Researchers at the Massachusetts Institute of Technology are encouraging U.S. policymakers to consider the nation's growing supply of natural gas as a short-term substitute for aging coal-fired power plants.

In the results of a two-year study, released today, the researchers said electric utilities and other sectors of the American economy will use more gas through 2050. Under a scenario that envisions a federal policy aimed at cutting greenhouse gas emissions to 50 percent below 2005 levels by 2050, researchers found a substantial role for natural gas.

"Because national energy use is substantially reduced, the share represented by gas is projected to rise from about 20 percent of the current national total to around 40 percent in 2040," said the MIT researchers. When used to fire a power plant, gas emits about half of the carbon dioxide emissions as conventional coal plants.

The report asserts the impact of national policies that place an economic cost on greenhouse gas emissions would, first and foremost, be a reduction in energy use across the United States. It would flatten demand in the electricity sector.

The MIT team of researchers was led by Ernest Moniz, a physics professor and director of the MIT Energy Initiative. Moniz's name often floats around Washington when it comes time to choose another energy secretary. A major sponsor of the report is the American Clean Skies Foundation, a Washington think tank created and funded by the natural gas industry.

The report, titled "The Future of Natural Gas," acknowledges that U.S. energy and climate policy is in flux. For the most part, the MIT researchers accept the idea that the advancement of onshore gas drilling technology has set the stage for a gas boom in the United States. As such, the MIT researchers analyze increasing gas consumption under a number of different scenarios.

A cushion, but not a complete answer

Gas is an option for cutting power plant emissions and addressing global warming in the short term. But the researchers warned that the gas cushion shouldn't distract policymakers from addressing the need for nuclear power and carbon capture and sequestration (CCS) technology for coal-fired generation.

"Though gas frequently is touted as a 'bridge' to the future, continuing effort is needed to prepare for that future, lest the gift of greater domestic gas resources turn out to be a bridge with no landing point on the far bank," the report says. "Barriers to the expansion of nuclear power or coal and/or gas generation with CCS must be resolved over the next few decades so they are capable of expanding to replace natural gas in generation."

This emissions policy does relatively little to alter natural gas markets, the report finds. Gas production and demand grows slightly more slowly, cutting gas use and supply by a few trillion cubic feet in 2040 compared with a scenario that doesn't include a climate policy. Gas use and production begins to fall after 2040, driven by higher gas prices due in part to a rising price on carbon dioxide emissions.

"While gas is less carbon intensive than coal or oil, at the reduction level required by 2050, its [carbon] emissions are beginning to represent an emissions problem," the report explains. "However, even under the pressure of the assumed emissions policy, total gas use is projected to increase from 2005 to 2050 even for the low estimate of domestic gas resources."

The scenario goes like this, according to MIT: Nuclear power, renewable energy and carbon capture and sequestration are relatively expensive next to gas. Conventional coal is no longer a major source of power generation in the United States. "Natural gas is the substantial winner in the electric sector: The substitution effect, mainly gas generation for coal generation, outweighs the demand reduction effect."

MIT projects that under a carbon policy regime, oil and today's biofuels are replaced by advanced biofuels.

A 30% hike in electricity prices by 2030

Both the economy and energy demand take a big hit under a carbon price regime. Electricity prices are increasing regardless of whether the U.S. government puts a price on carbon, said the MIT researchers, projecting a 30 percent increase in power prices by 2030 and 45 percent by 2050.

Low-priced gas sets a competitive price benchmark for other energy sources to compete against. But if the technology for wind and solar power advances and drives down prices, that will also cut into gas use. The largest impact on the use of gas for electricity generation could come from nuclear power. "Focusing on 2050, when the effects of alternative assumptions are the largest, a low-cost nuclear assumption reduces annual gas use in the electric sector by nearly 7 [trillion cubic feet]," the report says.

But if the energy industry can develop and deploy carbon capture technology at a reasonable cost, utilities and heavy industries will use more natural gas because they can cut their carbon emissions more cheaply.

"A major insight to be drawn from these few model experiments," says the report, "is that, under a policy based on emissions pricing to mitigate greenhouse gas emissions, natural gas is in a strong competitive position unless competing technologies are much less expensive than we now anticipate."

Economics favor vehicles run on natural gas

Automakers that take the plunge into compressed natural gas vehicles would see a significant jump in demand under a national climate policy that makes carbon dioxide emissions costly. Biofuels are expected to advance, but it's unclear how quickly and at what cost to important food crops. But even with biofuels in the picture, MIT projects natural gas vehicles will be 15 percent of the private vehicle fleet by 2050.

New shale gas fields could reconfigure the national map of gas producers and consumers. Gas production in the Marcellus Shale and other burgeoning gas fields in the Northeast, stretching from New England through the Great Lake states, is set to rise 78 percent by 2030. Under a carbon price regime, the researchers said gas production matches increasing gas consumption.

MIT researchers also consider a scenario under which Congress, the U.S. EPA or other regulators begin requiring steep industrial emissions cuts without using a market mechanism such as a price on carbon emissions. They focused on two potential scenarios; first, a requirement that utilities generate 25 percent of their electricity from renewable resources by 2030; and second, regulatory policies that force retirement of existing coal-fired power plants starting in 2020.

The MIT researchers tried to steer clear of heated political battles. They didn't weigh in on whether stripping carbon emissions from the power sector should be left to regulators instead of a policy passed by Congress. Still, the report weighs in to say the cost of using the regulatory approach would be higher, but fewer emissions reductions would result than under a carbon price-based approach.

"In the price-based policy, reductions in the electricity sector are about 70 percent even though the national target is a 50 percent reduction, because it is less costly to abate there than in the rest of the economy," the report says.

Under regulations, a rapid expansion of wind and solar power could squeeze out some gas-based electric generation at the start, while reduced coal use opens the door for more gas generation.

"The net impact on gas use in the electric sector depends on the relative pace of implementation of the two regulatory measures," according to the report, "compared to the assumed price-based approach, they have the potential to reduce the use of gas in the sector."

Copyright 2010 E&E Publishing. All Rights Reserved.