The process through which natural gas is liquefied, transported at cryogenic temperatures, and regasified is unique and costly and was economic only when domestic gas prices were higher than currently. Several LNG facilities were built on the East and Gulf coasts of the United States during the 1970s. At the time, domestic natural gas availability was limited, and rolled-in pricing permitted the high LNG cost to be cross-subsidized by low-priced, regulated gas. 6 However, LNG projects in the United States were abandoned once the domestic natural gas price decreased as a result of deregulation, and new proposals by potential exporters have not succeeded. An advantage of LNG for power generation is that it can be stored and used to meet peaking requirements without the need to construct larger pipelines.

In view of these considerations, LNG will not figure as an economic source of energy for power generation until natural gas prices rise to approximately $5/ 106 Btu. In the United States, coal gasification and other options should be economic at lower prices.

Oil

If crude oil prices were to fall to $12/bbl or less, coal might find a competitor for power generation in low-sulfur residual or distillate fuel. Although world reserves of crude oil are not as large as those of natural gas, they are still very large, and the cost of landing crude oil in the United States is substantially less than comparable costs for LNG. Distillate can be used in combined-cycle power generation systems as a substitute for natural gas, LNG, or coal-derived gas. The use of cheaper residual fuel is not currently feasible in turbines, but at a low enough price (less than $1.50/106 Btu, or approximately $9.50/bbl) it could displace coal in some existing boilers, as it did in the past.

Nuclear Power

Nuclear power accounted for 21 percent of U.S. electric power generation in 1993 and 14 percent of total U.S. generating capacity. However, no new commercial orders for U.S. nuclear power plants are anticipated until well after 2000. Nonetheless, recognizing the future attractiveness of electricity from nuclear fission, in part because of the potential for simpler, more economical nuclear plants, U.S. suppliers, nuclear utilities, the federal government, and EPRI are supporting the development of advanced light-water reactor designs (both evolu-

6  

"Rolled-in pricing" is the term used for the practice of purchasing high-cost gas to mix with low, price-controlled gas. The resulting average price was not prohibitively high, and natural gas continued to be in demand. Also, there was an apparent market for the high-cost supplies. The system worked only so long as there was a price-controlled "cushion" of low-cost supplies. With price controls gone, all gas is now priced at the market, and there is no longer an ability to mix high- and low-cost gas.



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement