Here is an attempt to provide a short explanation of why:
Have you ever thought about energy and how it makes our quality of life better? Think about driving to work, adjusting the thermostat for the most comfortable temperature, air travel on regularly scheduled airlines, transportation of manufactured products by land, air and sea. All these everyday aspects of modern life require energy. A lot of energy in fact. On average, each American uses approximately 300 million BTU’s (British Thermal Units) of heat energy each year. Figure 1 below highlights the sources and consumption of American energy.
Figure 1. US Energy Information Administration: Chart of Energy Sources and Consumption (2)
As illustrated in Figure 1, the largest percentage (37.2%)of the total energy used in the US is allocated to electricity production, followed by the transportation sector (28.1%).Most of the readers of this newsletter recognize that the source of over 80% of the energy needed to sustain our high standard of living is from thermal power used in heat engines. In essence, the high quality of living we all enjoy is made possible through the use of heat energy.
Energy and Economic Prosperity Are Linked
Figure 2 below illustrates the correlation of electricity use and economic prosperity. The graphic from Exxon-Mobil’s Outlook for Energy Report correlates data from the World Bank and the United Nations. Developed Countries use about 7,000 to 15,000 kWh per person each year. India and China on the lower end of the scale use less than 3,000 kWh per person. More surprising is that about half the global population uses less than 1,000 kWh per person/per year. The data reinforces the fact that electricity and energy use are directly correlated with quality of life and comfortable living standards. Did you know that over 1 Billion people of the world do not have access to electricity?(6) In the near future there will be over 1 Billion people without access to electricity in sub-Sahara Africa alone. Currently over 270 million people of India are without access to electricity. Worse yet, over 4.3 million deaths occur each year due to indoor air pollution that could be eliminated if poor people in the world of Developing nations had better access to electricity. (7)
Figure 2. From Exxon-Mobil Outlook for Energy Report. A graphical correlation of Living standards and electricity use (1)
The US Energy Information Administration (EIA) publishes annual data on the total national energy use. One of the clearest graphical representations of US total energy use, is the Sankey Diagram shown illustrated in Figure 3. The graphic highlights the sources of US energy on the left with the energy consumption sector on the right (similar to the data in Figure 1). The energy use within heat engines is approximately 89% of the total BTU’s consumed, including both nuclear power & fossil fuels. When geothermal, landfill gas, and Bio-Mass power sources are included the total energy consumption rate by heat engines exceeds over 90%
Figure 3. Total Energy Flows in the U.S.A. compiled by the EIA(1)
Figure 4. EIA Energy Flows for Electricity Generation (1)
EIA data of US energy use illustrates a current average annual consumption rate of 100 million BTU per person. In 2007 however, the per capita energy consumption was significantly higher at approximately 325 million BTUs per person. A fair question, would be why such a higher consumption rate? The reasons we have used less Btu’s in 2017 than we did in 2007 is two-fold: 1. Manufacturing has declined, especially American production of primary metals such as steel and aluminum. Primary metals production uses enormous amounts of electricity. 2. Energy efficiency improvements such as higher mileage automobiles, improved HVAC efficiencies and LED light bulbs.
Figure 5 below depicts the equivalent energy used by the average US citizen:
Figure 5. Approximate Equivalence of Common Fuels to Yield 300-350 million Btu’s
These 300 million BTUs are used for transportation, electricity generation and other uses as outlined
above. Of course, we need to be careful when considering “Averages”. Not all Americans travel as much as others, some have larger homes, etc. For example, I used to drive at least 100,000 miles per year for business travel. My vehicle would average 18 miles per gallon of gasoline, hence I consumed over 5,550 gallons per year. Expressed in BTUs, 5550 gallons of gasoline at 120,476 BTUs/gallon equals 669 million BTUs.
Heat Energy Conversion to Create Economic Prosperity
Heat energy can be transformed into steam, hot gas, or directly into internal combustion engines used in motor vehicles, jet airplanes, etc. If converted to steam or hot gas, heat energy can be used to pass through steam or gas turbines to generate electricity. The generated electricity can be used for steel or aluminum production, industrial production, and commercial/residential use. Electricity can also be used for charging electric vehicles such as a TESLA or Chevy Volt.
It’s important to highlight where energy originates and how heat energy can be transformed into electricity because as the cost of one fuel increases, a less expensive fuel sources can be substituted. This is what has happened over the past twelve years as natural gas prices have dropped significantly making it a more economically competitive (and more environmentally attractive) fuel. The natural gas boom, made possible by hydraulic fracturing and horizontal drilling, has driven natural gas prices downward from over $12.00 per million BTU in 2007, to about $3.00 per million BTU today. Figure 6 below depicts the trend of natural gas prices 2006-2012.
About six years ago, Storm Technologies were involved with a Florida Utility to assist the employees of a local coal plant aware of the market forces working against competitive coal plant generation. A few of the graphics used in the discussion are captured in Figures 6, 7 and 8. Key to low cost electricity production from natural gas plants is the new abundance of natural gas and low prices. The low prices are due to extreme productivity of hydraulic fracturing to produce Shale gas.
Thanks to the perfection of hydraulic fracturing and directional drilling, shale gas has been produced in the US to great abundance which resulted in the natural gas prices dropping from highs of over $12.00 per million BTU in 2009-2010, to a low in 2012 of less than $2.00 per million BTU. The drop in natural gas prices created a secondary surge in the production of new gas turbines and combined cycle plants which can produce electricity at a lower cost than the best Ultra-Supercritical steam plants using coal. Additionally, due to the low cost fuel, GTCC units are also more efficient with the new models exceeding 60% thermal efficiency.
Figure 6. Historical price volatility of natural gas fuel (4)
Figure 7. Florida Electric Power Generation by Fuels, 2009 actual and forecasted 2019
Natural gas was forecast to change from 48.5% to 51.4%. In actuality, natural gas will likely be much more than 52% in 2019 due to installation of additional pipelines and continued reduction of production costs of Domestically produced shale gas. (3)
Figure 8. Projected Florida Fuel Balance for 2019 by a Forecast completed in 2012 (Natural gas, 51.4%, Coal 26.5%, Nuclear 15.2%) The natural gas component in 2019 will likely be higher than 51.4%, due to continued low cost and increasing supply.
Owing to the Market Balancing, the cost of wholesale electricity has declined along with the cost of natural gas. The trend of electricity production costs is shown on the EIA graphic below.
Stable wholesale costs of about $35-40/MWhexcept during extreme weather events. For this reason and others including fuel security, a diverse fuel supply chain is best for reliability and economic power production.
January 2014 and 2018 saw the emergence of the Polar Vortex and Winter Bomb Cyclone (as referred to by Media Weather reporters) resulted in extremely cold temperatures across the US. As the temperatures dropped the required maximum coal and nuclear power generation needed to back up the large gas turbine and combined cycle plants skyrocketed. As a result, some gas plants imposed restrictions in supply as the power demand soared. Bottom line was, coal and nuclear provided about 58% of the power generation in January 2018 (5)
The energy demand surges in 2014 and 2018 highlight why fuel diversity is critically important to accommodate unforeseen changes such as weather, fuel supplies, fuel exports, environmental regulations, maintenance of equipment and new technologies. The “Unthinkable” question for the future is then; what if natural gas returns to the prices of 2008 (Figure 6)? Fuel cost represents about 90% of the production cost of electricity for gas turbine and combined cycle plants. If natural gas returned to its 2008 market price, the production cost of electricity would triple. In my view, I expect fossil fuels and nuclear power to remain important for decades into the future. Of course, no one has a perfect “Crystal Ball” that shows the future of power generation. There are Disruptive new technologies that can alter the economics of power generation, as Hydraulic Fracturing and Directional Drilling did during the last ten years.
Also imagine if manufacturing and especially more primary metals production such as steel and aluminum return to America. It takes huge amounts of electricity for steel and aluminum production. Aluminum smelting alone requires about 5 kWh per pound of aluminum produced, not including the reduction of Bauxite to aluminum oxide. The most likely disrupter of markets in the future, in my opinion, is electricity storage. If battery technology continues to progress to Utility scale, then the competition of intermittent power from solar and wind will be affordable and competitive. The Solar array installed at Williamson, as an example, has been economically helpful for peak shaving. Especially during the summer. Affordable electric storage is a big if, but who would have thought America would be the number one energy producer in the world ten years ago? Therefore, until Bulk electricity storage becomes practical, I recommend fuel diversity.
This is the eighth Newsletter of this series to introduce readers to the Williamson College of the Trades summer continuing education course. This is the third year that Williamson College of the Trades Is offering our summer course “Introduction to Thermal Power Plants”. During this course we will cover thermal power generation by “Heat Engines” that use coal, oil & natural gas for fuels. Five power plants will be toured with about 50% classroom and 50% plant tour time utilization. The goal of the course is to clearly show the importance of heat engines for electric power generation and to provide the participants an opportunity to visit operating power plants and to meet some of the technical persons who operate and maintain the plants. During the last two years, the management of the plants toured were very helpful and informative to answer all questions that our class has asked. Many of the plants are staffed with Williamson Alumni. We are grateful for these men who are pleased to help make this the best course on this topic available. I am grateful also for the instructors and Williamson staff who have volunteered their time to present the course. We have all worked hard to make the course the best that it can possibly be.
I hope to see you this summer.
Richard F. (Dick) Storm, PE, CEM
Williamson class of 6W2
- Exxon-Mobil, Outlook for Energy to 2040; http://corporate.exxonmobil.com/en/energy/energy-outlook/download-outlook-for-energy-reports
- U.S. Dept. of Energy, EIA Website Annual Energy Outlook for 2018, https://www.eia.gov/outlooks/aeo/ and for Total Energy Flows in 2017 https://www.eia.gov/totalenergy/data/monthly/pdf/flow/total_energy.pdf
- Storm Technologies Short Course, 2012 for a Florida Utility and EIA data
- Storm Technologies Inc., 2012 Seminar and EIA Data 2006-2012
- The Importance of Power Generation by Coal and Nuclear Plants during January 2018, by NETL/DOE. https://www.energy.gov/sites/prod/files/2018/01/f47/Power%20Generation%20Mix%20Infographic.pdf
- World Bank Report: 2017 State of Electricity Access Report For 2017
- Kicking Away the Energy Ladder, Global Warming Policy Foundation: