In this post I start a series which looks at natural gas
from a New Hampshire perspective, but, as we will learn, we do not stand alone
in NH as a natural gas consumer. Natural gas is very much a regional issue, and
natural gas supply and consumption can, like electricity, only really be
understood from a regional perspective.
Let’s start right away by looking at the history of natural
gas consumption in New Hampshire, shown in the chart below. The first thing we
note is that that natural gas consumption was relatively low and growing only
slowly until 2003 when there was an enormous leap in consumption.
This big increase in NH natural gas consumption was created by the commissioning, at the end of 2002, of the two combined-cycle natural gas combustion turbines at the then new Newington Power Facility. These turbines have a combined capacity of 525 MW and run exclusively on natural gas. This generation operation is owned by Essential Power (formerly known as North American Energy Alliance) which owns a number of other natural gas burning plants. Essential Power itself is owned by Industry Funds Management (IFM) which is a global investment fund held by 30 pension funds. [The Newington Power Facility should not be confused with the similarly named and nearby Newington Station owned by Public Service of New Hampshire, PSNH. The PSNH plant is a much older plant, put into service in 1976, and is a flexible operation that can burn oil or natural gas. This operation is rated at 406 MW capacity, its equipment is old and inefficient by modern standards, and it is used for peaking needs, i.e., it is only fired up when demand for electricity is high and prices are high.]
As can be noted from chart, other uses of natural gas, such
as industrial applications or home and commercial heating, rose slightly from
1980 but have fallen off since the early 2000s. The decline in residential
natural gas consumption since 2005, shown below, took me by surprise. I had
assumed that with the decrease in natural gas prices, especially when compared
to that of home heating oil over the same period, droves of people would have
signed up for natural gas and that residential consumption would have increased.
In fact, it turns out that the number of natural gas customers did increase from
2005 to 2012 but the increase was small. The number of
customers rose by 5.8% from 94,466 to 99,940. The fall-off in residential natural gas
consumption during this period is more likely a reflection of the decade-long warming
trend that I highlighted in Crude
Oil Blues. I anticipate that the cold winter we are presently enduring here
in New England will boost the residential natural gas consumption numbers.
Natural gas is important to us here in New Hampshire for industrial usage and residential and commercial heating but the tail that is wagging the NH natural gas dog is electricity generation. When we talk about electricity generation and natural gas consumption, we really need to think regionally: in truth, this is what we need to do with all energy matters. New Hampshire (as much as the independent Yankee folks up here might like it to be so) is not an energy island. It has few natural energy resources, except for a little hydro, some wind and wood, as well as a slowly growing amount of solar, so we need to think regionally in terms of energy imports and exports as well as our own consumption.
The most attractive feature of natural gas is that it is clean burning with fewer harmful combustion products than oil or coal. The main emissions are carbon dioxide and water. Of all the carbon-based fuels, methane has the lowest amount of carbon released, per unit of energy released. This is the reason that carbon emissions in the US have dropped as we have shifted from coal-fired to natural gas-fired electricity generation. The table below shows the carbon dioxide emissions per million BTUs produced by the combustion of different fossil fuels. The emissions of natural gas are almost half of those of coal.
Natural gas is odorless and colorless. Its distinctive smell is due to the odorant that distributors are required to add to the gas for safety reasons. The odorant is normally a smelly sulfide compound, a mercaptan, that smells like rotten eggs: if you smell it, it means that you have a gas leak—you should leave the area and call the gas utility right away. Natural gas explosions, although rare, can have devastating consequences, causing loss of life and enormous property damage.
The LDCs have a franchise for a specific area and, because they are monopolies, are regulated by the Public Utilities Commissions. Like electricity in deregulated markets, supply of natural gas is separate from distribution, so if you are able to buy your gas from a competitive supplier, it will have to be transported through the distribution pipeline of the LDC. In New Hampshire, we only have partial natural gas deregulation. Large industrial and commercial customers can purchase natural gas from competitive suppliers but residential natural gas users don’t have a choice and have to purchase their gas from the LDC.
Natural gas is important to us here in New Hampshire for industrial usage and residential and commercial heating but the tail that is wagging the NH natural gas dog is electricity generation. When we talk about electricity generation and natural gas consumption, we really need to think regionally: in truth, this is what we need to do with all energy matters. New Hampshire (as much as the independent Yankee folks up here might like it to be so) is not an energy island. It has few natural energy resources, except for a little hydro, some wind and wood, as well as a slowly growing amount of solar, so we need to think regionally in terms of energy imports and exports as well as our own consumption.
Before we jump into the complexities of regional natural issues,
which I will tackle in future posts, let’s take some time to better acquaint
ourselves with natural gas.
Natural gas consists largely of methane which is the simplest
of the hydrocarbon fuel molecules. Methane is built from one carbon and four
hydrogen atoms. Natural gas also contains varying amounts of other hydrocarbons,
such as those in the figure below.
Natural gas is produced by the biological decay of
vegetation and waste under anaerobic conditions (i.e., in the absence of oxygen
or air). It is recovered from natural gas wells, it is often associated with
crude oil, and it is found in coal seams. In the US, we have, in the past decade,
been able to release vast quantities from shale gas deposits by horizontal
drilling and fracturing shale deposits deep underground.
When natural gas is pumped up from underground deposits it
is pretty dirty and a good amount of cleanup is required before it can be
transported in a pipeline. When natural gas is
recovered from conventional or shale gas deposits, it is often accompanied by
other hydrocarbon gases, such as ethane, propane, propylene and butanes.
Natural gas which contains a lot of these other hydrocarbons is referred to as
"wet" gas. These other gases are removed during processing, which also
removes water, sulfur, mercury, and other byproducts from the natural gas. The
hydrocarbon gases are also separated into natural gas liquid (NGL) fractions,
such as ethane, propane, butane, etc., each of which has its own specific use. As
noted in Under
Pressure, this is the source of much of the
propane we use.
The composition of natural gas
delivered to consumers therefore varies, depending on its source and the
processing it has been through. Typical compositions are shown below.
Source: Union Gas
The most attractive feature of natural gas is that it is clean burning with fewer harmful combustion products than oil or coal. The main emissions are carbon dioxide and water. Of all the carbon-based fuels, methane has the lowest amount of carbon released, per unit of energy released. This is the reason that carbon emissions in the US have dropped as we have shifted from coal-fired to natural gas-fired electricity generation. The table below shows the carbon dioxide emissions per million BTUs produced by the combustion of different fossil fuels. The emissions of natural gas are almost half of those of coal.
Natural gas is odorless and colorless. Its distinctive smell is due to the odorant that distributors are required to add to the gas for safety reasons. The odorant is normally a smelly sulfide compound, a mercaptan, that smells like rotten eggs: if you smell it, it means that you have a gas leak—you should leave the area and call the gas utility right away. Natural gas explosions, although rare, can have devastating consequences, causing loss of life and enormous property damage.
Natural
gas is normally transported across the country by
pipeline. These steel pipelines are 20 to 42 inches in diameter and buried
underground along 100 ft rights of way. The gas flows at a rate of about 30
mph. The pressures range from 200 to 1500 psi and regular compressor stations
maintain the pressure along the pipeline routes The natural gas is directed to
distribution points where it passes through a gate station. Here it becomes the
responsibility of the local distribution company that then drops the pressure,
adds the odorant, and directs the gas to homes and business through a smaller
diameter and lower pressure natural gas grid. Service lines bringing the gas
directly into homes or businesses, through a gas meter, tap into this
distribution grid. These service lines can be smaller diameter plastic pipes in
which the gas pressure can range from 0.25 to 200 psi, depending on the amount
of gas needed by the customer.
Similar to electricity, there are
three main components to the natural gas business. The generation/production side is carried out by natural gas companies
who explore for, drill, pump, and treat the gas before it is fed into a
pipeline. The transmission part of
the business is the large network of natural gas transmission pipes and
underground storage caverns across the country. The distribution network is the responsibility of the local
distribution company (LDC).
The LDCs have a franchise for a specific area and, because they are monopolies, are regulated by the Public Utilities Commissions. Like electricity in deregulated markets, supply of natural gas is separate from distribution, so if you are able to buy your gas from a competitive supplier, it will have to be transported through the distribution pipeline of the LDC. In New Hampshire, we only have partial natural gas deregulation. Large industrial and commercial customers can purchase natural gas from competitive suppliers but residential natural gas users don’t have a choice and have to purchase their gas from the LDC.
Natural gas has different units to those of the other energy
industries, such as electricity or oil. The basic unit of natural gas is a
cubic foot of gas which has an energy content of 1027 BTU. This is not a great
deal of energy. By comparison, a cubic foot of home heating oil (~7.5 gallons)
would have about 1 million BTU. Because the energy content of a cubic foot of
gas is so low, we normally talk in terms of hundreds of cubic feet or millions
of cubic feet. Also, because a cubic foot of gas has an energy content of approximately
1000 BTU, we often talk about millions of BTU (MMBTU) when discussing natural
gas and assume that 1 million BTU (1 MMBTU) of energy is approximately equal to 1000 cubic feet of
natural gas. Returning to the first chart in the post, we note that NH natural
gas consumption in 2012 was just over 70,000 MMBTU or approx. 70 million cubic
feet.
Most home owners pay for natural gas in terms of the heat
content measured as therms. One therm is equivalent to 100,000 BTU or
approximately 100 cubic feet. The AGA also notes that 193 cubic feet or ~2 therms is enough to meet
the daily heating, hot water, and cooking needs for an average US home using
natural gas. A few points are noteworthy on the natural gas bill for a NH
resident, shown below.
There are three main components to the bill: 1) A minimum service charge; 2) a distribution charge; and 3) a fuel charge. Natural gas is metered into a home in hundreds of cubic feet but is charged in therms. . The conversion from cubic feet to therms involves multiplying by a therm factor (Note 4 in the figure above), in this case 1.035. I noted previously that a cubic foot of natural gas contains 1027 BTU, but this is an average which leads to 1.027 therms per 100 cubic foot. However, the actual BTU content of natural gas is very dependent on the amounts of the other hydrocarbon gases in the natural gas. The higher hydrocarbon gases have a higher heat values, so if the natural gas contains higher amounts of these, the therm factor will be higher than 1.027.
There are three main components to the bill: 1) A minimum service charge; 2) a distribution charge; and 3) a fuel charge. Natural gas is metered into a home in hundreds of cubic feet but is charged in therms. . The conversion from cubic feet to therms involves multiplying by a therm factor (Note 4 in the figure above), in this case 1.035. I noted previously that a cubic foot of natural gas contains 1027 BTU, but this is an average which leads to 1.027 therms per 100 cubic foot. However, the actual BTU content of natural gas is very dependent on the amounts of the other hydrocarbon gases in the natural gas. The higher hydrocarbon gases have a higher heat values, so if the natural gas contains higher amounts of these, the therm factor will be higher than 1.027.
The chart below shows the 13-year fluctuation of retail
natural gas prices, courtesy of the NH Office of Energy and Planning. Over this
period, there has been considerable price fluctuation, ranging from a low of
$0.71 in Oct 2002 to a high of $1.75 per therm in Oct 2008. In fact, as I have
highlighted on the chart, at the start of 2013 natural gas prices were
relatively low at $0.82 but there has since been a substantial increase, with
recent prices getting close to $1.45 per therm. Prices in March are even higher at $1.60 per therm. These Jumping Jack Gas* price increases have been
driven by increases in commodity gas prices, which, in turn, have been driven
by the increased demand we have experienced due to this very cold winter. We
will look more closely at natural gas prices in future blogs.
In my next post, I will take a look at regional natural gas
issues and particularly at how it makes its way into New England through the
natural gas pipeline network.
Until next time, remember to turn off the lights when you
leave the room.
Mike Mooiman
Franklin Pierce University
mooimanm@franklinpierce.edu
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(*Jumping Jack Gas -
A play on the famous Rolling Stones’ tune, Jumping Jack Flash, with the classic
line that most of us have lip synced to at one time or another, “Jumping Jack
Flash, it’s a gas, gas, gas.” I am a cover tune fan, so enjoy a great but short
version of the tune by the frenetic Tina Turner, rocking it out as only she can)
Excellent BLOG as always. I wonder if a reason that there has not been a substantial up-serge in the use of natural gas in NH is because pipes need to be installed under streets to supply the gas. I would assume this requires public /private coordination and contributions and NH has been keeping public expenditures very low for quite a while. In short, the demand may be there, however public private infrastructure is not keeping up?
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