Opinion: Natural gas — the “transition fuel”


What got me thinking about this topic was the article in the Camera a few days ago announcing the upcoming debate on fracking between County Commissioner Elise Jones and Governor John Hickenlooper. To quote the Camera, “the goal of the 45-minute session is to provide a state-versus-local perspective on the effects of fracking, including public health concerns, the environmental impacts and local economic considerations.”
To me, an equally important issue is the use of natural gas as the “transition fuel.” Hickenlooper speaks of it this way, but if he really grasped its significance, he’d be raising a whole host of other issues. Of primary importance is that methane (70-90 percent of natural gas) is a potent greenhouse gas that, per the EPA, has 25 times the global warming potential of CO2 over a 100-year period, with the effect concentrated in the first decades. Although burning methane may produce half as much CO2 per unit of electric energy produced as coal, any gas leaking from the wells or pipelines amplifies that global warming effect. A simple analysis indicates that a 10 percent leakage rate increases the total impact to approximately that of coal burning, but over a much shorter time period. So leakage is a big concern, and should be carefully regulated. (Coal mines emit considerable methane also, amplifying the warming effects of using coal as a fuel.)
Natural gas is a fossil fuel and there is only so much of it. Just as we are running out of easily mined coal, we will run out of cheap gas. So simply converting coal plants to burn natural gas, as the PUC recently approved, doesn’t solve anything over the long run; it just reduces the problem temporarily. Also, to follow the variability of wind and solar, gas must be burned in turbines and combined cycle plants (turbines whose exhaust heat runs another turbine) that can ramp up and down rapidly. Conventional coal plants, even if repowered with gas, can’t do this.
In order to make the transition to renewables soon enough to hopefully avoid runaway climate change, we need to get off of burning coal and shut down most existing coal plants before they are scheduled to be paid off and be retired. The question is — who will bear that cost? The utilities that own them will object if they are forced to take financial responsibility for their coal investments, and the ratepayers, who never had a say in being committed to these plants, will be equally resistant. One approach that could reduce, but not eliminate, the financial pain would be for the state to issue bonds to pay off the high cost equity that is sunk in these plants. If the utilities didn’t object, these bonds might be tax exempt and therefore cheaper yet; however, federal restrictions on the use of tax exempt financing for such purposes might need to be amended.
In a Camera op-ed a week ago Wednesday, the writer suggested, tongue in cheek I suspect, that if Boulder formed a muni, that ratepayers should be allowed the choice of paying the muni’s rates or Xcel’s rates. This was presented as a way to garner support for the muni. The problem is that to get any reasonable interest rate for the muni’s bonds, the ratepayers must be obligated to pay off these bonds. Clearly, if some ratepayers can choose to pay rates based on Xcel’s rates, which have no necessary relationship to the muni’s costs, then potential investors will feel less secure and will want higher interest rates to compensate, making the utility much less financially viable.

Also, per a Camera story last week, Lyons electric utility will have its first rate increase in five years: 25-30 percent for summer peak loads and 14 percent on average. To put this in perspective, 14 percent over five years is barely above the inflation rate. I also looked at my electric bills for January 2008 through January 2013. Because I had a PV system installed in the middle of this period, I needed to do some math to get meaningful numbers, and it appears that Xcel’s basic rates increased significantly faster than Lyons’. Rate increases are tied to investment schedules, contract expiration dates, etc., so it’s hard to compare them over the short term, but I’d say that the folks in Lyons should consider themselves fortunate.


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