In Today’s Energy Transition, Best Not Fly Blind

In 1929 Edwin Albert Link, finding that pilot lessons were too expensive, built the very first full flight simulator in his father’s basement.  He named it “The Pilot Maker”, which was later renamed to the Link Trainer.  Initially, it was not taken very seriously and sold at amusement parks for entertainment.  However, at the time there was an increasing need for more pilots and a faster, safer way to train those pilots by the Army Air Core.  By 1934, Link got his chance to demonstrate the success of his simulator to the Army Air Core, who ordered several Link Trainers.  From this he was able to build his company, Link Aviation.

Since that time flight simulators have gotten more sophisticated and have been made more accessible to the public through computers and game consoles.  My first experience with these tools was with the Microsoft Flight Simulators 4.0 and 5.0 back in the early 90’s.  5.0 was the first version to use textures achieving a much higher level of realism.  It also included new aircraft models as well as more realistic weather conditions.  Transitioning from Flight Simulator 4.0 to 5.0 proved to be quite significant as the better graphics and visualization made for a much more realistic and greatly improved experience.

Simulation is also a very valuable tool for other fields.  In the energy industry, market simulation involves a computerized representation (or model) of the functioning of a market, such as gas or power, which replicates that market’s operation.  To be effective, it must be able to reproduce the market’s behavior to a sufficient degree of accuracy.  This can be proven out by “calibrating” the simulator using historical data.  One can then use it to simulate future market behavior under different sets of assumptions for weather, economics, and government rules (scenarios).

Like with a flight simulator the experience and usefulness of market simulation is greatly improved with more realistic responses to the assumptions. 

Today, markets are too complex for serious analysts to trust to simplistic spreadsheet “models” or back-of-the-envelope calculations.  A good market simulator employs basic principles of applied economic theory to detailed models of existing, planned, and hypothetical infrastructure to compute realistic implications of various scenarios.  It can be used to determine which strategies are more likely to achieve profitability or environmental goals or both.

Energy companies, consultants, and government regulatory bodies would be wise to use market simulation to assist their organizations achieve their goals.  Both government and global finance are now demanding that energy companies expand the scope of their business goals to include ESG – environmental, social, and governance.  Market simulation enables organizations to include these goals in the analytical process supporting organizational decision makers in more appropriate investments and operations policies.

As we saw in the evolution of the flight simulator, the energy industry is going through a  significant evolution itself.  This energy transition is the shift from traditional fossil-fuel-based use in electric power, space heating, and industrial processes to renewable sources such as wind, solar, hydro, biomass or biogas, and non-carbon-based fuels such as hydrogen.  The purpose is to reduce or eliminate carbon dioxide and methane emissions into the atmosphere in order to protect against possible adverse consequences of global climate change.

However, as in the history of flight, there continues to be major changes in the energy industry as well.  New investments in infrastructure need to be made as well as development of new technology.  We need to find a way to transition safely and efficiently into this greener future.

In this new, greener world, “gas” is being re-defined to include natural gas produced from underground deposits, bio-methane (or Renewable Natural Gas) produced from organic material or waste products, and carbon-free hydrogen.  Liquefied natural gas (LNG) is made by cooling and pressurizing natural or renewable natural gas to liquid form in which it can be more easily transported over waterways by tanker to places needing energy for electricity generation, industry, or other uses.  When burned for these purposes, natural gas from LNG produces less carbon dioxide than coal, fuel oil, or even traditional biological fuels such as wood or dung.  Converting from these fuels to natural gas reduces carbon dioxide emissions, thereby aligning with the goals of the energy transition.  Combining the use of natural gas with carbon capture and storage (CCS) or carbon capture, use, and storage (CCUS) results in a more rapid attainment of the goals of the energy transition.

With investments and technological advancements, alternative fuels will start to play a larger role in the future of the energy industry.  Bio-gas, which is a combination of gases that includes methane, carbon monoxide, carbon dioxide, and other chemicals, can be refined into Renewable Natural Gas by reducing the concentration of the non-methane gases.  It can be used interchangeably with natural gas produced from the ground.  In the United States today about 750 million cubic feet of renewable natural gas is being produced and used per day.  This is about 0.8% of a total market of about 90,000 million cubic feet per day.  It is estimated that RNG’s contribution could grow from less than 1% to as much as 5 to 20% of the total market.  This wide range shows that there is a great deal of uncertainty about the ultimate role for RNG.

Compared with methane, hydrogen is a totally clean-burning fuel which has no carbon and produces no carbon dioxide when burned to produce power or heat.  However, it is very expensive to make by electrolysis (“green hydrogen”) and even by SMR – steam methane reforming (“gray hydrogen”).  SMR produces carbon dioxide as a byproduct, but if.  the CO2 produced is captured and stored, the “color” of the hydrogen magically changes from “gray” to “blue”.

RBAC believes there is a substantial role for hydrogen in the energy transition but as with biogas there is a great deal of uncertainty as to how it will play out.  This is another reason why a market simulator able to simulate widely different scenarios is essential for organizations to make the policies, plans, and investment decisions that achieve their financial and ESG goals.

As we look to the future, RBAC has specifically designed our GPCM® Market Simulator for North American Gas and LNG™ and G2M2® Market Simulator for Global Gas and LNG™ to have the level of flexibility and detail needed to credibly simulate a wide variety of pathways for the energy transition and the impacts it will have on regional and global gas markets.  RBAC’s gas market simulators also integrate seamlessly with power market simulators such as Plexos, Aurora, PROMOD, MAPS, and EnCompass as well as economic models such as REMI’s PI+.

The goal of a greener future with universal affordable energy access, stability and security is very important to all of us.  Using the right instrument to guide the decision making process, one won’t be flying blind and will have a much better chance to reach the desired destination.

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Contact Numbers:

(281) 506-0588
(281) 506-0588 ext. 126
(281) 506-0588 ext. 125