There is a “spark spread” and a “dark spread,” what about a “fart spread”
Friday, August 20th, 2010When energy companies look at the cost of building a new, natural gas fired power plant they use a metric for investment called the spark spread to calculate the cost of natural gas and the potential profit from converting its energy into electricity. A combined cycle gas fired turbine can convert the energy in natural gas with >80% efficiency.
When a coal power plant is being considered, the dark spread is used in a similar way to compare the cost of coal with the value of potential electrical sales. The larger the spread, the more potential for revenue and profit.
Climate change and external costs related to climate mitigation and offsetting have historically not been included in these calculations. But more and more, they are a factor and become relevant-especially because the global warming potential of coal and natural gas power is different for the same amount of energy, creating a potential advantage for natural gas.
So what is the “fart spread” that I am proposing? This would be a term for calculating the potential profitability of recovering bio-gas and other waste gasses for use. Right now the “fart spread” is negative in most cases, i.e. it is more expensive to recover the potential resources than the value they will have on the market place. Carbon credits have the potential to bridge this gap, but with the way current climate change policy making has gone in the US, that is not likely to happen soon.


