Discussing natural gas usage and barriers to a transition to cleaner energy

An introduction to natural gas demand and economic, educational, and governmental barriers to a clean energy transition

Authors: Ege Acaroğlu, Cansu Çulha, Roger Michaelides, Aristides Nakos

Introduction to Natural Gas

Natural gas (NG) was first extracted in 1821 in NY, in shallow fractures. NG is a naturally occurring hydrocarbon gas mixture, a fossil fuel, primarily consisting of methane, but will likely contain traces of other alkanes, carbon dioxide, nitrogen, hydrogen sulfide, and noble gases. It is formed when organic matter is covered in mud under high pressure at depths of 1–2 miles. It’s quite often found near oil deposits. There are various deposit types from which NG can be extracted. The following image depicts these types. In the USA, shale gas is the predominant form of NG extraction.

Fig. 1: Natural gas resource schematic. The source rock for natural gas is shale rock. Horizontal drilling and hydraulic fracturing are some of the techniques used to extract gas from shale. More conventional approach is to extract the natural gas that segregates from shale and gets trapped by a natural seal that prevents methane from seeping into the atmosphere. Tight sand gas are the pockets of methane gas that are often found in sandstone due to sandstone’s heterogeneity in porosity. Coalbed methane is the byproduct of organic material that becomes coal. This figure was originally published in the U.S. Energy Information Administration’s webpage.

A fun fact about natural gas is that it is given an artificial scent of rotten eggs, in order to detect leaks — the molecule responsible for that odor is mercaptan.

NG first became price competitive in 1998, when George P Mitchell lowered the cost of goods sold (COGS) to $USD13.5/MWh. For reference, the EU produced 16.6 MWh per capita in 2017. Thus, it’s cheap to source at scale, however its distribution entails additional costs. This aspect will be elaborated upon in future articles.

NG has its set of positive attributes in that it generates half the emissions when burnt relative to oil, it’s a major source of employment in the USA, and that its transmission and storage infrastructure has been identified as applicable for hydrogen and ammonia. On the other hand, NG is a net carbon emitter, and when not harnessed properly it can be 25 times more potent than carbon dioxide as a greenhouse gas over its first 100 years, once in the atmosphere. Usage of sulfurous compounds, benzene derivatives, and salts for hydraulic fracturing is problematic, since they result in contaminating and depleting water aquifers, which are common water sources for communities that don’t have access to surface water.

In order to transition from natural gas to renewable energy sources, we reviewed 3 different obstacles: economic, educational, and governmental challenges. Infrastructure challenges are another challenge, which we reserve for future discussions. We present reports from the regions of interest: Greece, Turkey, Cyprus, and Turkish Northern Republic of Cyprus.

Economics

The most immediate challenge that often justify the lack of transition from non-renewable resources to renewable is the cost of renewable resources is too high. In order to evaluate this claim, we review BloombergNEF (BNEF) article, “Economics Alone Could Drive Greece to a Future Powered by Renewables”.

In an effort to meet carbon emission reductions and energy independence, Greece is looking to upgrade its energy infrastructure with respect to the ambitious goals set by the Paris Climate Agreement. BNEF stipulates that economics can drive Greece’s energy infrastructure to be well over 90% carbon-neutral means by 2050. This conclusion was authored by employing its datasets and expertise on generating a least cost scenario model, which we summarize here.

For reference, about 70% of Greece’s energy is derived from lignite and natural gas. It is Greece’s intention to shut down all lignite plants by 2023, with the exception of Ptolemaida V that is currently being built and will be decommissioned by 2028. BNEF suggests that building renewables by 2025 would be cheaper than running existing gas plants. This is potentially because of the governmental regulations that are embedded within the system such as rising carbon cost and pollution regulations. Thus, it is of Greece’s best intentions to phase out of liginite.

The least cost model shows that Greece should bring more than 4GW of residential solar capacity by 2030 and triple its existing utility photovoltaic solar energy (PV) and wind capacity to 10GW by 2030.

Fig. 2: Cumulative Installed Capacity. This figure was originally published in the BloombergNEF article that Mediterranean Sustainability Coalition (MSC) reviewed.

Also, $USD 2B are suggested to be invested in flexible plant capacity, ⅔ of which should be allocated to 2GW of utility-scale battery storage. Through 2050 an expected energy mix of wind and PV is expected to comprise the energy market. From 2030 onward 6 GW of energy storage for excess wind and PV energy is slated to be added.$USD 33B is suggested to be invested through 2050. In the period of 2009–2019, $USD 6.9B were invested in clean energy, whereas $USD 14B is expected to be invested through 2030. The fiscal sums are not unordinary and should bridge the gap in energy transmission and distribution. The article further suggests that building the renewable sector could provide jobs that are essential in helping Greece recover from the economic challenges of COVID-19.

Although some of the cost benefit of going renewable is due to governmental regulations, the model provides a solution on how to make a cost effective transition.

Education

In order for resources to be invested into renewable energy and for governments to create policies that ultimately make the transition to renewable energy more cost effective, citizens must understand its value. Sustainability education spans multiple levels that range from at K-12 schools to the general public through media outlets. Sustainability is not part of the national curriculum for most, if not all, of the countries discussed above. However, there are assessments available for Turkey and Northern Cyprus on environmental literacy. These reports that tested thousands of students show that while all students can answer some basic questions about sustainability, very few show a strong grasp on all topics. Furthermore, although students learn that certain activities are not environmentally friendly, they still admit to taking part in these practices. These environmental literacy reports shed light on the environmental attitudes of the population at-large, and can provide insight into both the success of various policies and environmental initiatives, as well as the aspects that require additional attention or further educational initiatives. Currently, the three nations are members of the United Nations Educational, Scientific, and Cultural Organization (UNESCO)’s Education for Sustainable Development (ESD), which provides guidelines on teaching about sustainability. While the nations may not have a specific curriculum on sustainability education, UNESCO provides quality education that can help standardize this topic.

Outside of a proper formal education, policies around renewable energy and investment in non-renewable sources is also dependent on the continual reminder of the importance of sustainability. The public often gets educated through media outlets that frame the immediacy of renewable energy and the perspective of the public. The leaders of media such as the president of the country and/or the respected CEOs hold a lot of power in that sense. Thus, education should not be exclusive to schools, but should come in different forms including media, interactions at work, and social settings.

Governance

Calls to individual households for smart electricity usage and electricity conservation have been a mainstay of global energy policy for a very long time. These calls are mainly fueled by the thought that people switching to “smarter” devices or otherwise limiting their use of electricity will have a major impact on global emissions of greenhouse gases. However, IPCC reports have found that residential buildings only make up ~6% of global greenhouse gas emissions, with industry and agriculture combining to make up 45%.

It was discussed that this might be a case of what this paper from the Journal for Organizational Behavior and Human Decision Processes calls “passing the buck,” where people delegate decisions and actions to others when they expect unattractive outcomes, with a feeling that delegation will absolve them from felt responsibility and blame.

In this sense, the public and the private sectors may be seen as delegating the issue of tackling climate change to the individual household, when much more impactful and meaningful actions can be taken by governments and energy companies.

Of course, this does not mean that the public and private sectors do not face any barriers themselves in the adoption of policies leading to cleaner energy use. The long time scale of energy infrastructure projects, coupled with the irreversibility (inability to reverse course in light of new information) of starting these large investments, is one of the main reasons for these market barriers to measure adoption.

Infrastructure will be discussed in greater detail in the next report.

Discussion Questions

1. Can natural gas infrastructure be used for renewable energy?
2. How much responsibility for energy efficiency and conservation falls on individuals? How much depends on governments? How much on the private sector?