1 Natural Gas and Intermittent Renewable Energy, A Good Match or Not? Steven A. Gabriel Group Coordinator, Civil Systems Program, www.civilsystems.umd.edu Co-Director, Master of Engineering and Public Policy Program, www.mepp.umd.edu Associate Professor, Dept. of Civil & Environmental Engineering University of Maryland, College Park, MD USA 20742 Co-Authors: Knut Einar Rosendahl, Statistics Norway Sauleh Siddiqui, University of Maryland Hakob Avetisyan, University of Maryland Ruud Egging, University of Maryland 9th Conference on Applied Infrastructure Research 8-9 October, 2010, TU Berlin
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Natural Gas and Intermittent Renewable Energy, A Good Match or Not?
Steven A. GabrielGroup Coordinator, Civil Systems Program, www.civilsystems.umd.edu
Co-Director, Master of Engineering and Public Policy Program, www.mepp.umd.eduAssociate Professor, Dept. of Civil & Environmental Engineering
University of Maryland, College Park, MD USA 20742
Co-Authors: Knut Einar Rosendahl, Statistics NorwaySauleh Siddiqui, University of MarylandHakob Avetisyan, University of Maryland
U.S. Department of Energy StudySubcontract No. AGG-0-99526-01
Prime Contract No. DE-AC36-08GO28308
• Use the World Gas Model, a large-scale engineering-economic game theory formulation to understand domestic and international gas market possible futures• Three representative cases were determined by the UMD and DOE participants
•Base Case (AEO 2009) •Increased Shale Gas Case (based on Advanced Resources International-ARI publicly available estimates)•Possible Gas Cartel Case (using the Gas Exporting Countries Forum-GECF)
Natural Gas Scenarios
Base ARI GECF
Market Structure Free Market Free Market Cartel
Shale Potential Medium High Medium
3
•It was decided by the Department of Energy client (DOE) and the University of Maryland project team (UMD) that the ARI case would be used as an appropriate case for a positive future for shale gas.
4
•Using those forecasts for shale but keeping coalbed methane, tight, and conventional gas at their AEO 2009-ARRA levels resulted in the forecasts in Table 1 and Table 2.
5
Statistics Norway/Research Council of Norway Study Grant # 09123176
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7
Natural Gas Market Overview
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Natural Gas Industry Background
INDUSTRIAL
CITY GATE STATION
COMMERCIAL
RESIDENTIAL
DISTRIBUTION SYSTEM
UNDERGROUND STORAGE
TRANSMISSION SYSTEM
Cleaner
Compressor Station
GAS PROCESSING PLANT
GAS PRODUCTION
Gas Well Associated Gas and Oil Well
Impurities Gaseous Products
LiquidProducts
ELECTRIC POWER
From well-head
to burner-tip
8
World Natural Gas Reserves (top twenty countries), 1 Jan 2008, www.eia.doe.gov
0 5 10 15 20 25 30
RussiaIran
QatarSaudi Arabia
United Arab EmiratesUnited States
NigeriaVenezuela
AlgeriaIraq
TurkmenistanKazakhstan
IndonesiaMalaysia
ChinaNorway
UzbekistanEgypt
CanadaKuwait
Rest of World
% of World
Global Reserves
Russia, Iran, Qatar have more than 55% of the world’s proven natural gas reserves9
Sample of Natural Gas in the Headlines of the New York Times Dec 2005/Jan 2006
• Natural Gas and Geo-Politics-Russia– “Dispute Over Natural Gas Prices in Ukraine,” NYT 12/16/05– “Putin Offers 3-Month Extension of Ukraine’s Gas Subsidy,” NYT
12/31/05– “Russia Cuts Off Gas to Ukraine in Cost Dispute,” NYT 1/2/06– “Russia Restores Most of Gas Cut to Ukraine Line,” NYT 1/3/06– “A Dispute Underscoreds the New Power of Gas,” NYT 1/3/06– “Russian and Ukraine Reach Compromise on Natural Gas,” NYT 1/5/06– “Envoys Say Gas Crisis Hurt West’s Relations with Russia,” NYT 1/5/06– “Ukraine Concedes it Took Gas From Pipeline but Says it Had the
Contractual Right, “NYT 1/3/06– “Gas Halt May Produce Big Ripples in European Policy,” NYT 1/3/06– “Ex-Premier of Ukraine Attacks Gas-Price Deal,” NYT 1/7/06– “Europe Comes to Terms with Need for Russian Gas,” NYT 1/8/06– “Ukraine is Increasingly Dependent on Gas from Turkmenistan,” NYT
1/10/06– “Gazprom Builds Wealth for Itself, but Anxiety for Others,” NYT 1/13/06”
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Russia Exerting Market Power?
• Price dispute with Ukraine in 2006 and 2009• Ukraine a major transit country for gas to Western Europe
Dependence on Russian Pipeline Gas, 2007 (BP, 2008)
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(200
7)
15
The Christian Science Monitor, “Gas dispute with Russia boosts European interest in alternative pipeline,” January 27, 2009
Nord Stream and South Stream Pipelines Bypassing Ukraine
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Natural Gas Security Issues• Possible effects of market power by:
• Individual large producers (e.g., Russia, Iran, Qatar) whose agendas may differ from those of the consuming countries
• Gas Exporting Countries Forum• Algeria, Bolivia, Brunei, Venezuela, Egypt, Indonesia, Iran,
Qatar, Libya, Malaysia, Nigeria, the United Arab Emirates, Russia, Trinidad and Tobago and, as observers, Equatorial Guinea and Norway
• Together, the non-observers accounted for about 42% of production in 2007 (BP, 2008), and perhaps more importantly more than 73% of the reserves (www.eia.doe.gov) taking just the top 20 global producers
• World Gas Model (WGM) to model market power questions18
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Interactions of Natural Gas and Intermittent Renewables
19
20
Some Renewable Energy Directives for Europe
Source: “Impacts on the Nordic Energy System of the EU 2020 Directive Proposals-A model analysis”, Thomas Unger and Bo Rydén
Natural Gas and Renewables: Good Match or Mismatch?• Intermittency problem with some
renewables (e.g., wind, solar) for power generation
– Natural gas is a reliable back-up source & cleanest of the fossil fuels
– Generation assurance, wind vs. fossil fuels (WSJ article “Natural Gas Tilts at Windmills in Power Feud,” 2 March 2010)“The success of wind power in Texas has come at the expense of natural gas. If the wind build-out continues, by 2013 the amount of gas consumed to make electricity could fall by 18.5%, as gas plants sit idle for longer, according to Tudor Pickering & Holt, a Houston-based energy investment bank.”
• Other– Market power aspects (traders in pipeline and lng markets)– LNG contracts database– Seasonality of demand: each year a low and high demand period
• Computational aspects– Large-scale complementarity problem (optimization conditions for all players +
market-clearing conditions)– ~45,000 vars. Solves in ~50 mins (2GB, 1.2 GHz)
33
WGM Cases
• Base: Calibrated to • EU30: E.C. European Energy and Transport (2005,
2007) • USA: EIA AEO 2009• Other regions: E.C. World Energy & Techn Outlook
2008• GECF: Have GEC countries collaborate and enforce
Case) only positively affects the United States with increased production
– Other regions are decoupled
– Cartel Case does not affect the U.S.
Global Production
• Other Regions– Cartel Case leads to
a huge decrease in Russian production (about 1.53 TCF=43.325 BCM)
– Some other regions compensating (depends on membership in GECF)
36
• U.S.– US7&US8-Unconventional,
huge increase under ARI case
– Under ARI Case, Decrease in US7- conventional (smaller decrease in US8-conventional)
– Cartel Case-no effect
U.S. Production-by U.S. Node
37
• North America
– Under ARI Case, Increase to about 30.44 TCF (861.969 BCM) in 2030
– Cartel Case-no effect
Global Consumption
• Europe, Asia, other Non-North American Regions
– Under ARI Case, no change– Cartel Case-Dramatic drop
in European consumption (2.18 TCF=61.731 BCM)
– Asia Pacific, drop as well– Russian consumption
increases
38
• North America
– Under ARI Case, price drop of $0.50 in 2020 and $0.82 in 2030
– Cartel Case-no effect
Global Prices
• Europe, Asia, other Non-North American Regions
– Under ARI Case, no change– Cartel Case-large price
increase in Europe ($1.06 in 2020 and $1.47 In 2030)
– Cartel Case-Asia Pacific,Caspian similarly, Russian prices drop
39• 1 million btu (MMBTU) equals about 27.5 cubic meters• Multiply the $ by 1000/27.5=36.36 to convert to $/kcm
• North America– In 2030 under ARI Case
there is large increase in total exports from U. S. , which is 0.89 TCF
– Under Cartel Case U.S exports are similar to Base Case exports at 0.204 TCF
Total Exports/Imports from U.S., Russia, Germany
• Germany and Russia– Under ARI Case for Russia the
exported amount of gas is about the same. For Germany the amount of imports stay the same.
– Under Cartel Case Russia will face huge decrease in exports. As total its exports would be 5.38 TCF (152.345 BCM), which is a drop of 2.83 TCF (80.137 BCM) compared to Base Case 8.22 TCF (232.766 BCM)
Flows in TCF/Y (2030) Base Case ARI Case GECF CaseUNITED STATES -0.1779624 -0.89546 -0.204092RUSSIA -8.2169901 -8.19616 -5.385481GERMANY 4.0355799 4.04123 3.7439193
-10
-8
-6
-4
-2
0
2
4
6
UNITED STATES RUSSIA GERMANY
Pipeline and LNG Imports(+) and Exports(-) 2030
(TCF/Y)
Base Case
ARI Case
GECF Case
40
41
Selected Results from Statistics Norway/Research Council of Norway Study
– U.S. imports drop to 0.47 TCF under ARI and Cartel Cases
LNG Imports and Exports
• Non-North America– Russia’s exports would be
the same under ARI and will drop to 0.55 in Cartel Case
– In Germany the imports would be the same under ARI and will drop to 0.26 TCF under Cartel Case
-1,5
-1
-0,5
0
0,5
1
UNITED STATES RUSSIA GERMANY
LNG Imports(+) and Exports(-) 2030 (TCF/Y)
Base Case
ARI Case
GECF Case
LNG in TCF/Y (2030) Base Case ARI Case GECF CaseUNITED STATES 0.819192 0.46645 0.4706823RUSSIA -1.2734589 -1.26057 -0.550836GERMANY 0.3220272 0.32203 0.2591754
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• North America
– U.S. exports are basically due to pipelines and under ARI it will rise up to 1.36 TCF and will be about 0.7 TCF under Cartel Case
Pipeline Imports and Exports
• Non-North America– Russia’s export are mostly
by pipelines and are steady under ARI Case but drop to 4.84 TCF under Cartel Case
– Germany’s imports are also through pipelines and under ARI Case it is the same as in Base Case (3.71 TCF), but goes down under Cartel Case by reaching 3.48 TCF
-8
-6
-4
-2
0
2
4
6
UNITED STATES RUSSIA GERMANY
Pipeline Imports(+) and Exports(-) 2030 (TCF/Y)
Base Case
ARI Case
GECF Case
Pipe flow in TCF/Y (2030) Base Case ARI Case GECF CaseUNITED STATES -0.9971544 -1.36191 -0.674774RUSSIA -6.9437115 -6.93559 -4.834645GERMANY 3.7135527 3.7192 3.4847439