Over the past few weeks, I have seen many stories about propane shortages in the United States. As a result of these shortages, prices for propane have nearly doubled from around $2.20 per gallon at the end of last year to over $4.00 per gallon this week. This situation struck me as quite odd. We should be nearly drowning in propane at the moment. So I decided to try to figure out what was going on.
As usual, let’s start with the background. Propane is a small, simple hydrocarbon with the chemical formula C3H8. At normal temperatures and pressures, propane is a gas. By applying a modest amount of pressure you can induce it to liquefy, which is what comes in the propane tank you may be using for the grill on the back porch.
Three quarters of propane production in the U.S. comes from the refining of natural gas. The primary component of natural gas is methane (CH4). Mixed in with the methane are larger hydrocarbons such as ethane (C2H6), propane and butane (C4H10). Before natural gas can be put through a pipeline (the only economical way that it can be transported long distances), most of the propane and butane must be removed, thus resulting in most of our supply of propane and butane. Butane is what is used in most cigarette lighters.
The other 25% of propane production in the U.S. comes from petroleum refining. In order to make fuels such as gasoline and diesel from crude petroleum, there is a processing step called cracking. Cracking is just what it sounds like, the breaking up of larger hydrocarbon molecules into smaller ones. Some of these smaller molecules are propane, resulting in the rest of our propane supply.
Propane is used almost exclusively as a fuel for heating. The breakdown of propane consumption in the U.S. is shown below:
Industrial heating 50%
Residential/recreational heating 42%
Agricultural (e.g. drying grain) 7%
Due to the implementation of hydraulic fracturing (“fracking”) as a drilling technology, production rates of natural gas and petroleum in the U.S. have both increased approximately 15-20% since 2008. Therefore, production of propane, which is recovered from both of these sources, has also increased by this amount.
The increase in supply has resulted in a dramatic decrease in the price of refined natural gas, which has inspired power companies all across the country to convert from coal to natural gas for fuel. So I set about trying to determine how there could be a shortage of propane and a surplus of refined natural gas at the same time.
I checked U.S. propane consumption to see if increases in demand were outpacing the large increase in supply. The U.S. Energy Information Administration data shows that propane consumption in both October and November of 2013 was slightly above normal while use in December had fallen back to within the norm. This small increase in demand last fall could have put some strain on supply, but not enough to explain the dramatic price spikes on its own.
Then the likely answer occurred to me. Since natural gas can only be transported in an economically feasible manner via pipeline, nearly all of U.S. production is consumed domestically. Propane gas can easily and economically be compressed to a liquid. Liquids are easy to transport and, thus, easy to export.
That turned out to be the answer to the mystery. In 2008, only 5% of U.S propane production was exported. By 2013, driven in large part by high demand in Asia, the amount exported increased to 20%!
Let’s work the numbers. In 2008, the U.S. produced an average of 1.8 million barrels a day of propane, exporting 0.1 million barrels and leaving 1.7 million for domestic use. By 2013, production had increased 20% to 2.16 million barrels a day, but now 0.43 million of these were exported, leaving just 1.73 million for domestic use. As you can see, essentially all of the production increase since 2008 has been allocated to export.
The consumption of all fuels in the U.S. increased along with the growth of both population and the economy. Therefore, while the 1.7 million barrels a day of propane met demand in 2008 – a year with a weak economy – the 1.73 million barrels a day allocated to domestic use were just barely enough for 2013. As a result, even the minor increase in demand which occurred last fall was enough to cause a large spike in price.
This chain of events which led to the propane shortage this winter warrants some additional reflection and analysis. Consider the following timeline:
• In 2004-2005, natural gas production in the U.S. from traditional extraction technologies was not keeping pace with the demand and resulting in dramatic price increases.
• The high price for natural gas was a primary driver in the dramatic expansion of fracking in the U.S., which significantly increased the supply of natural gas and, thereby, caused a drop in its price.
• Fracking also brought about a large increase in propane supply.
• Because drilling companies are compelled to maximize near-term shareholder return, the surplus propane is being exported.
• Ensuring that U.S. citizens benefit from the increased propane supply in the form of lower prices stemming from surplus domestic supply would require the type of government regulation of the energy sector which is vociferously opposed by Republicans.
• Most homes which use propane for home heating and kitchen cooking, the people who are most harmed by the price increases, are located in rural areas.
• Rural areas tend to steadfastly vote Republican.
When the Republican politicians who represent those harmed by these price increases are pressed to provide an explanation for why their constituents’ heating bills have doubled, they tend to offer a list of talking points about excess government regulation. They offer the libertarian vision that if only the oil companies were free of government constraints, all would be well. As I laid out for you above, this explanation is demonstrably false.
When I ran unsuccessfully for a seat on the CHCCS Board of Education in 2005, I campaigned on my commitment to data-based decision making. That phrase lacks “zing,” which may explain why engineers make for mediocre political candidates. To me, though, the current domestic propane price increase is a perfect example of the need for data-based governance. The data tells us that the propane shortage in the U.S. is the result of the rise in exports. Our lawmakers should make policy based on this data to ensure that American citizens reap the benefits of increased American energy production. For those of you I confused back in 2005, this is what I meant.
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CHARLOTTE – The merger between Duke Energy and Progress Energy has combined two utilities under one name, but the operations of the company remain as two units.
Duke Energy spokesperson Jeff Brooks says, while it’s a possibility that one day the company will merge the entire function of the two utilities into one, the main focus now is on bringing the internal operations together.
“We have Duke Energy Carolinas in the western half of the state and then Duke Energy Progress—which is the former Progress Energy footprint—that serves customers in the eastern half of the state and Asheville,” Brooks says.
Duke Energy now serves 3.2 million customers in 83 of the state’s 100 counties and is the nation’s largest utility company.
Brooks says it helps to remember that if you were a customer of Duke Energy before the merger, you’re still under the Duke Energy utility; if you were a Progress Energy customer, you are now under the Duke Energy Progress utility.
He says a major positive to the merger is the distribution of electricity.
“We, for example, now jointly dispatch our generation fleet—so in other words, our power plants,” Brooks says. “Even though they belong to the two separate utilities, we think of them as one fleet in the way that we dispatch them day-to-day to support customer needs.”
Brooks says the company has recognized the growing pains. He says one of the biggest problem areas is in the reporting of power outages.
“Outage reporting has been one area where we’ve seen some instances of customers getting confused as to which system they should use,” Brooks says. “But the main thing that helps is if they go to duke-energy.com, for the customer it will ask them where are you located? So it will ask them to enter their service address, or they can select which area they’re in, and once they do that, it can remember where they were when they come back to the sites.”
Duke Energy provides customer service for both utilities for questions about billing and payments, moving service, outages, and other topics.
CHAPEL HILL – This weekend will be the last NC sales tax holiday with the Energy Star qualified products tax exemption.
The Energy Star tax holiday began right after midnight on Friday and will continue until 11:59 p.m. Sunday night. The holiday applies to Energy Star labeled washers, refrigerators, freezers, air conditioners, and more.
Matt Schumann is the co-owner of Kitchen and Bath Galleries in Chapel Hill. He says the tax-free weekend brings a lot of business to their store.
“We do about two months of business in two days,” he says. “It’s a good shot in the arm–stimulates our business.”
(Kitchen and Bath in Chapel Hill will not be open on Sunday, so Schumann’s encouraging people to come out before 4:00 p.m. Saturday.)
Elsewhere in Chapel Hill, Lowe’s assistant manager Howie Milligan says the weekend brings in more people, but the main impact of the tax exemption is to spread awareness and knowledge on energy conservation.
The Energy Star tax holiday is in its sixth and final year. Schumann says although this will be the last year of the Energy Star tax holiday they expect to continue sales in future years.
“Certainly I think we’ll lose a little of that business, but…in the long run I think it will all even out, and I think sales will continue on the same pace,” he says.http://chapelboro.com/news/business/last-nc-sales-tax-holiday-ends-this-weekend/
CARRBORO – Piedmont Electric Membership Corporation has begun evaluating the effectiveness of light emitting diode (LED) street and security lighting as a replacement for current lights in Carrboro.
Existing lights use either mercury vapor (MV) or high pressure sodium (HPS). A member from Piedmont Electric, Richard Mabbott, says that there a few lights in Anderson Park that they want to use to test different LED lights.
“What we want to do is replace some of those fixtures, about four of those fixtures, the 100 watt high pressure sodiums (HPS), with LED fixtures, and the one 250 watt high pressure sodium in the dog area with a 160 watt LED fixture” Mabbott says.
Replacing some of the existing HPS fixtures located in Anderson Park with LED fixtures will be at no cost to the Town of Carrboro until the evaluation is completed.
While evaluating the lights, Piedmont will monitor for efficiency, reliability, coverage and quality of the light compared to the current ones. Mabbott says they may put up signs in the park to let people know and to gain feedback from those who use the park.
“There has been some discussion about maybe some signage to inform folks on what’s going on, and solicit their input as it relates to what they think about the quality of light,” Mabbott commentes. “could just try to get feedback from the users of the park.”
LED outdoor and roadway lighting has the potential to reduce energy use by half and reduce our carbon footprint by more than 1,500 tons in carbon emissions. Mabbott says that although the LED’s will save on energy, there could be higher maintenance costs when finding the right LED fixture.
“Hopefully use about half the energy as the high pressure sodium light (HPS) and would have the effect of reducing the carbon footprint about half.” Mabbott claims. “There’s savings in energy, but the fixtures cost more, and we’re not exactly sure how that’s going to shake out until we determine what a good fixture is.”
This project at Anderson Park is just one of the many test sites around Piedmont’s territory that will help determine what effective LED fixture may be used.http://chapelboro.com/news/business/piedmont-to-start-testing-led-lights-in-anderson-park/
CHAPEL HILL – The UNC Board of Governors is working to cut energy and water costs for the schools to make a more efficient system and President Tom Ross says the schools are making small changes to save big.
“You may recall that our strategic plan identifies some key areas of work, like including energy-related research, analysis, instruction, and outreach, where with targeted investments UNC, we believe, can make a real and meaningful difference,” Ross says.
The UNC system averages $225 million per year on energy and water costs. Since last year the university system has saved $63 million in energy costs and $13.7 million in water costs. Since the 2002-2003 school year the total equals $297 million in savings.
System wide, the schools have managed to cut electricity by 20 percent and water by 40 percent, and President Ross says there are more plans to continue making the University more efficient.
“To date, this board has authorized 15 guaranteed energy performance projects across the system,” Ross says. “Ten of these projects are currently under contract producing energy savings of more than $10 million per year.”
Current energy sources can be costly in terms of money and for the environment. The UNC system has often been at the forefront of innovation and new ideas, and energy is no different. Ross says that UNC will stay at the forefront when dealing with energy and water to improve the system.
“Recognizing that most sources of easily accessible energy are limited and that many are non-renewable, the plan calls for UNC to be in the forefront, in collaboration with private industry and non-profit organizations and making discoveries that will fuel our state and the world in the future,” Ross says.
The University schools have worked to reduce costs of energy and water by substantial amounts. However, Ross says that they will continue to work and cut costs for expenses like water and energy.
“But we know we can do more, and we have as a collective goal in our university system to save $1 billion over the next 20 years in water and energy costs,” Ross says. “And while the financial savings are important, we will also be helping to preserve our natural and environmental resources for future generations. “Water, for example, is, we believe, the new precious metal, and we have to be sure its preserved as a public asset and that we protect our water supplies and find new ways to reduce consumption.”
UNC has implemented many ways to conserve water, like grey water in the bathrooms. The University says plans like these will continue to appear as it works to conserve resources.http://chapelboro.com/news/unc/unc-bog-discuss-energy-and-water-saving/
CHAPEL HILL- UNC’s Carolina North project is one step closer to being completed, now that a generator has been installed at the site to convert landfill methane gas into electricity.
“This is kind of a partnership with Orange County,” says UNC Director of Energy Service Phil Barner. “Methane is a big greenhouse gas, and it has some value, if there’s enough of it, to put in an engine and make electricity. We did a feasibility analysis, and it looked like it had some promise.”
The project will use leftover methane gas from the Orange County landfill, which is set to close on June 30. The undertaking is part of a larger plan to eliminate UNC’s carbon footprint over the next several decades.
In order to obtain the gas, Barner says his team used a process involving wells.
“We put in a system of wells in both the north and south landfill, we cleaned it up by getting the moisture out of it, and we can flare what we don’t use,” he says.
Orange County Solid Waste Management Director Gayle Wilson says this project will be particularly useful once Carolina North’s buildings are actually constructed.
“At some point in the future, whenever there’s a building constructed on the Horace Williams track, that power will be used to power the facilities there.”
For now, the electricity is being sold to Duke Energy.
Upon its completion, the Carolina North project will span over 250 acres near the Horace Williams Airport site, two miles away from UNC’s main campus; it’s slated to be used for both academic and research purposes.
Barner says the generator portion of the project will cost between $1 million and $3 million.http://chapelboro.com/news/unc/carolina-north-adds-gas-converting-generator-to-plan/
Forgive me for the title. I do love a pun but when it’s particularly apt, well, I just can’t resist.
This post is about some of the work being done by the Town of Chapel Hill to cut costs during this difficult budget time. But, as explained by Energy Management Specialist Brian Callaway, it’s cost-cutting in a way most of us won’t necessarily notice.
Aside from the budgetary benefit, which I’ll outline in a moment, you may have already experienced the first large scale change in our public facilities if you park in the Wallace Deck. The lights there are always on and in May of last year, the town switched the stairwell bulbs to LED’s, which use less energy but also give off a crisp, white light. While the LED bulbs cost more to buy, they last longer so replacement cost is down, as is the maintenance cost because they need to be replaced less often. Callaway says the town is on track to be paid back for this investment within seven years thanks to that savings. And, if we do notice the difference, it will be the better quality of light.
Not all of his work is that glamorous because some of what Callaway does is review the energy bills for the town’s various facilities and optimize the available rate structures to suit the facilities’ needs. This is more necessary now than ever before not only because of budgetary constraints but because the price of energy is rising and the town’s consumption has been increasing also. Those are two arrows pointing in the wrong direction and if Callaway can’t change their direction, perhaps he can slow their rate or even nudge their trajectory a bit.
Where else can we expect sustainable, energy-efficient change? Certainly, we’ll see more switching of outdoor lighting around town facilities and inside some as well, including the Aquatics Center. The town is also investigating the feasibility of battery-operated electric buses. I got instantly excited at the prospect of buses practically gliding along our streets but Callaway brought me back to reality reminding me that switching the town’s bus fleet wouldn’t just be expensive in the initial equipment cost. The town’s transit infrastructure would have to change to provide upkeep and maintenance of vastly different vehicles.
There’s another project being studied that might have just the right kind of trickle down effect (apologies to all economists everywhere): the town is trying to find a way to support solar investment for residents. Stay tuned for details on that.
Do you know any bright lights working on ideas for our future? I’d like to know about them so please share below or write to me at Donnabeth@Chapelboro.com. Also, leave a comment with any energy-saving ideas large or small.