In Depth October 8, 2009, 5:00PM EST

Betting Big on a Boom in Natural Gas

(page 3 of 3)

Browse Issues

Story Tools

Florida Power & Light (FPL), the nation's largest renewable-energy developer, is building a solar thermal power plant that will be the nation's second largest. The Juno Beach (Fla.) company put its new facility next to an existing gas-fired plant so that when a cloud passes in front of the sun, the gas plant can keep the power flow steady. Public Service Enterprise Group, (PEG) a major mid-Atlantic utility, is developing gas and renewable projects simultaneously. "The ease of dispatching gas-combustion turbines makes them perfect complements" for wind and solar plants, says PSEG CEO Ralph Izzo.

General Electric (GE) has targeted a line of fast-start gas turbines at renewable projects. As part of a $320 million investment, Topeka (Kan.)-based Westar Energy (WR) has paired four of those turbines with 300 megawatts' worth of wind capacity spread around the region. It's a wind-rich area, where gusts not only die suddenly but also get too brisk, forcing the turbines to shut down for safety. In either event, gas turbines can kick in to maintain power. Westar committed to build the turbines back in 2006, when gas was double today's price. Now, with prices so low, "they offer an extra benefit, supplying regular power too," says Greg A. Greenwood, a vice-president at Westar.

Natural gas is also making a small dent in the transportation market. AT&T (T) in March announced that it would be replacing 8,000 service vans with natural-gas-powered vehicles. The 10-year, $350 million upgrade came as part of a $565 million alternative-fuel vehicle initiative started last year. Rising gasoline prices are turning skeptics into believers. From April to July the average price of a gallon of gasoline jumped by 22%, to $2.46, while the price of compressed natural gas for cars rose just 6%, to the equivalent of around $1.73. "When the price of gas rises at the pump by a cent and you're buying about 80 million gallons of fuel a year, it gets pretty expensive," says Jerome Webber, AT&T's vice-president for fleet operations. The company is betting the new vehicles will save it 49 million gallons of gasoline over the next decade. Transportation giant UPS, meanwhile, deployed 300 new natural gas vehicles in February alongside 800 already on the road.

The market for natural gas vehicles is limited by the dearth of fill-up stations in the U.S. Just 1,100 of the country's 162,000 stations sell natural gas, according to Natural Gas Vehicles for America. But that number is growing. Clean Energy (LNE), a Seal Beach (Calif.)-based company backed by T. Boone Pickens, has installed 184 natural gas stations in North America and plans to add up to 80 more in the next two years. Utah's Questar Gas has built 20 along that state's I-15 corridor and plans six more over the next 18 months.

Of course, the CEOs of natural gas outfits understand that such inroads don't amount to much compared with the massive reserves still sitting underground. They've descended on Washington in recent months to persuade lawmakers to create incentives for gas use in a climate-change bill moving through Congress. By boosting demand over the long term they hope to strengthen their position vs. Big Coal and Big Oil.

Whether or not they succeed in D.C., the shift away from coal and toward natural gas seems likely to continue, at least for a while, as the price and policy dynamics point in its favor. Says PSEG's Izzo: "We're building gas turbines because...there's no other option in the near term."

With Brian Burnsed in Washington

Business Exchange: Read, save, and add content on BW's new Web 2.0 topic network

Shale Gas: Good or Bad for the Environment?

Cheap natural gas is "the single biggest game changer for climate action in the next two decades," writes Joseph Romm, of the Center for American Progress, on his blog. If the U.S. were to replace half its coal-fired plants with gas, it would cut all the emissions called for in proposed climate legislation by 2020. But such a shift could pollute local water, land, and air. Amy Mall of the Natural Resources Defense Council runs a blog that catalogs the environmental effects of natural gas drilling.

To read both, go to: http://bx.businessweek.com/natural-gas-markets/reference/

LeVine is a correspondent in BusinessWeek's Washington bureau. Aston is Energy & Environment editor for BusinessWeek in New York.