Natural Gas is the Easy Answer

When it comes to cheap electricity, natural gas is the easy answer…but not for everyone

At the turn of the century, coal was the king of energy. It dominated the electrical power generation landscape.

I remember visiting the Four Corners power plant in southwestern Colorado back in the late 1990’s. They built a huge power plant on top of a coal mine. Today, it’s a shadow of its former glory. Of the five units, now only two produce power. And they will shut it down by 2031.

A host of issues led to its demise. Pollution (nitrogen, sulfur, and other toxic compounds) impacted surrounding communities. The plant had difficulty making economic changes to mitigate those issues. It was just easier to close.

And that’s the big story of coal. If you don’t account for the downstream impacts, it is a cheap source of electricity. According to a study by Brookings, coal power costs just 3.2 cents per Kilowatt hour (KWh). However, when you consider the cost of health care, it is 170% more expensive.

However, the cost of electricity from new natural gas plants is about 6.5 cents per KWh. That’s about 25% less than coal.

Natural gas or methane is the simplest fossil fuel. One methane molecule contains a single carbon atom and four hydrogen atoms. When it burns, it releases one molecule of carbon dioxide and two molecules of water. Far cleaner and safer than coal.

We should take a second here to note that only coal and natural gas contribute to electrical power generation. Oil is primarily a transportation fuel.

And, based on the above numbers, we would expect natural gas to be the cure for all our electrical needs. Particularly since we cracked the shale code back in 2009. Since then, the natural gas price plunged, as you can see below:

In the first half of the 2000’s we were building massive liquified natural gas (LNG) plants to receive shipments. By the end of the 2000’s, the companies had to refurbish those LNG to ship natural gas abroad.

The answer to the U.S. demand for cheap electricity should be natural gas. But there is a major problem – transportation.

Even back in 2018, the cost of natural gas pipes soared. The average cost for a mile of pipeline ranged from $3 million to $13 million per mile. To put that in perspective, a mile of natural gas pipeline under the Gulf of Mexico only cost $3 million per mile.

The main problems are population density and jurisdiction. The worst areas are in the northeastern U.S. Prices reflect those issues, with that region paying up to 30% more for natural gas than the rest of the U.S. And there simply isn’t enough room for new pipes in some areas.

So, even though the northeastern U.S. sits next to Appalachian natural gas supplies, they can’t get cheap natural gas. It’s the sort of gordian knot problem that we face with older, more densely populated areas.

There are solutions to this problem, but they don’t include new gas pipelines. That’s why we support (and invest in) a diverse basket of energy.

For the Good,

The Mangrove Investor Team

Numbers You Need to Know

3 Million

The natural gas pipeline network has about 3 million miles of mainline and other pipelines that link natural gas production areas and storage facilities with consumers. (US Energy Information Administration)

189 Million

More than 189 million Americans use natural gas to cook with, heat their homes and water, or fuel other household appliances. (American Gas Association)

32.50 trillion cubic feet

The United States consumed 32.50 trillion cubic feet (Tcf) of natural gas in 2023, the equivalent of about 33.61 quadrillion British thermal units (quads) and about 36% of U.S. total primary energy consumption. (US Energy Information Administration)

What’s New in Sustainable Investing

Solar and Wind Won’t Replace Natural Gas for Decades: They Will Depend on It.

Solar and wind are rolling out rapidly in the United States and many expect it will simply replace natural gas as well. But as Robin Gaster explains in RealClearEnergy, that’s a mistake: In fact, solar and wind will depend on gas for decades to come. (Information Technology & Innovation Foundation)

Regulators OK Duke Energy’s gas-plant buildout despite N.C. climate law

North Carolina regulators on Friday accepted Duke Energy’s controversial plan for curbing carbon pollution, a blueprint that ramps up renewable energy and ratchets down coal power but also includes 9 gigawatts of new plants that burn natural gas. (Canary Media)

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