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Auntie Green: Natural Gas: Caution or, All In?

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by John Facey

auntie green

Spring has definitely sprung and it has become impossible to find Auntie Green when I need her. I wish she was simply spending more time outdoors in the garden but, great weather compels Auntie to move! Last week, I found her in the garage stringing together soaker hoses which are now being used in lieu of pop-up sprinklers. Earlier this week, I found her down the street at the community compost pile making one of her frequent deposits of vegetable food scraps. Yesterday, she was down the street making a withdrawal to spruce up her garden. Earlier today however, she caused my heart to skip a beat when I found her at the top of a ladder with her elbows on the roof measuring the real estate available for those solar panels she wants to get. I suppressed the urge to yell that she shouldn’t be up there after I noticed that she had placed the ladder at the optimum angle (75.9 degrees) and that it was anchored at the ground and securely attached to the rafters. My dear Auntie is no fool!

After she came down we exchanged pecks on each others’ cheeks and she said, “Break time! Let’s get some lemonade and I’ll tell you what I’m thinking.” While she poured the lemonade, I put the ladder away for her. I reentered the house and found my lemonade at the dining table surrounded by stacks of appliance manuals. Apparently, Auntie had been very busy studying up for some reason. Just what was she up to now? She joined me with a sample of her macadamia nut oatmeal cookies – still warm from the oven and clued me in.

It seems that Auntie had gotten wind of recent natural gas prices; what she called “HUB chart” prices. She told me that at $2 per million British Thermal Units (MMBTUs) it now made sense to get rid of as many electric appliances as possible and replace them with their natural gas equivalents. She was thinking of the entire house starting with the garage. She planned to ditch her gasoline vehicle for a compressed natural gas (CNG) vehicle, and her water heater, air conditioner, clothes dryer, stove, oven and even her refrigerator. Auntie Green did not plan a half-hearted effort. She was very sure that it all made sense. Then, she asked me the killer question, “Don’t you agree?”

Not having a large, chewy candy bar handy to quickly shove in my mouth and buy me time to think, I answered, “Wow, Auntie! What a massive undertaking! I never thought about that before! Your idea appears to have merit but, will you hold off for a while and let me check on some things? I want to get a better feel for how much money you’ll be saving!” Auntie raised a suspicious eyebrow but, said, “Ok, kid. But, you’d better make it fast! I’m going appliance shopping tomorrow!”

My first order of business was to learn more about the price chart she had been reviewing. After that, exploring appliance purchase and operating costs was in order. Scratch that. My very first order of business would have to be prioritizing what exactly was motivating Auntie Green. Was she looking for significant utility cost savings? Was she looking to reduce her greenhouse gas footprint? Maybe she just wants to thumb her nose at foreign sources of energy in favor of the proven natural gas abundance in the United States. Hmmm. Scratch that scratch. I knew the answer. It was all three.

Before Auntie left to work in the garden, I had her locate the natural gas price chart that she referred to. It turns out that she had a chart depicting natural gas spot prices over the past twelve years at the Henry Hub (a nexus for thirteen major natural gas pipelines) located in Louisiana.

Natural_Gas_USD-MMBtu

Looking at the chart, I could see why she was excited. Spending $2 for a million BTUs sounds like getting an awful lot of natural gas for very little money. I could see that I needed to understand just what a million BTUs represented before I could ever hope to advise Auntie Green. The phrase, British Thermal Unit was as good a place to start as any so, I consulted a dictionary. A BTU is “the amount of heat energy needed to raise the temperature of a pound of water one degree Fahrenheit.” So, one MMBTU could bring over 800 gallons of cool water to a boil! That’s clearly a lot of heat energy but, it doesn’t really help to understand CNG.

Luckily, in 1994 the U.S. National Institute of Standards and Technology (NIST) anticipated my need and developed a useful measure to compare liquid gasoline to other fuels. NIST found that one gallon of gasoline (regular unleaded) was equivalent to 114,100 BTUs. They call this conversion measure the Gasoline Gallon Equivalent or, GGE. Now, that was a number I could use!

The logic was straightforward. Since one MMBTU equals 8.76 GGEs (1,000,000/114,100) and (in central Texas, May, 2012) a gallon of regular unleaded gasoline costs roughly $3.50, 8.76 of those gallons will cost $30.66. Another way of putting it is that a CNG “gallon of gasoline” costs $0.23. Hmmm, should I spend $0.23 a gallon or $3.50? This 15 to 1 advantage was enough to convince me that maybe Auntie Green was onto something. So, I decided to consult the ultimate source of knowledge – the internet! It was a sobering consultation on many fronts.

I first checked the availability and prices for automobile CNG refueling in Texas and found that CNG is not yet universally available. In Texas, for example, there were only 261 public CNG refueling stations available for the entire state with an average price per GGE of $2.292 ranging from a low, city supported rate of $0.79 in Corpus Christi to a high of $2.59 in Houston.

These prices were not complete show stoppers to Auntie’s plan but, $2.29 compared $3.50 wasn’t the 15 to 1 advantage that I was expecting. And here’s the most important point: the $2.29 per GGE figure exists at a time when the Henry Hub price was hovering at $2.00 per MMBTU. I returned to the Hub price chart and plotted an “eyeball” line that averaged the 12 years of previous price data. The ball park figure was surprisingly high – just under $6.00 per MMBTU.

I decided to check another source3 and found three scenarios for Henry Hub prices: Low, Moderate and High. All three scenarios begin with a 2012 forecast of $2.96 per MMBTU. The Low scenario drops to $2.46 in 2013 and 2014 and then slowly rises to $3.07 by 2021. The Moderate and High Scenarios rise steadily to $4.11 and $5.76 respectively. All cases were significantly above the $2.00 per MMBTU that had first attracted Auntie Green.

I decided to dig a little deeper and explore the cost of residential natural gas. Using a very unscientific sample of one – my own utility bill, I found that the cost of electricity (33.56 kWh) per GGE is $2.87, while the cost of natural gas (1.267 CF at 0.25 psi) per GGE is $1.83. So, it appears that residential natural gas is less expensive than that found at most automobile CNG refueling stations. That said, its price is also based upon Henry Hub values that will likely vary upward.

Another significant factor is that different appliances have differing levels of efficiency making energy comparisons even more difficult. One source, found at:  http://michaelbluejay.com/electricity/gas.html estimates a $32.67 annual savings for a gas stove and oven combination over an electric combination. The same source estimates a $59.20 annual savings for using a gas clothes dryer instead of an electric dryer. When it comes to refrigerators, comparisons became quite murky but, a passable job was done by a fellow who found that there was little difference in the daily operating costs for an 18 cubic foot model: the cost of the electric model was $0.54 per day and the gas model was $0.57 per day - which equates to a $10.95 annual advantage for the electric model. For all of the appliances, the net gain for using natural gas models came to a total annual savings of $80.92. Without the need for complex modeling, this small annual savings doesn’t justify the expense of changing appliances. See URL below: http://rvmobile.com/wb/default.asp?action=9&boardid=2&read=2534&fid=7&FirstTopic=0&LastTopic=19

My last bit of advisory research for Auntie Green was to use the Sustainable Project Analysis tool that can be found online at: http://www.sustainabletx.org/library/cat_view/56-tools/69-calculators. This tool easily calculates the net present value, internal rate of return and payback period for any project. However, it was clear from the historical Henry Hub price chart variability and the expert forecasts cited above that any analysis base upon the current cost of gas would be rendered invalid as soon as the price of natural gas changed – and all signs are that those changes will be upward.

So, my real challenge was in how to approach Auntie Green with all this information that didn’t support her plan? Given her love of technical details, I couldn’t try to simplify the answer. She would poke me in the eye for insulting her intelligence. Instead, I printed out all the tables and charts I consulted, spread them out on the kitchen work table and placed a heartfelt but, hastily written note on top of the research documents. Then I left without saying a word.

When Auntie Green came in from the garden, she read all the research documents and then opened my note which said, “Dear Auntie Green, thanks for the great cookies. I hope this material helps you select the best appliances. Gotta’ go!” She called me later that night and we had a laugh about my running away. She has decided to keep her electric appliances after all! I’m still worried though, because she asked me what I knew about drilling equipment. She said that she was now interested in geo-thermal energy. Oh, no! Here we go again!

1 “Economic Impact of the Eagle Ford Shale” Page 77, Institute for Economic Development, University of Texas at San Antonio, May, 2012

2 Average of 21 public refueling stations – private user website © 2012 – http://www.altfuelprices.com/stations/CNG/Texas/

3 “Economic Impact of the Eagle Ford Shale” Page 85, Institute for Economic Development, University of Texas at San Antonio, May, 2012

 

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