Gas is cheap

Apr 20, 2020DMA Engineering

Thomas Friedman laid out a future in his book, “Hot, Flat, and Crowded: Why We Need a Green Revolution – and How It Can Renew America” (2008) offered a future scenario that I think we are on the cusp of embracing. Peak oil may or may not ever happen, as we hear differing estimates of proven reserves.

Gasoline and natural gas are more or less the same prices as the 1970s). The cost of gasoline and natural gas is the same price as the 1970s when adjusted for inflation. Energy is the same cost it has been for the past 30 years. Natural gas is so cheap that oil producers flare it versus piping it. When drilling a new natural gas well, drillers will flare the gas until the pipeline is installed as they are paid once the well is drilled.

Why is this important?

Well, any immediate future with renewable energy and energy storage mix will have to include some sort of fossil fuel generation for electricity. There are a few days a year that create a large dip in both solar and wind generation that costs for storage become diminished. Highly efficient small gas turbines can cover these gaps, while significantly reducing carbon on an electrical grid.

The way the electric grid is currently owned and governed, make moving electricity harder from different localities and regions. The disparate nature of how we manage electricity is not beneficial to our future and in practical terms, has created safety issues (PG&E).

I’m of the mindset that the government will need to take over the management of electricity providers. The grid will be seen as a state or national asset to be carefully managed with the current provider’s will managing the infrastructure. We will see smaller companies tie into the grid with their energy-producing technologies, and the grid will distribute this energy. This will give the customer more of a choice of whom to buy their energy from. A carbon tax, while still politically unpopular, will be more prevalent at the state level and essentially we will see changes coming at the national level.

How does this impact us?
Well, we can no longer consider a building’s energy consumption to be managed strictly through ROI. It’s a larger issue. Natural gas is cheaper and readily available. We are living in a time of climate change. Solely focusing on ROI is no longer the main reason to invest in energy savings. It is my prediction that every business and building owner will need to consider the impact of their business on the environment. The name of the game will be about carbon calculation and carbon impact.

Buildings are an asset class that will need to be energy producers and not merely energy consumers. We will need to isolate the cost of operation and ownership – right now. There are radical shifts in our energy makeup and rising consumer expectations that dictate environmental stewardship.

Abandoning gas as our fuel for heating and converting solely to electric heating using heat pumps allows for the energy consumed to be produced with renewables, that in the future you will be able to select your energy producer or produce onsite.

Profit is still a driver of business success and any decision that would put a business in financial stress should not be undertaken, shaving a few profit points immediately while implementing energy strategies will ultimately have multiple times return on your capital expenditure. Leadership and environmental stewardship will be key.

We can help you navigate these times and prepare your assets for climate change, carbon tax, and a renewable approach that is right for these times.  We can make your building a productive member of society. Contact us at info@dma-eng.com.