The Natural Gas Revolution and the Electricity Sector: The Good, The Bad and the Uncertain
Karen Palmer, Research Director, Senior Fellow, and Associate Director of the Center for Climate and Electricity Policy, specializes in the economics of environmental and public utility regulation, particularly on issues at the intersection of air quality regulation and the electricity sector. Recent advances in drilling technology have led to a substantial increase in the supply of natural gas and a commensurate reduction in natural gas prices, which, according to the US EIA, are expected to remain fairly low for some time to come. In turn, lower gas prices have resulted in a significant increase in the share of electricity produced with natural gas, coming largely at the expense of coal. Because natural gas is often the marginal fuel for electricity supply, lower gas prices tend to reduce wholesale prices in competitive markets for power posing economic challenges for renewables and for energy efficiency investments that must pass cost-effectiveness tests. The reduced reliance on coal has helped to reduce CO2 emissions associated with electricity production, but questions remain about greenhouse gas emissions associated with natural gas extraction.