American Gas - August/September 2010 - (Page 5)

in the know industry insights natural gas in the wake of Climate Change Legislation Natural gas utilities may find it wise to shift their business model from energy provider to energy service provider. LeGisLAtion to establish a national climate change policy is moving forward, albeit at an unpredictable pace. Whether or not we control greenhouse gases through an economy-wide carbon market or impose generalized standards on power plants and industrial facilities, the landscape of the utility industry is about to change significantly. Trends Shaping the Future As a relatively low-carbon-generating resource, natural gas may have a lot to gain in a carbon-constrained environment. Natural gas plants generally emit 60 percent less carbon than conventional coal-fired plants, and combinedcycle technology has lower in-cost and performance risk than many other major power sources. Unlike carbon capture and storage and many renewable sources, natural gas technology is already proven and continues to become more efficient and cost-effective with each successive generation. As a source of fuel for large-scale power, the prospects for natural gas hinge on a few key drivers. First, natural gas will be the baseload of choice until uncertainties involving coal and nuclear plants are resolved—which may take a decade. However, the United States might need very little new baseload during this period. A second key driver for gas power is for peaking plants and plants that supply power to back up wind and solar plants when they aren’t producing. The demand for gas for this purpose will depend on several factors, including the growth of wind and photovoltaic power, utilities’ skill at integrating these resources and technological improvements in storage. Demand response also will greatly reduce peak power demand over time. The net result of all of these factors could cause gas for power to trend up or down. For example, a recent paper by The Brattle Group, “Prospects for Natural Gas Under Climate Policy Legislation,” noted several factors that could result in declining demand for natural gas over the next decade, even under carbon restrictions. The paper noted that demand for natural gas may be limited if carbon prices are moderate, federal mandates to promote renewable energy speed the development of those sources or if existing coal-fired generation remains in use longer than assumed. Additional trends, such as natural gas supply and price outlook, also PETER FOX-PENNER, principal and chairman emeritus of The Brattle Group, specializes in economic, regulatory and strategic issues in network industries. His recent book, Smart Power: Climate Change, the Smart Grid and the Future of Electric Utilities (www.smartpowerbook.com), examines innovative business models for the changing utility industry. HEIDI BISHOP is a policy and marketing coordinator with The Brattle Group. AmericAn GAs august/september 2010 5 http://www.smartpowerbook.com

Table of Contents for the Digital Edition of American Gas - August/September 2010

American Gas - August/September 2010
Contents
President’s Message - Energy Efficiency: Consider the Source
In the Know - Natural Gas in the Wake of Climate Change Legislation
Industry News
Safety First - Alleviating the Strain
More Power to You
An Online Power Boost
Vendor News
Places to Be
Noteworthies
Marketplace
Advertisers’ Index
Jobline
Facts on Gas

American Gas - August/September 2010