warming effect of carbon dioxide. If total methane leakage—from drilling through end use—is greater than about 4 percent, that could negate any climate benefits of switching from coal and oil to gas.

Modeling the boom. I was part of a group of 13 researchers from the United States, Australia, Austria, Germany, and Italy that recently published a paper in the journal Nature tackling the question of how a global gas boom alone would affect carbon dioxide emissions between now and 2050. Using five independent “integrated assessment models” that account for economic activity, energy demand and supply, and the Earth’s climate system, my colleagues and I explored two alternative assumptions about future gas availability: a “conventional gas” scenario reflecting extraction costs and availability before the shale gas revolution, and an “abundant gas” scenario reflecting a global abundance of natural gas and substantially reduced extraction costs.

The findings were stark: By 2050, market-driven gas use was greater in the abundant-gas scenario by 82 percent on average, but carbon dioxide emissions varied only from a minor drop of 2 percent to an increase of 11 percent. Accounting for the climate impacts of methane leakages eliminated all climate mitigation benefits.

Clearly, abundant gas not only displaced coal but also nuclear power and renewables. Nuclear electricity was reduced by 16 percent on average; renewables by 24 percent. Moreover, cheaper gas and electricity prices increased overall energy demand and raised the economic barrier for efficiency improvements.

We concluded that, if left to market forces alone, cheap and abundant gas would not help mitigate climate change. It could even hamper the de-carbonization of the global energy system by eliminating economic incentives for ramping up virtually-carbon-free nuclear power and renewables. The study, however, showed that prices can make an enormous difference, here to the detriment of climate stability. But when rising prices are imposed on carbon dioxide emissions in the models, climate change mitigation is induced, as shown in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. As the fossil fuel with the lowest carbon dioxide intensity, gas displaces coal and oil, but the costs of its own carbon dioxide emissions constrain its use.

With climate policies that put a price on carbon emissions and recognize low-carbon energy sources, natural gas would partner well with renewables and nuclear energy, offering backup for intermittency and peaking for baseload. Then abundant gas could play a role as a “bridge fuel” and become a major player on the global energy scene without unduly restraining nuclear power and renewables—and while helping the climate.