Abstract
This chapter reviews the impact of the shale gas revolution in the USA on the sectors of electricity generation, transportation, and manufacturing. Natural gas is substituting for other fuels, particularly coal, in electricity generation, resulting in lower CO2 emissions from this sector. The use of natural gas in the transportation sector is currently negligible but is projected to increase with more investments in refueling infrastructure and better natural gas vehicle technologies. Petrochemical and other manufacturing industries in the USA and abroad have responded to lower natural gas prices by investing in US-located manufacturing projects.
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Notes
- 1.
See EIA, “Henry Hub Gulf Coast Natural Gas Price”, http://www.eia.gov/dnav/ng/hist/rngwhhdM.htm
- 2.
Natural gas price volatility may be reduced as a result of changes in supply/demand balance and the geographic dispersion of shale plays, which would probably lower the importance of Gulf of Mexico as a source of gas supply (Lipschultz 2012).
- 3.
The US shale gas revolution has changed the energy landscape worldwide. For example, the shrinking demand for coal for power generation in the USA has resulted in an increase in US coal exports to the Europe, with coal replacing natural gas in European power sector. However, such effects on the energy market outside the USA are beyond the scope of this chapter.
- 4.
Renewable generation includes traditional hydroelectric power as well as biomass, geothermal, solar, and wind generation.
- 5.
Note that this does not necessarily indicate an equal share of coal and natural gas in annual generation in 2012. This is because natural gas generation fluctuates a lot across different seasons of the year and is highly concentrated in the summer, when the peaking generators powered by natural gas are used to meet the high demand.
- 6.
The Cheap Gas scenario reflects EIA’s AEO 2011 projections of both electricity demand and natural gas supply, while Expensive Gas scenario uses the same AEO 2011 projection of electricity demand but substitutes EIA’s projections of natural gas supply made in AEO 2009, which are much smaller. From AEO 2009 and AEO 2011, the unproved technically recoverable shale gas resource estimate increased by more than threefold from 267 Tcf to 827 Tcf (EIA 2012c). Relative to the Cheap Gas scenario, this scenario shows the effect on the electricity sector of lower natural gas supply and higher natural gas wellhead prices.
- 7.
Examples include hybrid concentrating solar power (CSP) and natural gas-fired power generation systems, biogas and natural gas co-fired combined cycle gas turbines, natural gas-powered compressed air energy storage (CAES) to store non-peak renewable electricity generation for peak period usage, etc. (Lee et al. 2012).
- 8.
- 9.
Natural gas consumed in the transportation sector includes both the use of natural gas to power natural gas pipeline transmission networks (2.8 % of total gas consumed in 2011) and natural gas used as vehicle fuel (0.1 % of total gas consumed in 2011) (Lee et al. 2012).
- 10.
“Currently, on a Federal level, [compressed natural gas] is taxed at the same rate as gasoline on an energy-equivalent basis (<Footnote ID=”Fn10”><Para ID=”Par33”>“Currently, on a Federal level, [compressed natural gas] is taxed at the same rate as gasoline on an energy-equivalent basis ($0.18 per gasoline gallon equivalent, or 0.21 per diesel gallon equivalent), while [liquefied natural gas] is taxed at a higher effective rate than diesel fuel” (EIA 2012c, p. 38).</Para></Footnote>.18 per gasoline gallon equivalent, or 0.21 per diesel gallon equivalent), while [liquefied natural gas] is taxed at a higher effective rate than diesel fuel” (EIA 2012c, p. 38).
- 11.
Natural Gas Vehicles for America, http://www.ngvc.org/about_ngv/index.html (accessed on 11/08/2013).
- 12.
Ibid.
- 13.
Natural Gas Vehicles for America, http://www.ngvc.org/about_ngv/index.html
- 14.
ESI has recently developed the natural gas-fueled Phoenix 7.6 L, a 300-horsepower rework of the heavy-duty Navistar MaxxforceDT diesel engine. Currently, ESI has plans to begin sales of the 375-horsepower Phoenix 9.3 L, project development on the T444E 7.3 L, and research and development on a 475-horsepower Phoenix 13 L in the third quarter of 2011 (Turner 2010).
- 15.
http://www.sasollouisianaprojects.com/page.php?page=projects (accessed on 05/29/2014).
- 16.
- 17.
PL 109–58 also provided for a tax credit of 50¢ per gasoline gallon equivalent of CNG or liquid gallon of LNG for the sale of CNG and LNG for use as a motor vehicle fuel. The credit began on October 1, 2006, and has recently expired. Note that this rebate (which is over twice the excise tax rate paid now) was to the seller, not the buyer. It is not clear if this could have been paid to the ultimate seller—in which case an owner of a trucking company could have qualified for the rebate—or to the wholesaler.
- 18.
- 19.
Specifically, the NAT GAS Act offers (1) a tax credit for new NGV purchases, up to 80 % of the price differential, which translates to a maximum of $7,500 for LDVs and $64,000 for HDVs; (2) an infrastructure tax credit of 50 % of the cost of a new station, up to a maximum of $100,000; (3) an extension of the 50¢ per gallon fuel tax credit; (4) a $2,000 tax credit to home refueling units; and (5) a tax credit to NGV manufacturers. (Gray 2011).
- 20.
http://www.ngvamerica.org/gov_policy/fed_legislate.html (accessed on 05/19/2014).
- 21.
The Marcellus Shale Coalition, a natural gas trade group in Pennsylvania, released a study in April 2011 to spearhead a campaign for 17 new refueling stations statewide and subsidies for a proposed 850 new natural gas HDVs for an estimated $208 million (Gladstein, Neandross and Associates 2011).
- 22.
“GE and Chesapeake Energy Initiative Targets Natural Gas Fueling Infrastructure Development,” NGV Global News, http://www.ngvglobal.com/ge-and-chesapeake-energy-initiative-targets-natural-gas-fueling-infrastructure-development-0309
- 23.
Chesapeake Energy Corporation, “Transform U.S. Transportation Fuels Market and Increase Demand for U.S. Natural Gas,” http://www.chk.com/About/BusinessStrategy/Pages/Increase-Demand.aspx
- 24.
See http://scm.ncsu.edu/public/lessons/less031014.html for a discussion of this system for major retailers in the USA.
- 25.
These estimates are taken from Honda’s own website. A similar comparison (Goulding et al. 2011) uses information from a Kansas Gas Service website, which asserts that “Some fleet operators have reduced maintenance costs by as much as 40 percent by converting their vehicles to CNG” (http://www.oneok.com/en/KGS/CustomerCare/BusinessDevelopment/NaturalGasVehicles.aspx).
- 26.
Honda Corporation also notes (personal communication) that high water content in the natural gas and low compression by home refueling units raises risks of fuel fouling in CNG engines.
- 27.
Irrespective of these price differentials, it is appropriate to consider any tax benefits for natural gas over diesel. Currently, no such benefits are available. Until the end of 2009, LNG sellers were eligible for a credit of 50¢/gallon from the federal government (and some state programs provide per gallon credits against excise taxes). It is likely that some of these benefits would have been passed on in lower fuel prices.
- 28.
Interview with Mitchell Pratt, Clean Energy Inc., November 17, 2009.
- 29.
Total Transportation Services recently purchased 22 additional Kenworth T800 LNG trucks to expand its fleet of 8 such trucks purchased six months before. This purchase suggests that fuel and maintenance costs are manageable (Kell-Holland 2009).
- 30.
Interview with Michael Gallagher, Cummins Westport, November 2009.
- 31.
See http://www.chebeague.org/fairwinds/risks.html, which is an excerpt from a report produced by the Federal Transit Administration’s Clean Air Program, Sect. 3.3.4 Liquefied Natural Gas.
- 32.
Such as HythaneTM(20 % H2 by volume) or “HCNG” (30 % H2 by volume) blends.
- 33.
BASF, “Governor Jindal and BASF Dedicate Methylamines Plant in Geismar”, http://www.basf.com/group/corporate/en_GB/news-and-media-relations/news-releases/news-releases-usa/P-10-0109
- 34.
Here, direct effects refer to the output and employment effects generated by the sector itself; indirect effects refer to such effects supported by the sector via purchases from its supply chain; and induced effects refer to the employment and output supported by the spending of those employed directly or indirectly by the sector (American Chemistry Council 2012).
- 35.
Only four free-trade agreement countries (South Korea, Australia, Mexico, and Canada) are big natural gas consumers; of these, only South Korea is a major LNG importer. The world’s largest LNG importers, such as Japan, China, and the UK, are non-free-trade-agreement countries (Johnson et al. 2013).
- 36.
The Fertilizer Institute, “Natural Gas Access/ Supply”, http://www.tfi.org/issues/energy/natural-gas-accesssupply
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Krupnick, A., Wang, Z., Wang, Y. (2015). Sector Effects of Shale Gas Development. In: Hefley, W., Wang, Y. (eds) Economics of Unconventional Shale Gas Development. Natural Resource Management and Policy, vol 45. Springer, Cham. https://doi.org/10.1007/978-3-319-11499-6_9
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