Environmentalists have mixed feelings about natural gas. It is a fossil fuel but its greenhouse gas emissions are 50% lower than coal and this is why California's electric utilities are relatively "green". But, this horrible explosion in PGE's territory in the outskirts of San Francisco has everyone here wondering whether this is a fluke or a sign of something bigger?
My concern relates to earthquake caused depreciation of the natural gas lines. My family uses natural gas to heat our home and to cook. Do small earthquakes (that occur a lot) weaken the natural gas infrastructure network?
As discussed here, to avoid terrorism risk -- the utilities are not eager to share information with the public concerning whether our homes are close to major natural gas lines. This asymmetric information is not useful. In a well functioning housing market, people are alerted if they live in an earthquake zone or near toxic waste sites and the price of real estate adjusts to reflect compensation for this "bad news".
Now, here is my question. As small earthquakes rock California --- does this accelerate the depreciation of the natural gas infrastructure? For each piece of the natural gas pipe network, I would like to know;
1. When was it built?
2. When was it last inspected?
3. How do the gas providers choose what pieces to inspect?
4. When earthquakes take place, do the utilities invest more effort to determine whether the network is still secure?
5. From an engineering perspective, what "fail-safe" investments can the utility make to minimize the probability of a disaster? Do they have the right incentives to do so? Can they pass such costs on to customers? Does fear of ex-post liability in lawsuits provide sufficient incentive or is there a moral hazard effect because firms such as PGE have insurance?
If I'm right with my hunch that earthquake zones make reliance on natural gas more risky, then maybe this will nudge solar further and stimulate new interest in a second generation of "electric homes"?
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