Economics Essays on Natural Gas and Coal

Economics Essays on Natural Gas and Coal

In the U.S. and most of other economies, natural gas and coal are used to meet the energy needs in various sectors including electric power generation, industry, commerce, and infrastructure. The availability of adequate supplies of these energy sources and costs involved in their production and development determines the willingness of a country to utilize the energy supply. In a carbon-constrained economy, countries are also required to consider the ability of an energy source to control carbon dioxide (CO2) emissions when deciding about the choice of energy supplies. The utility of natural gas and coal not only lies in their being important sources of energy but also in their cost effectiveness and ability to reduce greenhouse gasses emissions thus helping a country in its pursuit of controlling environmental pollution.

Natural gas should be considered as an attractive source of energy as it provides various benefits and can be utilized in different sectors of the economy. The study by Ernest et al. in “The Future of Natural Gas” recommends that the U.S. should consider relying more on natural gas in its efforts to maintain energy balance in the future (1). Some of the factors make natural gas a better source of energy. These factors include its abundant supply in the U.S. and in other countries, its cost effectiveness and ability to control the levels of CO2 emissions. Abundant sources of natural gas exist in the world, and a majority of these sources are being developed and produced at relatively reduced prices. The global mean estimation of recoverable resources that are remaining is 16,200 trillion cubic feet (Tcf). The projections are 150 times of the existing annual natural gas consumption in the world. About 9,000 Tcf of these mean projections could be economically developed at the export point with a natural gas price at or below $4 per million British thermal units (MMBtu). Natural gas has low carbon content compared to other fossil fuels, which allows it to play a significant role in minimizing CO2 emissions. This supports the achievement of a nation’s low-carbon future. In the U.S., natural gas plays a major role in various sectors of the economy such as generation of power, commerce, industry, and housing than other fossil fuels. In 2009, natural gas was the source of 18 percent of the primary fuel used in power generation, and it offered 23 percent of the produced electricity, which demonstrates its high efficiency. Additionally, natural gas has the likelihood of offering more benefits in a carbon-constrained economy since it is one of the cost-effective ways of maintaining energy supplies while lowering CO2 emissions. Taking advantage of the capacity at the current levels, natural gas-fired power plants would allow reduction of CO2 emissions by up to 20 percent in the electric power sector, or 8 percent in all sectors with minimal capital expenditure. Therefore, the use of natural gas in the global economy is likely to continue growing due to its increased supply, utility and minimal costs compared to other energy supply sources (Ernest et al. 2).

Evaluation of the huge costs involved in the development of other sources of energy such as grid storage technologies reveals that natural gas is also cheaper than other sources, making it a better choice for meeting energy needs. Hittinger and Lueken examine the relationship between natural gas prices and grid energy storage in the United States (140).  The study establishes that the declining prices of natural gas have hindered the growth of grid energy storage in the country. In the past years, grid energy storage experienced considerable technological improvements due to increased research and policy efforts. However, since 2009, the industry has encountered issues that have resulted in minimal growth in the exploitation of grid-level storage. Several organizations and projects in the industry have also collapsed owing to these problems.  The falling prices have offset the technology improvements that have been made over the same period in the storage technologies. Hittinger and Lueken established that the amount of direct revenue that energy storage system was capable of making has been reducing over the past 5 to 10 years in a number of locations in the country (151). With the help of real and simulated market price data perspective, the study established that revenues in 2012 were one-half to one-third of what they were in the 2004-2008 period.  The huge change in the potential revenue is a hindrance to investments in energy storage systems (Hittinger and Lueken 151). The study under reference helps in confirming that natural gas should be a preferred choice of energy supply since it is cheaper and may require minimal investments than other sources such as the grid storage systems.

Although several studies such as those mentioned above indicate that natural gas should be considered as the most appropriate source of energy, still some other studies show that coal has also helped in meeting energy needs and it should continue being used even in the future. According to the work “U.S. Coal Supply and Demand: 2010 Year in Review” by William et al., the coal industry in the U.S. experienced a recovery due to a significant increase in exports and a rise in domestic production over the previous year (1).  In 2010, production increased by 1.04 percent from 2009 level of 1,074 million short tons to 1,085.3 million short tons. In 2010, the U.S. coal exports increased by 22.6 million short tons from 2009 levels to 81.7 million short tons. In contrast, the U.S. imports of coal reduced to 19.4 million short tons or 3.3 million short tons below 2009. The positive trends reported in 2010 were expected to move over to 2011. It is expected that the growth of the U.S. and majority of other industrial economies will lead to an increase in domestic consumption of coal and metallurgical coal exports. Consequently, coal price should continue rising at a moderate pace (William et al. 14).

The review by William et al. shows that coal has been used in the past as a domestic source of energy and for export purposes (14). However, the review does not mention whether coal has contributed to increased levels of CO2 emissions since it is known to have huge environmental impacts. “The Future of Coal”, a study by James et al. seeks to find out how coal can be used as a source of energy in a world that has adopted constraints on carbon emissions (4). The report claims that the abundance and low price of coal imply that it will continue being used in the production of energy for years to come. Usable energy from coal costs between $ 1 to $2 per MMBtu compared to $6 to $12 per MMBtu energy obtained from oil and natural gas. Additionally, coal can be sourced from various parts of the world apart from the Persian Gulf that has the largest oil and gas reserves (James et al. 4). James et al. also argue that, although coal will continue playing a critical role in a carbon emission constrained world, governments and countries are required to take appropriate actions that will reduce CO2 and other greenhouse gasses emissions (5). The high carbon content found in coal can cause relatively large emissions per Btu of heat energy. Therefore, the production and use of coal can result in unfavorable effects on the environment. The report challenges governments to come up with policies that will offer solutions for mitigating carbon emissions while continuing to use coal in meeting the pressing energy needs.  The researchers conclude that carbon capture and sequestration (CCS) is an essential technology that can help in enabling a significant reduction of carbon while also ensuring that energy needs rising in various economies are met (McElligott 19).

In conclusion, both natural gas and coal have been identified to have adequate resources that can be used to meet energy needs in the U.S. and other countries. Natural gas offers various benefits due to its abundant supply and ability to reduce greenhouse gasses. Similarly, with the adoption of the right technology, coal can also be exploited to meet a considerable proportion of energy needs. Therefore, the U.S government should adopt the necessary technologies that will enable them to utilize these energy resources without causing any harm to the environment.

 

Works Cited

Hittinger, Eric and Roger Lueken. “Is Inexpensive Natural Gas Hindering the Grid Energy Storage Industry?” Energy Policy, vol. 87, Dec. 2015, pp. 140-52, doi:10.1016/j.enpol.2015.08.036.

McElligott, Suzanne. “MIT Says CCS Is Key to Coal’s Future.” Gasification News, vol. 10, no. 3, 15 Mar. 2007, p. 19, 0-search.ebscohost.com.library.vu.edu.au/login.aspx?direct=true&db=bth&AN=24685212&site=eds-live.

Katzer, James, et al. The Future of Coal: An Interdisciplinary MIT Study. Technical report. Cambridge, MA: Massachusetts Institute of Technology, 2007.

Moniz, Ernest J., et al. “The Future of Natural Gas.” Cambridge, MA: Massachusetts Institute of Technology, 2011.

Watson, William, et al. “US Coal Supply and Demand: 2010 Year in Review.”Washington, DC: Environmental Protection Agency, 2010.