Friday, October 23, 2009

Fuel Substitution between energy types

I was reading this article from Sober Look blog a few weeks ago and thought I'd investigate further into the ability to switch fuels from coal, natural gas and oil for electricity generation.  To quote:
Fuel switching is actually quite common at power plants, the biggest users of natural gas. Many modern power plants can switch between gas and fuel oil, and many can switch to coal as well.

In fact cheap natural gas has created an oversupply of coal as well.
EIA: A generating unit capable of burning more than one fossil fuel is referred to as a dual-fired unit. Some dual-fired units can only burn one fuel at a time (that is, the fuels are fired sequentially), while others can burn more than one fuel simultaneously (concurrent firing of different fuels). A sequentially fired unit generally uses one fossil fuel as its primary energy source, but can switch to a second fossil fuel as an alternate energy source.

I perused the Energy Information Adminstrations web site and found some confirmational data. 

Here's the year to date (through July 2009) energy production from various sources

Coal  -13.1%
Natural Gas +1.7%
Petroleum Liquids -8.6%

It is apparent natural gas production has been favored in the US over coal and petroleum based products this year due to the low price of natural gas. Considering the continued drop of natural gas prices I would conclude the share of production from natural gas will increase for the year.
Additional data can be found at the EIA website showing total electricity production as well as products consumed.

Electricity production from coal is down and as you can see from the chart, coal inventories are up. (EIA source)

I understood the possibility of fuel switching from a petroleum based product to natural gas, but had always assumed natural gas has always been cheaper to run than petroleum.  So why run petroleum at all?  I'm concluding the petroleum only power plants are older, more expensive and only run when electricity demands outstrips supply from cheaper sources such as coal, natural gas, nuclear, etc.

This is where the mindset of contstant growth can trip you up.  Total electricity production in the US is down so far for 2009.  In that situation, the first power plants to be shut down would be the most expensive, the oil based power systems.   

When electricity demand returns and the less expensive natural gas and coal based power generators are running at full capacity, only then will more expensive additional oil generators will be turned on. 


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