carbon capture and storage (CCS) schemes tend to use only 2.5 percent of the nation’s electricity, so any additional percentage of emissions reductions via a wide-scale implementation would be a boon. Many of the proposed CCS systems use natural gas (mostly as a fuel to burn coal or oil into gas), so they would help with the transportation sector’s emissions. (Carbon capture technologies usually capture up to 90 percent of the emissions.)

Among the coal producers who provided information, only Consol Energy (NYSE: CNX) says it hasn’t considered building an emissions-capturing coal plant. The other coal producers that responded are Foresight Natural Resources (CNX) and Patriot Coal (NYSE: PCX)

Gas, not the ideal low-carbon option

Another advantage of natural gas is that it has more than half the carbon emissions of coal. Even so, the gas companies themselves acknowledge that demand for gas will shrink over the long term as renewable energy and electric vehicles increase their popularity. The U.S. Energy Information Administration expects renewable energy’s share of the U.S. electricity market to reach 15.6 percent by 2040 and 25 percent by 2050. The International Energy Agency is slightly more bullish and expects renewables to account for 40 percent of total electricity consumption by 2050. (Natural gas production, by contrast, is expected to increase substantially over the coming decades.)

Natural gas’s much cleaner emissions profile can make it a particularly attractive alternative to coal. However, natural gas has its drawbacks: It is a bit more expensive than coal for electricity production, and it emits more CO2 when it is burned. Moreover, it takes much more energy to produce natural gas than to produce electricity with coal. Therefore, if electric utilities want to make the switch to natural gas, they will have to think about the long term.

For example, Duke Energy (NYSE: DUK) said that it has many wind farms planned or underway in its service area that would deliver electricity in the low-$50-per-megawatt hour range. At that level, natural gas could still be competitive with coal for many years to come. However, if electricity demand increases as much as Duke expects, it will have to add more plants like the massive Cross-Bay and Kent plant expansions.

The view from the utility sector

There is one more part of the transition story. Although energy companies in many sectors can add renewable energy to their generating mix and might consider switching to natural gas, utilities have to decide if they want to invest in solar, wind, hydroelectric, geothermal, or other alternative energy sources. Many utilities have resisted the adoption of these renewable energy sources, but they are facing some financial pressure.

California utilities are facing legal pressure to produce more electricity using renewable energy. Moody’s Investors Service estimates that Southern California Edison’s investment in renewable energy has reduced the utility’s carbon emissions by 22 percent. Meanwhile, Pacific Gas and Electric is focusing on buying renewable energy certificates (RECs), not buying renewable energy itself.

Natural gas faces pressure too

Another challenge for natural gas is that environmental groups are increasingly criticizing the fuel because of its contribution to greenhouse gases. The Natural Gas Supply Association noted that the Environmental Protection Agency’s rules on hydraulic fracturing could force the natural gas industry to clean up its emissions, but said that state regulators are responsible for addressing methane emissions from gas wells.

The political risk for natural gas and its prospects as a low-carbon fuel are a bit more complex. For one thing, while environmentalists sometimes pressure utilities to buy renewable energy certificates, many of these certificates are an imperfect alternative. They might be more affordable than wind or solar power, but they have long terms and are less flexible than some other renewable sources. Moreover, renewables generate power when there is little demand for it, so utilities face challenges meeting demand during cloudy or windless days.

Finally, there is the risk that electric vehicles will be popular in the coming years and increase demand for natural gas vehicles. The IEA estimates that electric vehicle sales are growing by 20 percent annually, but it estimates that more than half of all global vehicle sales will be gasoline-powered vehicles by 2035. If the trend of electric vehicles gaining in popularity reverses and there is more demand for natural gas, utilities could be faced with excess demand and a less attractive option than natural gas-fired electricity plants.

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