I was talking with my friend John Moore earlier today. He’s the CEO of Acorn Energy (NASDAQ:ACFN), and we share a common interest in all things energy. Lately, we’ve been particularly focused on nuclear power, a source of clean, dispatchable energy. John wanted to know what I thought about Constellation Energy pulling out of loan guarantee negotiations with the DOE. His concerned that they might just go ahead and build a gas-fired power plant instead, because natural gas is so cheap and loan guarantees are so expensive.
That’s a distinct possibility, but in the end I’m not so sure. I remember in the mid 1990s when we thought the wellhead price of natural gas would stay around 2 bucks forever. Then gas-fired power plants starting popping up all over and 10 years later the price spiked up to $14 per mcf! Now, with depressed demand following the recession, and increased supply from Marcellus Shale, prices are low again – but for how long?
Let’s be optimistic and assume the price of natural gas remains relatively stable for 20 years. How does that gas get delivered? The 300,000 mile interstate pipeline system developed over a period of about 50 years, mostly on a “burn in the winter, store in the summer” business model. As more gas gets burned to generate power, we will be burning in the summer too, and there won’t be enough pipeline capacity to deliver to some storage sites. The system will need to be expanded. I think the public concern over the pipeline rupture in San Bruno is going to make this difficult. Difficult usually means expensive. So, the winner in this horse race is not obvious to me.
Which do you think will win?
Posted By Henry Cialone, EWI, President & CEO.