Fuel Switching Part 2: Canada

Unlike the United States, there are federal government policies aimed at reducing greenhouse gas emissions in Canada, and they may result in gas to coal fuel switching. On June 23, 2010 the federal government announced regulations regarding the gradual phase-out of inefficient coal-fired generation in Canada in an effort to reduce greenhouse gas emissions.

The regulations will apply to new coal-fired facilities as well as those reaching the end of their economic life, defined as the longer of 45 years from commissioning date or the expiry of the power purchase agreement in effect when the policy was announced.

The performance standard will be the equivalent of the emissions intensity of natural gas combined cycle technology, which is between 360 and 420 tonnes per gigawatt-hour, and will come into effect in mid-2015.

Coal is used by five provinces as a primary fuel for generating electricity and accounts for 13 per cent of Canada’s greenhouse gas emissions.

However, some fuel-switching has already taken place. Since 1998, Alberta has added 615 megawatts of coal capacity and decommissioned 603 megawatts. Over the same period, as the demand for electricity rose, the province added 4,376 megawatts of natural gas fired electricity while decommissioning 877 megawatts.

Saskatchewan forecasts replacing its entire generating system by 2033. In the short term, it will focus on natural gas projects, including partnering with a natural gas power provider to build a 261 megawatt power station.

Ontario will phase out coal-fired generation by 2014, replacing switching to natural gas or biomass.

Fuel Switching Part 1: United States

Coal to natural gas fuel switching the United States is a function of coal prices versus natural gas prices. Coal has historically been the fuel of choice, but the percentage of electricity generated from coal has dropped from 52.1 in 1996 to 44.5 in 2009 while the percentage generated from natural gas has risen to 23.3 from 13.2 over the same period.

In 2009, high coal prices relative to low natural gas prices caused an 11.5 per cent drop in the amount of electricity generated by coal compared to a 4.3 per cent increase in the amount generated by natural gas.

On an annual basis, the percentage of electricity generated from coal rises in the winter months when natural gas is directed to home heating. Conversely, in summer months, more natural gas is available for electricity generation, so the amount generated by coal decreases.

In the longer term, the United States Energy Information Administration predicts that by 2035, natural gas will account for 25 per cent of the electricity generated in the U.S. compared to the current 23 per cent. Over the same period, coal-fired electricity will drop to 43 per cent from 44.5.

These changes result from the expectation that natural gas prices will remain low for at least the next ten years and construction costs for natural gas plants will remain lower than those for new nuclear or renewable energy plants. Although there are no federal government policies to reduce greenhouse gas emissions, environmental concerns will curtail new coal-fired capacity.

Protecting Potable H2O

Shale gas is simply natural gas produced from reservoirs composed primarily of shale. Shale reservoirs are considered unconventional in that they have extremely low porosity and permeability, and advanced technologies such as horizontal drilling and multi-stage hydraulic fracturing must be used to produce the gas.

Video by EnCana

Shale gas is produced in Canada primarily in northeast British Columbia and northwest Alberta. Exploration and evaluation programs are currently underway in New Brunswick and Quebec, which, if successful, would greatly reduce the need to import natural gas for these two provinces.

According to the Canadian Association of Petroleum Producers, a primary concern in producing shale gas is protecting potable water aquifers. In all gas wells, regulations require a steel pipe, called casing, to be cemented into the well bore from ground level deep enough to isolate groundwater aquifers from the well. The casing is set in stages depending on the depth of the aquifers and the nature of the surrounding material.

Consequently, water used in drilling or fracturing the well, non-potable water from deeper formations, and the gas itself is prevented from contaminating drinking water.

Water used in drilling or fracturing comes from lakes, rivers, local supply or existing oil , gas or water wells. It is re-cycled as much as possible, or disposed of in deeper saline aquifers.

Shale gas resources in Canada are estimated at between 86 trillion cubic feet and 1,000 trillion cubic feet. Assuming 20 per cent recovery, at current consumption rates, this would last up to 35 years.

NGVs reduce GHGs

In the future, when you stop for gas, you may actually be stopping for gas, as in natural gas.

The Natural Gas Use in Transportation Roundtable, a group comprising representatives from the trucking, automotive and natural gas industries, environmental groups and federal and provincial governments, published its report Natural Gas Use in the Canadian Transportation Sector: Deployment Roadmap (4.2MB PDF) in December 2010.

The report touts natural gas as a clean, economic and abundant fuel for all vehicles, but particularly for medium and heavy trucks operating in return-to-base and corridor fleets.

In commending the report, the Canadian Gas Association, added that natural gas can reduce GHG emissions from heavy trucks by as much as 25 per cent, while saving up to 30 per cent in fuel costs. The CGA also pointed out that natural gas vehicles can run on renewable natural gas from landfills, digesters and wastewater treatment plants.

Currently, 99.4 per cent of the energy used in Canada’s transportation sector is sourced from refined crude oil products and only about 0.1 per cent is sourced from natural gas.

There are some barriers, however, such as vehicle conversion costs and limited infrastructure. But, with growing environmental concerns, with vehicle energy use forecast to increase 31 per cent between 2004 and 2020, and with the price of crude oil forecast to average $93 US per barrel in 2011, natural gas vehicles deserve a closer look.

Natural Gas Pricing

The bad news about the winter of 2011 is that it’s here.

The good news is that it may not cost as much to heat our homes as it has in previous winters. Environment Canada assures us temperatures will be slightly higher than normal, and the National Energy Board is saying that “for the second year in a row, Canadian consumers will likely pay relatively low prices for natural gas.”

But, winter weather is unpredictable and sure, a cold snap could cause a temporary increase in gas prices, but market fundamentals suggest temporary is the operative word.

So, why the low prices? The Canadian Gas Association points to sustained production with only moderate growth in demand. Add to that the increased impact of unconventional sources, especially shale gas in British Columbia and the United States, and the result is a North American natural gas market that is “well supplied,” so much so that gas storage levels are above the five-year average.

This causes downward pressure on natural gas prices. The wholesale gas price from January through September 2010 averaged $4.60 per MMBtu, about 34 per cent lower than the five-year average of $7.00 and this is expected to continue through the winter.

Enjoy it while you can. Depressed prices mean decreased drilling and, over time, a reduction in new supply. As well, prices for oil and coal are rising, and natural gas is seen as a lower-cost replacement for transportation fuel and thermal electricity generation. Short supply and increased demand may mean expensive winters in the future.

If They Approve It, Will It Still Be Built?

The approval by the National Energy Board (NEB) on December 16, 2010 of the Mackenzie Gas Project marks a huge milestone in the 30-odd year history of natural gas exploration in Canada’s north. But, approval does not necessarily mean the pipeline will be built.

In 2004, the pipeline proponents, Imperial Oil Resources, Shell Canada Limited, Mobil Canada and Gulf Canada Resources Limited (later acquired by ConocoPhillips) proposed a $16.2 billion, 1,196-kilometre pipeline capable of transporting 1.2 billion cubic feet per day from three fields in the Mackenzie Delta to markets in the south. Total gas reserves in the area at that time amounted to 5.7 trillion cubic feet.

During the six-year review process, much has changed in the North American natural gas scene. New fracturing and horizontal drilling technologies have made it possible to economically produce resources such as shale gas and gas from tight sands that were previously abandoned. Using these technologies has greatly increased the gas supply nearer to major markets in both Canada and the United States.

Consequently, Canada’s gas exports to the U.S. have dropped 13 per cent since 2007 and the price of natural gas has dropped to around US$4 per thousand cubic feet (Mcf). Industry experts note that shale gas is profitable at that level, but the price has to be above US$10/Mcf for Arctic gas to be economic.

The Northwest Territories views this project as one of the most important economic opportunities in its history. But although the NEB says current natural gas prices are no reason to shelve the project, the proponents say the project has to compete with other sources of supply to the North American market.

Injecting Gas, Cash and Controversy

Fuel injection’s a great way to improve the efficiency of an engine, but a cash injection’s nothing to sneeze at either. UBC researcher Steven Rogak is going to be getting the latter to do the former, with a five-year, $499,824 grant from  the federal government in support of his natural-gas-injected-engine research.

The project’s goal is to develop a fuel injector that will make natural gas engines competitive with equivalent diesel engines. And while natural gas is currently a relatively niche fuel — the Canadian Natural Gas Vehicle Alliance (CNGVA) says that Canada has only 12,000 natural-gas-powered vehicles — that might not always be the case.

Canada’s transportation industry currently accounts for the largest share of our CO2 emissions — more than 35 per cent — and natural gas emits less carbon than oil. According to the CNGVA (1.1 MB PDF), for example, a comparable diesel-powered heavy-duty truck would save 23 per cent in GHG emissions, while rail transport could save 19 per cent. And supply is no issue, even if the supply has issues.

Unconventional reserves are now being accessed across the country, with shale, natural gas from coal and tight sands constituting a potential boom in production. However, drawing all that extra natural gas from unconventional isn’t a done deal yet. In Quebec, for example, which currently has no natural gas production infrastructure, Questerre Energy and Talisman Energy recently pushed back the start of test wells by six months because of public opposition based on another kind of injection — fracking. In freeing trapped gas with chemically infused water, the industry is confronting fears of contamination and the use of our limited water reserves. Federally, the government says that shale gas rules are still a work in progress, but it’s certain that these issues will continue to inform any future discussion on unconventional natural gas, even if it’s destined for our engines.

Energy in Canada #5

NATURAL GAS: A CANADIAN RESOURCE
Canada is the world’s third largest producer of natural gas. With conventional resources and the potential of unconventional sources like tight gas, shale gas, and coalbed methane, natural gas continues to offer a dynamic range of opportunities. Read More

MEETING THE ENERGY CHALLENGE
Nobody in the energy industry has a crystal ball, but one prediction no one would take odds against is consumers will keep using energy. The target increases in demand are now expected to come from China, India and other emerging economies. Read More

SAME GAS, DIFFERENT RESERVOIR
As revolutions go, the shale gas revolution might be one of the calmest in history: most of its activity will remain deep underground. Conventional reserves are dwindling, and unconventional natural gas is becoming more attractive. Read More

INCREASING INFRASTRUCTURE
Until homeowners start building gas wells in their backyards, natural gas will continue to be something that needs to make its way from somewhere else to your home. Canada’s natural gas infrastructure has to be able to meet demand. Read More

NATURAL GAS DEFINED
Natural gas is a naturally occurring hydrocarbon, a class of organic compounds consisting of carbon and hydrogen – the basis of crude oil, natural gas and coal. Find out about the who, what, where, when and how of this energy source. Read More

CANADIAN GAS ASSOCIATION
The Canadian Gas Association’s (CGA) 125+ members are gas distribution companies, transmission companies, related equipment manufacturers, and other service providers involved in the delivery of natural gas in Canada.

In April, the organization published its Natural Gas Update to provide current information on natural gas markets, commodity pricing, storage levels and drilling activity across the country. In August the organization announced the appointment of Timothy Egan as President and CEO of the CGA effective September 1.

CANADIAN NATURAL GAS VEHICLE ALLIANCE
Natural gas vehicle technologies provide proven, commerically available transportation solutions that reduce emissions while using lower cost fuel. The Canadian Natural Gas Vehicle Alliance members are involved in research, manufacturing, fuel supply and vehicle conversion technology.

A Week of Gas, Naturally

For the rest of the week, until Saturday, October 16, BC is celebrating its Oil and Gas Week, recognizing the contributions of the oil and natural gas industry across the province. In 2009/2010, royalties from oil and natural gas production provided $1.35 billion in royalties — more than half of the province’s total resource revenues.

In a province where mining constitutes nearly one in every 20 jobs (according to the Mining Association of British Columbia), resource revenues are no small deal. British Columbia is Canada’s second-largest natural gas producer, and has reserves of 16.5 trillion cubic feet.

The week’s celebrations coincide with the B.C. Energy Conference, which runs from October 12 to 14 in Fort St. John. Topics at the conference cover a range of the issues facing the oil and natural gas sector, with talks on topics like “Transition to Unconventional Gas” and “Energy Resources and Technologies, Today & Tomorrow”. And, given the role that the oil and natural gas sector already plays, it’s likely that those resources will also be in the province’s future.

In addition to existing production, the province’s gas resources include tight sands, shale gas and natural gas from coal. And as long as there are resources to produce, there’ll be cause for celebrations.

A Bridge Not Too Far

Last month, the Canadian Centre for Energy, this humble blog’s (mostly) proud parent, wrote a newsletter about natural gas. In many ways, Canada’s energy future is going to resemble its present, with existing types of energy production, but unconventional sources are going to have major effects on that production.

As the country’s conventional reserves of oil and natural gas decline, we’re increasingly looking toward alternative sources like the Athabasca oil sands and unconventional natural gas. But if unconventional natural gas seems like more of the same, there’s certainly the chance that it’s actually a sign of changing energy use.

According to researchers at the Massachusetts Institute of Technology, natural gas electricity generation could be a “bridge” to future low-carbon energy production, replacing the carbon-intensive coal generation that dominates the US’s supply. Given natural gas’s lower carbon footprint (natural gas-fired plants emit about half as much CO2 as comparable coal facilities), and its increasing availability, the fuel makes sense for the heavy energy demands of the short term. While renewables are appealing, in Canada, for example, wind still makes up only 0.3 per cent of the country’s electricity generation. Getting that number up will require time and energy in the interim.

Unlike the US, our country’s electricity supply is already dominated by renewables, with hydro making up 61.7 per cent of electricity generation in 2007. Still, the federal government recently announced a plan to phase out the country’s remaining coal generation, retiring two-thirds of the country’s 51 coal plants by 2025. Provincially, both Manitoba and Ontario have already committed to going coal-free. Ontario has set a deadline of 2014, and Manitoba currently has only one remaining coal facility. Alberta, meanwhile, has nine coal-fired facilities. Electricity generation currently makes up about 22 per cent of the country’s CO2 emissions.

Changes to energy are certainly coming, but if our country’s hunger for energy is any indication (13.8 quadrillion Btu in 2007), we’ll need something to sate demand in the short term. In the interim, natural gas could be that fuel.

Via Scientific American

« Previous Page — Next Page »