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Economics Info re: Using Natural Gas for Power Plants and/or Heating?

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  • Jonathan Clemens
    HREG, I am forwarding this message because of its economics content, its observation of the situation in California (already deregulated), and for its link to
    Message 1 of 1 , Dec 19, 2000
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      HREG,

      I am forwarding this message because of its economics content, its
      observation of the situation in California (already deregulated), and for
      its link to the DOE's "Clean Energy Futures" Report. The report is a good
      case for NOT carrying on with business as usual, with respect to pollution
      control. The report was presented at the climate talks at The Hague a few
      months ago.

      I would like to take a poll. If there are HREG members with a special
      interest in climate, global warming, acid rain, and such, let me know. I
      may set up a separate e-mail list to forward relevant information about the
      subject, sparing the full membership. Contact me at hreg@... with
      your thoughts. Thanks.

      Jonathan

      ----- Original Message -----
      From: "Ned Ford" <Ned.Ford@...>
      To: <CONS-SPST-ENERGY-FORUM@...>
      Sent: Monday, December 18, 2000 11:54 PM
      Subject: Re: Using Natural Gas for Power Plants and/or Heating?


      > Five years or so ago, the Electricity Journal (before it was bought up
      > by Elsevier) carried an article in which some noteworthy authors whom I
      > failed to take note of observed that there are statistical arguments
      > that an entity which controls about 36% of a market can dictate price.
      > Thus the support by the largest utilities for the deregulation, in spite
      > of industrial energy users' fixation on the theory that competition
      > would force prices lower.
      >
      > That argument, like most attempts to present economic principles as
      > guides to real life, oversimplifies the situation. I've been amazed at
      > the degree to which the Californian experience has been so brutal. I
      > would have thought that companies who were accustomned to jiggering the
      > take for so long would have demonstrated a little more finesse as they
      > screwed the public for everything that they could.
      >
      > The real economic force is brought into bearing as the utilities force
      > customers out of business, and find that there is a limit to how high
      > they can raise prices before sales start dropping.
      >
      > I also worry that environmental laws will be blamed for some of this.
      > The best response I know of is that the November 2000 DOE REPORT
      > "CLEAN ENERGY FUTURES" http://www.ornl.gov/ORNL/Energy_Eff/CEF.htm
      > This report was released in The Hague at the COP-6 talks, and contains a
      > wealth of reference that advocates should use. I will continue citing
      > it
      > until I find something better. (Be forewarned, it is 5.7 MB in PDF, but
      > you can download individual chapters. Chapter 7 is the one on electric
      > generation. Among other important observations, the Clean Energy
      > Futures
      > report studies three cases, Business as Usual, Moderate CO2 control and
      > Aggressive CO2 control. THE DOE FINDS THAT THE BUSINESS AS USUAL CASE
      > IS THE MOST
      > EXPENSIVE OF THE THREE CASES, THROUGHOUT THE 20-YEAR STUDY PERIOD.
      >
      > The logic that problems in California are caused or aggravated by
      > pollution concerns is only true if you pick and choose your pollution
      > problems. We need
      > a variety of good responses to this charge, but we should always try to
      > direct
      > attention back to the fact that there is still an enormous untapped
      > efficiency
      > potential which the utilities have been fighting tooth and nail.
      >
      > - Ned
      >
      > Emil Lawton wrote:
      > >
      > > ---------------------- Information from the mail
      header -----------------------
      > > Sender: Energy Forum <CONS-SPST-ENERGY-FORUM@...>
      > > Poster: Emil Lawton <emill@...>
      > > Subject: Re: Using Natural Gas for Power Plants and/or Heating?
      >
      > --------------------------------------------------------------------------
      -----
      > >
      > > ------=_NextPart_84815C5ABAF209EF376268C8
      > > Content-type: text/plain; charset=US-ASCII
      > >
      > > A recent Los Angeles Times article compared the price of NG (natural
      gas)
      > > at some recent price spikes to the equivalent oil price of $350/barrel!
      Not
      > > mentioned very often is that L.A.Department of Water and Power is a
      municipal
      > > monopoly and was not forced to sell off its generators. L.A. has
      adequate
      > > power. It was 15to 20% cheaper even before deregulation.
      > >
      > > I wish I could have Rich's confidence that
      > > competition will come, but even with almost30 suppliers to California,
      it seems
      > > that a few major ones have cornered the market. Businesses are closing
      up
      > > shop. Worst of all, the shortage is being blamed on environmental
      > > regulations.
      > >
      > >
      Emil
      > > Lawton
      > >
      > > ----- Original Message -----
      > >
      > > From: Michael
      > > Vickerman
      > >
      > > To: CONS-SPST-ENERGY-FORUM@...
      > >
      > > Sent: 12/17/00 7:03:25 PM
      > >
      > > Subject: Re: Using Natural Gas for Power
      > > Plants and/or Heating?
      > >
      > > Ned et al--
      > >
      > > An energy consultant once told me that for every
      > >
      > > $1/mmBtu increase in the wholesale price of natural
      > >
      > > gas, per kWh cost of combined cycle gas-fired
      > >
      > > generation goes up 0.7 cents. So, if we assume that
      > >
      > > capital cost + fixed and variable O M of an NGCC plant
      > >
      > > amount to 1.5 cents/kWh, then at $4/MMBtu, production
      > >
      > > costs come to 4.3 cents/kWh. For peaking plants, the
      > >
      > > cost would be considerably higher at $4MMBtu.
      > >
      > > More rigorous analysis of these costs would be very
      > >
      > > beneficial for this group and others I participate in.
      > >
      > > As an aside, some of the companies developing
      > >
      > > gas-fired generators have locked in long-term fuel
      > >
      > > contracts. It wasn't long that long ago that 10-year
      > >
      > > contracts were available in the $3-4/MMBtu range. I
      > >
      > > would think companies that have acquired long-term gas
      > >
      > > contracts would be very eager to continue their power
      > >
      > > plant development plans.
      > >
      > > Michael Vickerman
      > >
      > > --- Ned Ford wrote:
      > >
      > > The recent run-up in the price of natural gas will
      > >
      > > probably kill all but
      > >
      > > a tiny handful of the new natural gas generation
      > >
      > > projects. Someone
      > >
      > > needs to produce a side-by-side comparison of the
      > >
      > > cost of natural gas as
      > >
      > > it affects the cost of a KWH generated by a natural
      > >
      > > gas combined cycle
      > >
      > > plant. I suspect most new generation projects fell
      > >
      > > off the wagon around
      > >
      > > $4/mmbtu, but I would prefer to KNOW. This is
      > >
      > > tremendous good news for
      > >
      > > the wind industry, and should be better news for
      > >
      > > energy efficiency, but
      > >
      > > I think efficiency needs a PR firm, and some strong
      > >
      > > public programs. It
      > >
      > > may also be good news for the new coal technologies
      > >
      > > which are more
      > >
      > > efficient than current. If those plants become
      > >
      > > cost-effective it is
      > >
      > > possible that there will be a cascading process that
      > >
      > > ultimately replaces
      > >
      > > all existing coal plants, which could result in 20%
      > >
      > > or greater reduction
      > >
      > > in CO2 from the electric sector over the next
      > >
      > > several decades. It
      > >
      > > should be possible to define the cost points where
      > >
      > > balances are tipped,
      > >
      > > but I don't know who has done it, or enough to do it
      > >
      > > myself. If new
      > >
      > > coal at 40% greater efficiency serves new electric
      > >
      > > growth, but doesn't
      > >
      > > displace old plants, it will be about as bad as
      > >
      > > natural gas, for CO2.
      > >
      > > - Ned
      > >
      > > =====
      > >
      > > Michael Vickerman
      > >
      > > "Those who cast the votes decide nothing. Those who count the votes
      decide
      > > everything." Joseph Stalin
      > >
      > > __________________________________________________
      > >
      > > Do You Yahoo!?
      > >
      > > Yahoo! Shopping - Thousands of Stores. Millions of Products.
      > >
      > > http://shopping.yahoo.com/
      > >
      > > - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
      > >
      > > To get off the CONS-SPST-ENERGY-FORUM list, send any message to:
      > >
      > > CONS-SPST-ENERGY-FORUM-signoff-request@...
      > >
      > > For help in managing your subscription, or questions/comments about the
      > > Energy
      > >
      > > Forum, contact Ned.Ford@...
      > >
      > > --- Emil Lawton
      > >
      > > --- emill@...
      > >
      > > --- EarthLink: It's your Internet.
      > >
      > > ------=_NextPart_84815C5ABAF209EF376268C8
      > > Content-Type: text/html; charset=US-ASCII
      > >
      > > <HTML><HEAD>
      > > <META content="text/html; charset=windows-1251" http-equiv=Content-Type>
      > > <META content="MSHTML 5.00.2919.6307" name=GENERATOR></HEAD>
      > > <BODY>
      > > <DIV>A recent Los Angeles Times article compared the price of NG
      (natural gas) at some recent price spikes to the equivalent oil price of
      $350/barrel! Not mentioned very often is that L.A.Department of Water and
      Power is a municipal monopoly and was not forced to sell off its generators.
      L.A. has adequate power.  It was 15to 20% cheaper even before
      deregulation. </DIV>
      > > <DIV>    I wish I could have Rich's confidence that
      competition will come, but even with almost30 suppliers to California, it
      seems that a few major ones have cornered the market. Businesses are closing
      up shop.  Worst of all, the shortage is being blamed on
      environmental regulations.</DIV>
      > >
      <DIV>            
      ;            &nb
      sp;            &
      nbsp;            
      ;            &nb
      sp;            &
      nbsp;            
      ;            &nb
      sp;            &
      nbsp;  Emil Lawton </DIV>
      > > <BLOCKQUOTE style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px;
      PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
      > > <DIV style="FONT: 10pt Arial">----- Original Message ----- </DIV>
      > > <DIV style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color:
      black"><B>From:</B> <A href="mailto:mvickerman@..."
      title=mvickerman@...>Michael Vickerman</A> </DIV>
      > > <DIV style="FONT: 10pt arial"><B>To: </B><A
      href="mailto:mvickerman@..."
      title=mvickerman@...>CONS-SPST-ENERGY-FORUM@...</A></
      DIV>
      > > <DIV style="FONT: 10pt arial"><B>Sent:</B> 12/17/00 7:03:25 PM </DIV>
      > > <DIV style="FONT: 10pt arial"><B>Subject:</B> Re: Using Natural Gas for
      Power Plants and/or Heating?</DIV>
      > > <DIV><BR></DIV><FONT size=2>
      > > <P>
      > > <DIV>Ned et al--</DIV>
      > > <DIV> </DIV>
      > > <DIV>An energy consultant once told me that for every</DIV>
      > > <DIV>$1/mmBtu increase in the wholesale price of natural</DIV>
      > > <DIV>gas, per kWh cost of combined cycle gas-fired</DIV>
      > > <DIV>generation goes up 0.7 cents. So, if we assume that</DIV>
      > > <DIV>capital cost + fixed and variable O&M of an NGCC plant</DIV>
      > > <DIV>amount to 1.5 cents/kWh, then at $4/MMBtu, production</DIV>
      > > <DIV>costs come to 4.3 cents/kWh. For peaking plants, the</DIV>
      > > <DIV>cost would be considerably higher at $4MMBtu.</DIV>
      > > <DIV> </DIV>
      > > <DIV>More rigorous analysis of these costs would be very</DIV>
      > > <DIV>beneficial for this group and others I participate in.</DIV>
      > > <DIV> </DIV>
      > > <DIV>As an aside, some of the companies developing</DIV>
      > > <DIV>gas-fired generators have locked in long-term fuel</DIV>
      > > <DIV>contracts. It wasn't long that long ago that 10-year</DIV>
      > > <DIV>contracts were available in the $3-4/MMBtu range. I</DIV>
      > > <DIV>would think companies that have acquired long-term gas</DIV>
      > > <DIV>contracts would be very eager to continue their power</DIV>
      > > <DIV>plant development plans.</DIV>
      > > <DIV> </DIV>
      > > <DIV>Michael Vickerman</DIV>
      > > <DIV> </DIV>
      > > <DIV> </DIV>
      > > <DIV> </DIV>
      > > <DIV> </DIV>
      > > <DIV>--- Ned Ford <NED.FORD@...>wrote:</DIV>
      > > <DIV>> The recent run-up in the price of natural gas will</DIV>
      > > <DIV>> probably kill all but</DIV>
      > > <DIV>> a tiny handful of the new natural gas generation</DIV>
      > > <DIV>> projects.  Someone</DIV>
      > > <DIV>> needs to produce a side-by-side comparison of the</DIV>
      > > <DIV>> cost of natural gas as</DIV>
      > > <DIV>> it affects the cost of a KWH generated by a natural</DIV>
      > > <DIV>> gas combined cycle</DIV>
      > > <DIV>> plant.  I suspect most new generation projects
      fell</DIV>
      > > <DIV>> off the wagon around</DIV>
      > > <DIV>> $4/mmbtu, but I would prefer to KNOW.  This is</DIV>
      > > <DIV>> tremendous good news for</DIV>
      > > <DIV>> the wind industry, and should be better news for</DIV>
      > > <DIV>> energy efficiency, but</DIV>
      > > <DIV>> I think efficiency needs a PR firm, and some strong</DIV>
      > > <DIV>> public programs.  It</DIV>
      > > <DIV>> may also be good news for the new coal technologies</DIV>
      > > <DIV>> which are more</DIV>
      > > <DIV>> efficient than current.  If those plants
      become</DIV>
      > > <DIV>> cost-effective it is</DIV>
      > > <DIV>> possible that there will be a cascading process that</DIV>
      > > <DIV>> ultimately replaces</DIV>
      > > <DIV>> all existing coal plants, which could result in 20%</DIV>
      > > <DIV>> or greater reduction</DIV>
      > > <DIV>> in CO2 from the electric sector over the next</DIV>
      > > <DIV>> several decades.  It</DIV>
      > > <DIV>> should be possible to define the cost points where</DIV>
      > > <DIV>> balances are tipped,</DIV>
      > > <DIV>> but I don't know who has done it, or enough to do it</DIV>
      > > <DIV>> myself.  If new</DIV>
      > > <DIV>> coal at 40% greater efficiency serves new electric</DIV>
      > > <DIV>> growth, but doesn't</DIV>
      > > <DIV>> displace old plants, it will be about as bad as</DIV>
      > > <DIV>> natural gas, for CO2.</DIV>
      > > <DIV>></DIV>
      > > <DIV>> - Ned</DIV>
      > > <DIV>></DIV>
      > > <DIV> </DIV>
      > > <DIV>=====</DIV>
      > > <DIV>Michael Vickerman</DIV>
      > > <DIV> </DIV>
      > > <DIV>"Those who cast the votes decide nothing. Those who count the votes
      decide everything."  Joseph Stalin</DIV>
      > > <DIV> </DIV>
      > > <DIV>__________________________________________________</DIV>
      > > <DIV>Do You Yahoo!?</DIV>
      > > <DIV>Yahoo! Shopping - Thousands of Stores. Millions of Products.</DIV>
      > > <DIV><A
      href="http://shopping.yahoo.com/">http://shopping.yahoo.com/</A></DIV>
      > > <DIV> </DIV>
      > >
      <DIV>- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -</DIV>
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      > > <DIV><A
      href="mailto:CONS-SPST-ENERGY-FORUM-signoff-request@...">CO
      NS-SPST-ENERGY-FORUM-signoff-request@...</A></DIV>
      > > <DIV>For help in managing your subscription, or questions/comments about
      the Energy</DIV>
      > > <DIV>Forum, contact Ned.Ford@...</DIV>
      > > <DIV> </DIV>
      > > <P></P></FONT>
      > > <P></P></BLOCKQUOTE>
      > > <DIV> </DIV>
      > > <DIV>--- Emil Lawton</DIV>
      > > <DIV>--- <A
      href="mailto:emill@...">emill@...</A></DIV>
      > > <DIV>--- EarthLink: It's your Internet.</DIV>
      > > <DIV> </DIV></BODY></HTML>
      > > ------=_NextPart_84815C5ABAF209EF376268C8--
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      > > Forum, contact Ned.Ford@...
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