Thursday, the U.S.
Energy Information Administration (EIA) reported that working gas in storage as
of Friday November 12, 2021, was 3,644 Bcf. This was an increase of 26 Bcf from
the previous week, a bit higher injection than was expected. Inventories are
now 310 Bcf lower than this time last year, and 81 Bcf below the 5-year average.
the week ending 11/18/2021, the 12-month NYMEX natural gas strip (Dec 21-Nov
22) was down 2.6% and the PJM Western Hub ATC (7X24) 12-month strip down 1.6%. As
noted last week, prices have been very volatile, even as weather forecasts have
been relatively stable and calling for near-normal weather. Any significant
turn warmer or, especially, colder will likely cause significant price
Thanksgiving, COP26, and the House passage of the Build Back Better Bill
including half a trillion to fight climate change, we thought it would be
interesting to look at the impact increasing natural gas generation is having
on CO2 emissions, specifically in the PJM region.
While perhaps not good
“enough” to outweigh the increasingly troubling outlook for keeping the global
temperature rise to 1.50C, the news regarding CO2
emissions from the PJM Region has been very positive. As shown in the chart
below, the emissions rate (pounds of CO2 per MWh generated) has
decreased 39% from 2005 to 2020 (1,292 down to 791 lbs./MWh). Factoring in
roughly 800 million MWh generated in PJM in 2020, this means PJM CO2
emissions were reduced roughly 182 million metric tons versus what they would
have been at 2005 emission rates. That reduction is equivalent to taking almost
40 million cars off the road for the year. Put another way this reduction
represents roughly 3% of total United States CO2 emissions
from all sectors.
So how did we get
there? Renewables have been part of the story to-date and are the most likely
sources for emissions reductions in the future, however they account for only
5.2% of the total PJM generation in 2020 – so the increase above the 1.4% level
in 2005 is welcome but overshadowed by other factors. The big story is that the
coal generation fraction has decreased from 57% in 2005 to 19% in 2020. The
bulk of that 38-percentage point decrease was made up from natural gas which
increased 35 percentage points from 5% in 2005 to 40% in 2020. While natural gas is still a fossil fuel with
some carbon emissions, its emission rate is roughly 60% lower than that of coal.
So, while it does not cut emissions to zero, due to its large share of the
displacement of coal, natural gas has had the lion share of the impact on CO2
as shown below.
We are likely to give
up some of those gains in 2021 as higher natural gas prices have led to a
slight rebound in coal generation. Gas was able to displace coal in large part
due to lower gas prices in recent years, which in turn are due in large part to
the increasing supply of shale gas, which of course is not without negative
impacts. However, those looking for lower CO2 emissions can be
thankful for natural gas displacing coal in PJM.