Natural Gas and America’s Power Mix
Posted May 11, 2012 at 8:06 am 
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Automotive, Electricity, Electrification, Energy Demand, Environment, Oil Dependence On Tuesday, the Energy Information Administration (EIA) released its most recent Short Term Energy Outlook. This monthly report updates EIA’s projections for 2012 and 2013 across numerous energy supply and demand sectors and provides a useful way to track changes in the American energy economy as they are developing. After reviewing this month’s data, we want to highlight the outlook for U.S. electricity generation.
The mix of fuels used to generate electricity in the United States is experiencing a seismic shift that is unlike anything that has happened in decades. Looking across all sectors, U.S. coal-fired generation in 2011 fell to its lowest level since at least 1949, which is the earliest data available from EIA. Moreover, according to EIA’s latest estimates, this trend will accelerate sharply in 2012, with coal-fired generation falling to just 36.2 percent of the U.S. total—far removed from its decades-long position as the source of more than half of U.S. power generation.
What’s driving this shift? One look at the graph above tells the story pretty clearly. The use of natural gas in power generation—which has steadily increased since about 2003—is set to soar in 2012. While total U.S. power generation will increase by less than 1 percent between 2011 and 2013, gas-fired generation will increase by 23 percent.
In the past, natural gas was viewed as a risky option for baseload power generation, because fuel prices tended to be both high and volatile, making them unable to compete with coal. This fuel price volatility has historically outweighed the distinct advantage held by natural gas generators when it comes to capital cost. The revolution in domestic shale gas production, which has depressed natural gas prices to levels that are highly competitive with coal in numerous U.S. markets, has fundamentally changed the calculus for power generation economics. Moreover, some recent analysis suggests that the capital cost equation has been moving even farther in favor of natural gas as air quality regulations and the complex construction requirements drive the cost of coal plants higher.
Changes in the fuels used to generate electricity could have important implications for everything from electricity prices to greenhouse gas emissions and air quality. One area of particular interest to us is the impact a cleaner grid will have on the upstream CO2 emissions associated with plug-in electric vehicles (PEVs). We sometimes point out that PEVs are the only vehicles that will get “cleaner” as they get older as the grid moves toward lower-carbon forms of electricity. The experience of the past several years and expectations about the very near term demonstrate this quite well.
As the figure below shows, the amount of upstream CO2 emitted by a PEV in charge-depleting mode has been declining substantially in recent years—even when it is powered by the average U.S. grid mix. A driver who purchased a PEV in 2005 would have seen his or her upstream emissions fall by 16 percent by 2012. In other words, the driver’s vehicle would have continuously improved its advantage over the average light-duty vehicle for that year, which achieved an adjusted fuel-economy rating of 19.9 miles per gallon. In fact, even when taking into account line losses, a PEV purchased in 2005 would just about be on par with the best hybrids on the road today, which tend to register fuel-economy ratings of about 50 miles per gallon. Going forward, as more U.S. electricity is generated by natural gas, nuclear power, and renewables, electric vehicles will only continue to get cleaner.
A final note: Of course, no EV is likely to be powered by the ‘average mix.’ Instead, it will be powered by the marginal power plant serving its load. To the extent that this is a natural gas turbine, nuclear power plant, or renewable source, EVs are already the cleanest available transportation option. Analyses like this one from Oak Ridge National Labs suggest that gas turbines are likely to play a key role in powering EVs.
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