Representatives from some of the nation’s leading power generators and one of its largest grid operators continue to tout the benefits of natural gas, but they cautioned that the fossil fuel faces challenges, and it won’t be the only fuel source for electricity in the coming decades.

Executives from power generators Calpine Corp. and Dynergy Inc., along with a representative of PJM Interconnection, gathered last week to discuss the Appalachian Basin’s growing natural gas supplies and their effects on the Midwest, southern and Mid-Atlantic power markets at Pennsylvania State University’s Natural Gas Utilization Conference.

“The Marcellus and Utica have had a huge impact on our operations,” said PJM’s Lead Market Strategist Gary Helm, who said the grid operator expects 25,000 MW of coal-fired retirements in the near-future.

Natural gas end-use in the power market has become increasingly important as more coal-fired power plants are retiring, in the face of low gas prices and stringent federal and state environmental standards. In its 2015 Annual Energy Outlook, the Energy Information Administration predicted that coal-fired capacity across the country would decline from 304 GW in 2013 to 260 GW in 2040. In the longer term, natural gas is expected to fuel more than 60% of the new generation needed between 2025 and 2040.

With less coal anticipated to feed the nation’s electricity consumption, gas-power coordination is becoming more imperative as more generators look to fill the gap. The complexity came into sharp relief during the brutally cold winter of 2013-2014, when demand for gas reached record-setting highs (see Daily GPI, May 14, 2014).

Many of the nation’s coal-fired power plants, Helm said, are in the Midwest, having long drawn supplies from the Appalachian Basin. But with fuel switching ongoing, more gas is being delivered through pipelines rather than just sitting on site like coal. This has required PJM and others to work more closely with local distribution companies (LDC), midstream companies, producers and power generators.

“There are 32 LDCs that we’re working closer with,” Helm added. “All this is a huge challenge for us, but I would say it’s a big opportunity because we’re seeing a lot of benefits from natural gas in this area.”

Dynegy’s Chief Commercial Officer Henry Jones said “we’re doing our best to procure supply and building relationships with producers and pipeline operators.” Dynegy operates power generating facilities in eight states in the Midwest, the Northeast and West Coast. All of the company’s coal-fired power plants east of Chicago are operating at capacity, meaning more gas would be needed going forward, he said.

After its annual capacity auction earlier this year, PJM secured 166,837 MW for the 2018-2019 delivery year (see Daily GPI, Aug. 24). That was down compared with 167,004 MW in the 2014 auction. But new power plants, mostly gas generation, accounted for 2,919 MW. One of the nation’s largest grid operators, PJM coordinates electricity in 13 states and the District of Columbia.

Calpine’s Joe Kerecman, who directs Government and Regulatory Affairs, reminded conference attendees that gas prices can be volatile and noted that coal would continue to be used in the United States for electricity. Calpine is the nation’s largest power generator from gas and geothermal sources. Kerecman said his company operates 87 power plants, of which 95% use gas to generate electricity. The company currently accounts for 10% of all gas burned by the power industry each day, he said.

“Yes, coal is challenged, but it’s not going away,” Kerecman said. He added that some coal-fired plants are simply uneconomic and run at nowhere near the efficiency of today’s modern coal facilities. Many of today’s retiring plants were built in the mid-20th century and have reached the end of their useful life-cycle.

“The price of gas is putting pressure on other fuel sources,” Kerecman said. “But [other sources] will continue to account for generation.”

The Obama administration’s Clean Power Plan (CPP), which calls for cutting carbon emissions from the power generation sector by 30% below 2005 levels by 2030, also had panelists concerned (see Daily GPI, June 2, 2014). Power plants remain the nation’s single largest source of carbon pollution, but the administration’s proposal is currently facing a challenge in federal court. The CPP would rely on each state to create its own program to lower carbon output from power plants.

“There could be impacts to reliability because of the way it’s set up,” Helm said of the CPP. “If we get states doing different things, it would make coordinating and trading [gas] more difficult. That would have a negative impact on dispatch that at the very least impacts costs.”

Former chairman of the Public Utilities Commission of Ohio Todd Snitchler, who moderated the panel, agreed with Helm, saying he believes the costs to implement CPP have been grossly underestimated. Increased regulation and costs could disrupt power markets and have inadvertent effects on consumers, he said.

“Consumers want the lights on; their beer cold and their water warm,” Snitchler said. “They want low costs, and what that takes, they don’t care.”