Expected growth in natural gas use in U.S. electricity generation from the shale revolution and climate-driven government policies is not expected to cause a corresponding building boom in gas pipeline infrastructure, a recent report by the U.S. Department of Energy (DOE) has concluded.
That projected growth is in the range of 38-42 Bcf/d of new capacity added by 2030, meaning there would need to be $2.6-$2.8 billion spent annually on interstate expansion.
DOE's report, "Natural Gas Infrastructure Implications of Increased Demand from the Electric Power Sector," said there are two primary factors lessening the need for future infrastructure expansions -- the growing geographical dispersion of shale-driven gas supplies and the prospect for using currently under-used capacity on the nation's interstate pipeline network.
With the ongoing retirement of coal-fired generation and the prospects for more, and the increasing opportunities for more gas-fired generation, DOE undertook its study to add to the general understanding of what this might mean for the future gas pipeline system. DOE contracted to use Deloitte MarketPoint's North American Integrated Model, examining base case, intermediate and high-growth power demand scenarios.
The results don't necessarily coincide with recent past regional analyses in places like the Northeast or coal-dominated states where the anticipation is that more stringent federal emissions standards will mean more switching from coal to gas-fired power generation (see Daily GPI, Oct. 14, 2014; July 22, 2013).
Under the DOE growth scenarios, the study concluded that the incremental increase in interstate gas pipeline expansion and associated investment "is modest relative to historical capacity additions." In fact, it noted that projected growth would be well below the levels of pipeline growth experienced during the past 15 years.
"The projected rate of interstate pipeline capacity expansion in the scenarios considered in this analysis is lower than the rate of historical capacity additions over the past 15 years and is consistent with information currently available on planned capacity additions over the next three years," the DOE report said.
From 1998 to 2013, the report pointed out, there was nearly 127 Bcf/d of new pipeline capacity added in the United States. The projected needs for the next 15 years add only up to about 42 Bcf/d of new capacity.
The DOE report lists four major findings:
Shale gas developments are spread around more areas than conventional production, increasing the diversity of both supply and demand and reducing the need for additional interstate gas pipeline infrastructure;
Similarly, higher use of the full capacity of interstate pipes, which generally are under-utilized, also will lessen the amount of new infrastructure needed;
While future carbon policy could significantly increase gas demand from the power generation sector, the projected incremental increase in gas pipeline capacity additions is "modest" relative to the base reference case scenario; and
The historic constraints and complexity of siting new pipeline infrastructure are expected to continue, but the additions needed for the future are a lot less than those that were completed in the past 15 years while facing the same constraints. In addition, there are a number of processes underway, including at the Federal Energy Regulatory Commission, to address the permitting bottlenecks going forward.
DOE said its report is consistent with an ICF International report completed last year for the Interstate Natural Gas Association of America (INGAA) (see Daily GPI, March 6, 2014). INGAA's study, which dealt with the United States and Canada and used a different set of input assumptions, found average U.S. annual expenditures on added capacity would range from $2.7-$4 billion annually.