GAS COSTS AND GULF STREAM TURBINE PROFITS

The Gulf Stream Turbines Can Produce Cheaper Electricity

             Though environmentalists are urging the increased use of renewable energy because of their legitimate and well-founded concerns about global warming, there is a more urgent reason to move quickly toward non-fossil fuel energy: the depletion of those gas reserves that can be transported to US consumers by pipeline. This section explains why skyrocketing gas prices are a certainty and why the EIA’s projections of gas prices are less than worthless.  It compares the amortization costs for the power generated with the Gulf Stream Turbines to the cost of just that gas consumed to generate an equal amount of power, using the most efficient combined-cycle gas turbines.  It shows that, if large numbers of the Gulf Stream Turbines share transmission cables and other facilities, they can produce electricity at lower costs per kilowatt-hour than all existing gas-fired power plants and all other power plants not yet built.  Because these submersible plants will not corrode and because of their mechanical simplicity, they can operate without servicing for many years and periods of more than 20 years are possible.  Produced in sufficient numbers, the capitalization costs per kilowatt of generating capacity should be between $800 and $1,600 comparable to the costs of the wind turbines and less than the costs of new coal-fired plants that consume fuel.  Because of the Gulf Stream Turbine’s high capacity factor, no fuel costs, and almost no maintenance costs, the costs of that steady power that they can produce should be only about one-third that of the unreliable power produced by the most efficient wind-powered turbines at locations where there is good wind potential.  And, although the Gulf Stream Turbines can already produce electric power much more cheaply than the gas-fired turbines, as the gas prices increase, the Gulf Stream Turbine’s cost advantage will increase very rapidly.  

Inelastic Gas Demand Will Can Cause Huge Increases in Gas Prices

            Even though U.S. natural gas production is peaking now and will be declining, a decrease in the gas supply is not needed to cause skyrocketing gas prices all that is needed is that the firm demand for gas exceeds the producers’ ability to satisfy that demand.  The reason that a small shortage can cause huge price increases is that the firm demand for natural gas is inelastic because it remains relatively constant regardless of price.  Elasticity of demand refers to the relationship between a change in the price of a commodity and the change in the quantity of that which can be sold.  When a commodity has an inelastic demand and the supply is more than sufficient to satisfy that demand, prices will remain low, determined primarily by the costs of producing additional quantities of that commodity.  Because the natural gas supply is determined by the total production flowing from all the producing wells and because that flow rate is not effected by short-term changes in demand, when there is more than enough gas to cover the normal firm demand and fill storage requirements, the surplus must be disposed of by selling it at prices below those of competing fuels to those interruptible gas customers that can switch fuels. However, when there is not enough gas to cover the firm demand and refill required storage, the gas distributing companies, electric utilities, and industrial users will bid up the gas prices to obtain that gas they will need.  On December 26, 2000, the NYMEX spot gas prices soared to $9.9025 cents per million Btu (equivalent to $10.20 per Mcf).  On January 2, 2001, the Wall Street Journal ran a front-page story that said, "In California, where natural gas powers many electricity plants and state rules until recently banned electricity producers from buying on the futures market, the cash price has risen, though fleetingly, to as high as $60 per million BTU.”  These prices prove one thing: unlike the prices of past, future gas prices will no longer have any relationship to the costs of its production, they will be determined only by what prices people will be willing to pay.

            How high the gas prices will go during the near-term will depend on the weather, economic growth, and fears that the gas in storage will become depleted.  A factor that will effect the speed of the price increases will be how rapidly those US manufacturers that must have cheap gas to remain competitive, will move their operations to other countries where cheap gas may still available.  Though there will always be seasonal and short-term swings in gas prices, caused by changes in the fuel’s short-term availability and the weather-related demand, the gas shortage will worsen and the gas prices will increase to unbelievable levels during the next few years and beyond.

Spot-market and Wellhead Gas Prices

            Whether the Gulf Stream Turbines can produce electric power cheaper than the gas-fired turbines depends on the Gulf Stream Turbines’ costs and the costs of that gas used to produce the same power.  As we compare the costs of the electricity produced by the two systems, it would help to understand the differences between the gas prices.


            The Henry Hub spot and futures prices have become recognized as the source for “real-time” gas prices because they are the only spot prices that are reported on a daily basis by several natural gas industry news publications.  The Henry Hub price is measured downstream of the wellhead, after the natural gas liquids have been removed and after transportation costs has been incurred. Because the Henry Hub NYMEX prices represents only those sales contracts for next day delivery, they can be extremely volatile when there are threatened shortages.  Although only about 3 percent of the nation’s natural gas is sold through the Henry Hub pipeline terminal, their prices can portend the future for all gas prices.  The Henry Hub spot price is quoted in dollars per million Btu. (Go to www.oilnergy.com or www.wtrg.com for updated prices for oil and natural gas prices.)  


            Because the Gulf Stream Turbines would operate off the East Coast of South Florida, the most important prices for making comparisons are those being paid by Florida Power & Light for that gas that powers their combined-cycle turbine generators.  FPL Energy Services buys their gas from the spot market at the Henry Hub pipeline terminal in Louisiana.  Their gas costs would therefore be the Henry Hub price at the moment of purchase, plus a 50-cent per million Btu transportation charge.


            Instead of using the NYMEX spot prices, the EIA reports the average wellhead prices for natural gas in its monthly and annual data publications and forecasts these wellhead prices in both its Short-Term Energy Outlook and the Annual Energy Outlook.  The wellhead prices are reported after the final production and price data are received from the States and the U.S. Minerals Management Service.  They include the value of natural gas liquids and cover the wellhead prices of all gas sold under contracts of all durations.  They are stated in dollars per thousand cubic feet.  The following graph shows the average wellhead prices between 1930 and 2004, with my estimate for 2005 that is based on the spot market prices through August and those anticipated through December.



 Why EIA Price Forecasts Are Less Than Worthless

            The EIA’s forecasts of the gas prices are worthless because they are all based on the false assumption that there will be plenty of gas to cover the growing demand through 2025.  The EIA price forecasts are wrong because they are based on ridiculously optimistic estimates of future production costs and ignore the impact that an unsatisfied inelastic demand can have on the prices. 

            The following graph on the left was reproduced from the EIA’s Annual Energy Outlook 2002.  The graph shows three projections of the wellhead gas prices to 2020.  In their reference case the gas price is projected to reach approximately $3.25 by 2020, based on the value of the dollar in 2000.  Their “high growth” price is projected to increase to approximately $3.63, and their “low growth” price is projected to increase to approximately $2.93 in non-inflated dollars.

 

            The above graph (on the right) compares the EIA’s price forecasts to my earlier price forecast (red ) that shows the effect that an unsatisfied inelastic demand can have on the prices.  The average wellhead gas prices for 2004 exceeded $5.50 per Tcf.  On October 4, 2005 the price was $14.51/MMBtu, equivalent to about $14.01/Tcf.

            The following graph shows my earlier estimates (made about 5 years ago) of the wholesale gas prices since 1980 and projections to 2020.  These prices are a blend of prices for gas selling under long-term contracts, intermediate contracts, short-term contracts, and on the spot market. Because the gas production from the older wells is declining and many new gas wells are being drilled in an effort to maintain production, the average wellhead prices will increase rapidly as the increasing volumes of the higher priced “new” gas replace the declining volumes of the cheaper “old” gas that is sold under long-term contracts.  Because the firm demand for natural gas is inelastic, as the production declines, the only things that can slow the price increases is a rapid increase in LNG imports, or a rapid decrease in the demand. This reduced demand can come from conversions to other fuels, conservation, curtailments of service because of customers’ inability to pay, and from the losses of those industries that must have low-cost gas to remain competitive.  The graph projects both high and low estimates, with the lower estimates reflecting major losses of the gas-dependent industries and conversions to coal.  Though the graph shows smooth price increases, they will be extremely volatile within each year.  The red dash near the top of the following graph shows the highest spot gas price paid during 2000-2001 of $61.8 per million Btu, equivalent to $60 per thousand cubic feet.  

Decreasing Gas Volumes Can Increase Transportation Costs per Unit

            Though decreases in demand can reduce the upward pressures on the gas prices, it can also increase the transportation costs for the remaining gas users.  Though gas production appears similar to oil production and natural gas competes with oil, the transportation costs for the natural gas are much higher than are those for oil.  After the investments in transmission, distribution and storage facilities are made, the total costs of operating the pipeline system are pretty much fixed.  This is because the variable costs for a pipeline’s operation and maintenance are relatively low compared to the pipeline’s capital costs.  Consequently, the use of a pipeline, or its load factor, will not greatly influence the total costs of transportation, although the changes in the volumes being transported can cause large changes in the transportation costs per unit.  For example: If the volumes being transported through a pipeline were to decline by 30 percent, the transportation costs per unit for the remaining gas users would increase by approximately 43 percent.

Calculating Fuel Costs per Kilowatt Hour For Existing Gas-Fired Plants

            There is no question as to whether natural gas prices will increase.  The only question is how fast and how far and how will the increasing gas prices affect the costs of generating electricity and the demand for power.  Because one Btu per hour equals .2931 watt-hour and one watt-hour equals 3.411804845 Btu, one million Btu equals 293.1 kilowatt-hours and one kilowatt-hour equals 3411.804845 Btu.  That means that 293.1 kilowatts-hours of electricity would be produced from each million Btu in a fuel, if the plant could operate at an efficiency of 100 percent.  We can calculate the amount of Btu required to produce a kilowatt-hour of electricity for any power plant by multiplying the 293.1 kilowatt-hours by the operating efficiency of the plant.  For example: If a gas-fired plant has an operating efficiency were 60 percent, it could produce 175.86 kilowatt-hours per million Btu (293.1 x .60 = 175.86).   

            The cost of fuel per kilowatt-hour generated is the price of the gas per million Btu, divided by the kilowatt-hours that that gas can generate.  The formula for the cost per kilowatt-hour can be written as:

C = P/(293.1 x E)                    C= fuel cost per kilowatt-hour in dollars

 P= the gas price/MMBtu

 E= the operating efficiency of the plant.

For a plant that operates at a 60 percent efficiency, the electricity cost would increase $0.0056863 per kilowatt-hour for each dollar the gas price increased per million Btu [$1.00/(293.1 x .60) = $0.0056863].  Efficiencies of the combined-cycle gas-fired plants approach 60%; the efficiencies of the single-cycle turbines and boiler plants are roughly 30 to 33 percent.  The following table gives the fuel costs in cents per kilowatt-hour for electricity generated by gas-fired power plants operating at the efficiencies shown at the top of the six columns, when the gas prices per million Btu are as shown in the left column.



Gulf Stream Turbines Have Low Capital Cost per Kilowatt of Capacity

            By producing the Gulf Stream Turbines in large numbers and grouping many together into “farms” where they can share the transmission cables and other facilities, their total capitalization costs should be between $800 and $1,600 per kilowatt of generating capacity comparable to those of wind turbines.  Because the Gulf Stream Turbines have much higher capacity factors, however, their generating costs per kilowatt-hour of power produced should be about one-third that of those wind turbines that are placed at the better wind sites.  Florida and the other southeastern states are south of the westerlies and lack the steady winds that are required to efficiently generate electricity with wind-powered turbines.

            The following graph compares the dollar costs per kilowatt of generating capacity for various types of electricity producing systems.  Except for the cost of the Gulf Stream Turbine, all cost figures were reproduced from an EIA graph.  With the exceptions of the gas-fired plants and the wind-powered turbines, all the power plants listed have higher capital cost per kilowatt of generating capacity than the Gulf Stream Turbines.

 

]

 Except for the estimate for the Gulf Stream Turbine, all data is from the EIA

The Costs per Kilowatt-hour For Gulf Stream Turbines

            Because the Gulf Stream Turbines will consume no fuel, almost all of the costs for the electricity that they will generate will be from the amortized costs of the system including the costs of the underwater transmission cables, anchor lines, and the transmission and distribution facilities ashore.  Those costs would be determined by the total cost of the system, the time over which those costs are amortized, and the interest rate being charged.  Those cost per kilowatt-hour would be the annual amortization cost, divided by the kilowatt-hours generated in a year. 

            If the Gulf Steam Turbines are grouped to spread the incremental costs of the transmission cables over many units, the total installed costs for each two-turbine unit should be between $1 million and $1.5 million.  The following 8 tables show the costs per kilowatt-hour for the electric power produced by each Gulf Stream Turbine, equipped with two 50-foot turbines, having a total rated capacity of 1.25 megawatts, amortized over 5, 7, and 12 years, at the interest rates listed.

 

 

       Cost per Kw-hr based on 5-yr Loan, 80% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0262

$0.0327

$0.0392

$0.0458

 

 

6%

$0.0268

$0.0335

$0.0402

$0.0469

 

 

7%

$0.0274

$0.0343

$0.0412

$0.0480

 

 

8%

$0.0281

$0.0351

$0.0421

$0.0492

 

 

9%

$0.0288

$0.0360

$0.0431

$0.0503

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 5-yr Loan, 90% Capacity Factor                 

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0230

$0.0287

$0.0345

$0.0402

 

 

6%

$0.0235

$0.0294

$0.0353

$0.0412

 

 

7%

$0.0241

$0.0301

$0.0362

$0.0422

 

 

8%

$0.0247

$0.0309

$0.0370

$0.0432

 

 

9%

$0.0253

$0.0316

$0.0379

$0.0442

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 5-yr Loan, 100% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0207

$0.0258

$0.0310

$0.0362

 

 

6%

$0.0212

$0.0265

$0.0318

$0.0371

 

 

7%

$0.0217

$0.0271

$0.0325

$0.0380

 

 

8%

$0.0222

$0.0278

$0.0333

$0.0389

 

 

9%

$0.0227

$0.0284

$0.0341

$0.0398

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 7-yr Loan, 80% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0196

$0.0245

$0.0295

$0.0344

 

 

6%

$0.0203

$0.0254

$0.0305

$0.0337

 

 

7%

$0.0210

$0.0263

$0.0315

$0.0368

 

 

8%

$0.0217

$0.0271

$0.0325

$0.0380

 

 

9%

$0.0224

$0.0280

$0.0336

$0.0392

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 7-yr Loan, 90% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0172

$0.0215

$0.0258

$0.0301

 

 

6%

$0.0178

$0.0222

$0.0267

$0.0311

 

 

7%

$0.0184

$0.0230

$0.0276

$0.0322

 

 

8%

$0.0190

$0.0237

$0.0285

$0.0332

 

 

9%

$0.0196

$0.0245

$0.0294

$0.0343

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 7-yr Loan, 100% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0157

$0.0196

$0.0236

$0.0275

 

 

6%

$0.0163

$0.0203

$0.0244

$0.0270

 

 

7%

$0.0168

$0.0210

$0.0252

$0.0294

 

 

8%

$0.0173

$0.0217

$0.0260

$0.0304

 

 

9%

$0.0179

$0.0224

$0.0269

$0.0314

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 12-yr Loan, 80% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0130

$0.0163

$0.0195

$0.0228

 

 

6%

$0.0137

$0.0171

$0.0206

$0.0240

 

 

7%

$0.0145

$0.0018

$0.0217

$0.0253

 

 

8%

$0.0152

$0.0190

$0.0228

$0.0266

 

 

9%

$0.0160

$0.0200

$0.0240

$0.0279

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 12-yr Loan, 90% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0113

$0.0141

$0.0169

$0.0197

 

 

6%

$0.0119

$0.0148

$0.0178

$0.0208

 

 

7%

$0.0125

$0.0564

$0.0188

$0.0219

 

 

8%

$0.0132

$0.0165

$0.0198

$0.0231

 

 

9%

$0.0139

$0.0173

$0.0208

$0.0242

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 12-yr Loan, 100% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0101

$0.0127

$0.0152

$0.0177

 

 

6%

$0.0107

$0.0134

$0.0160

$0.0187

 

 

7%

$0.0113

$0.0508

$0.0169

$0.0197

 

 

8%

$0.0119

$0.0148

$0.0178

$0.0207

 

 

9%

$0.0125

$0.0156

$0.0187

$0.0218

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 20-yr Loan, 90% Capacity Factor                

 

 

     Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0080

$0.0100

$0.0120

$0.0141

 

 

6%

$0.0087

$0.0109

$0.0131

$0.0153

 

 

7%

$0.0094

$0.0118

$0.0142

$0.0165

 

 

8%

$0.0102

$0.0127

$0.0153

$0.0178

 

 

9%

$0.0109

$0.0137

$0.0164

$0.0192

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 20-yr Loan, 95% Capacity Factor                

 

 

      Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0076

$0.0095

$0.0114

$0.0133

 

 

6%

$0.0083

$0.0103

$0.0124

$0.0145

 

 

7%

$0.0089

$0.0112

$0.0134

$0.0156

 

 

8%

$0.0096

$0.0121

$0.0145

$0.0169

 

 

9%

$0.0104

$0.0130

$0.0156

$0.0182

 

 

 

 

 

 

 

 

 

       Cost per Kw-hr based on 20-yr Loan, 100% Capacity Factor                

 

 

     Capitalization Cost Per Gulf Stream Turbine         

 

 

$1,000,000

$1,250,000

$1,500,000

$1,750,000

 

 

5%

$0.0072

$0.0090

$0.0108

$0.0126

 

 

6%

$0.0078

$0.0098

$0.0118

$0.0137

 

 

7%

$0.0085

$0.0106

$0.0127

$0.0149

 

 

8%

$0.0092

$0.0115

$0.0137

$0.0160

 

 

9%

$0.0099

$0.0123

$0.0148

$0.0172

 

 

Comparing Cost for Existing Gas Plants to New Gulf Stream Turbines  

            Using the preceding tables, it is possible to find the amortization costs per kilowatt-hour for Gulf Stream Turbines with various capital costs and financing arrangements.  The following graph compares the fuel costs per kilowatt-hour for three gas-fired power plants that are burning gas having differing costs per million Btu, to those costs per kilowatt-hour for that power produced by the Gulf Stream Turbines.  The diagonal lines are the fuel costs for gas-fired turbines that have operating efficiencies of 30, 50, and 60 percent.  The horizontal lines near the bottom of the graph are the amortization costs per kilowatt-hour for six Gulf Stream Turbines having capital costs of $1.25 million ($1,000 per kilowatt of capacity), and financed over 5, 7, and 12-year periods and operating in a 5.5 mph current at capacity factors of 80% and 100%.

Schedule for the graph

                A = Gas-fired single-cycle turbine plant or boiler plant operating at 30% efficiency 

                B = Gas-fired, combined-cycle power plant that operates at 50% efficiency 

                C = Gas-fired, combined-cycle power plant that operates at 60% efficiency

                D = Gulf Stream Turbine financed over 5 years at 5%, operating at 80% capacity factor.

                E = Gulf Stream Turbine financed over 5 years at 5%, operating at 100% capacity factor.

                F = Gulf Stream Turbine financed over 7 years at 5%, operating at 80% capacity factor

                G = Gulf Stream Turbine financed over 7 years at 5%, operating at 100% capacity factor.    

                H = Gulf Stream Turbine financed over 12 years at 5%, operating at 80% capacity factor

                I  = Gulf Stream Turbine financed over 12 years at 5%, operating at 100% capacity factor

            The following graph shows an old estimate of how the natural gas prices were expected to increase during the following 11 years.  The numbers on the left side of the graph shows the costs of the natural gas.  The numbers on the right side shows the costs per kilowatt-hour for those gas-fired plants that can operate at an efficiency of 60 percent, and for the Gulf Stream Turbines.  The horizontal lines near the bottom represent the amortized costs of a Gulf Stream Turbine, costing $1.25 million and financed over 7 years at 5 percent, and operating at the capacity factors shown.  Because it will take at least two years to get the first machines operational, the amortization period starts in two years.  After the seven-year amortization period ends and the loan repaid, the costs of the electricity produced by the non-fuel-consuming Gulf Stream Turbine would drop to virtually zero.  This graph was drawn in 2002 and gas prices have thus far been tracking above what I predicted.  Because of all the new gas-fired power plants that consume gas during the summer, making it very difficult to fill storage, I now believe that future prices will be much less volatile than those shown, but will increase faster.

 

 

Return on Investments in Gulf Stream Turbines Based on Gas Costs

                Because of the deregulation of the power industry, the prices of electricity are now being largely driven by the costs of that gas that is being consumed to produce it.  Under federal rules, a grid operator calls on power companies to submit the price for electricity they can supply.  The operator than lists these prices from cheapest to the most expensive.  Starting with the cheapest, the operator accepts offers until it has enough power to cover the demand.  The last price accepted is what is then paid to all the suppliers, with certain exceptions.  As the gas prices increase, the resulting higher electric prices will increase the profits for all those companies that can generate their power from energy sources that are cheaper than the gas. 

The following table shows the annual returns on investments on a Gulf Stream Turbines, compared to the per million Btu fuel costs for natural gas to produce the same kilowatt-hours of electricity.  These calculations are based on the Gulf Stream Turbine operating at an 85% capacity factor and the gas-fired plant operating at an efficiency of 60%.  Capitalization costs per Gulf Stream Turbine are given at the top of the columns.

        Annual Returns on Investment in Gulf Stream Turbines

 

Gas cost

 $ 1,000,000

 $  1,250,000

 $  1,500,000

 $ 1,750,000

 $  2,000,000

 

 $         5

26%

21%

18%

15%

13%

 

 $      10

53%

42%

35%

30%

26%

 

 $      15

79%

64%

53%

45%

40%

 

 $      20

106%

85%

71%

61%

53%

 

 $      25

132%

106%

88%

76%

66%

 

 $      30

159%

127%

106%

91%

79%

 

 $      35

185%

148%

124%

106%

93%

 

 $      40

212%

169%

141%

121%

106%

 

 $      45

238%

191%

159%

136%

119%

 

 $      50

265%

212%

177%

151%

132%

 

 $      55

291%

233%

194%

166%

146%

 

 $      60

318%

254%

212%

182%

159%

 

 $      65

344%

275%

229%

197%

172%

 

 $      70

371%

297%

247%

212%

185%

 

 $      75

397%

318%

265%

227%

199%

 

 $      80

424%

339%

282%

242%

212%

 

 $      85

450%

360%

300%

257%

225%

 

 $      90

477%

381%

318%

272%

238%

As the years pass and the shortages of both natural gas and petroleum worsen and their prices skyrocket, the returns produced by the investments in the Gulf Stream Turbines will continue to increase. 

Mind Boggling Savings from the Gulf Stream Turbines

            According to EIA, US electric utilities produced 2,054 billion kilowatt-hours of electricity by burning fossil fuels in 2000.  The EIA projected that an additional 47,549 megawatts of new gas-fired capacity will be added by 2005.  If that additional capacity were to be used for one year with a reasonable capacity factor of 85 percent, 354.4 billion kilowatt-hours of additional power would be produced.  If we add that additional power to the 72.3 billion kilowatt-hours that were produced by oil and the 289.8 billion kilowatt-hours produced by gas in 2000, we get an annual total of 716.4 billion kilowatt-hours that would be generated by all the gas and oil powered plants that exist now and were projected to 2005.

            If one Gulf Stream Turbine submersible generating unit can produce 1.25 megawatts in a 5.5 mph current, it would produce 9,861,750 kilowatt-hours of power per year, assuming a 90% capacity factor.  Because one kilowatt-hour is equivalent to 3,412 Btu, that power would be equivalent to 33.65 billion Btu.  Because there are 1,030 Btu in a cubic foot of natural gas and because the best gas-fired plants operate at efficiencies of 60 percent, a single Gulf Stream turbine would produce the same amount of power in one year as would the gas turbines burning 54.56 million cubic feet of gas. 

            An aggressive approach would be to install enough Gulf Stream turbines along those 175 miles of the Gulf Stream’ central axis off South Florida to provide a generating capacity of 218,711 megawatts.  This would replace the total capacity of all the existing and planned gas and oil-fired power plants to 2005.  If there were 175,000 of the Gulf Stream turbines producing power in a 5.5 mph current, they would have a total generating capacity of 218,750 megawatts.  If those Gulf Stream turbines operated at capacity factors of 90%, they would produce 204,764.4 megawatt-hours per year.  Because the fuel costs for the most efficient gas-fired turbines increase by $0.00056863 for each dollar the per-million-Btu gas price increases, the fuel costs to produce those 204,464.4 megawatts with the gas turbines would increase by $10.90 billion for every dollar increase in the gas price.  As of October 29, 2005, the Henry Hub gas prices were bouncing between $13 and $14.50 per MMBtu.  At a $14 gas price, the cost of that gas would be $152,653.7 million.  If each installed Gulf Stream Turbines cost $1.5 million, the total cost for the 175,000 machines would be $262,500 million.  At a gas price of $14 per MMBtu, the Gulf Stream Turbines would reduce the annual fuel costs by $152,653.7, giving a return on investment of 58 percent.  That is based on the present gas prices.  By the time that the Gulf Stream Turbines would be producing power, the gas prices will be much, much higher.  

            It was previously determined that a Gulf Stream Turbine, operating at a 90 percent capacity fact, would produce the same amount of electricity as would the gas-fired turbines consuming 54.56 million cubic feet of gas.  If we multiply that 54.66 million by the proposed 175,000 Gulf Stream Turbines, that saving would be equivalent to 9,548 billion cubic feet of gas.  That would be equal to exactly half of the 19,080 billion cubic feet of natural gas produced in the US in 2000.

 

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