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Xcel Eyes Storage Needs in Rockies

Demand for gas storage capacity in the Rockies is growing as gas demand continues to grow and the push for more renewable energy such as wind power creates a need for more back-up gas-fired generation. Xcel Energy told Colorado state regulators last week that it's in the market for more storage space to support its gas supply portfolio.

"We're always in the market looking for more storage," said Xcel's Kurt Haeger, managing director of wholesale planning for the Colorado utility company. In a gas storage presentation last week to the Colorado Public Utilities Commission, Haeger and officials from other regional pipeline and utility companies stressed the need to add more storage in the Rockies to meet gas-fired power generation growth. Storage helps supply reliability and lowers price volatility, Haeger noted.

"We don't have any set amounts [in mind] or any certain projects, but we're continuing to look as our system grows and as we add more wind to our system on the electric generation side," Haeger told NGI in an interview Monday. "With the need to be able to regulate around that wind, gas storage is a benefit."

By the end of next year, Xcel expects to have 1,057 MW of wind energy in Colorado, nearly four times the current 282 MW. Because windpower is intermittent, Xcel needs back-up gas supply for gas-fired generation to be available when the windpower isn't an option.

"You never know when the wind is going to blow, so to the extent that the wind is [intermittent] gas would be the most likely fuel on the margin," Haeger said.

But storage also can be expensive to develop. About 5 Bcf of base gas alone could cost a Rockies storage company at least $25 million in today's market. And although the right geology can be found in the region, today there are only eight storage fields operating in Colorado (seven if you combine the Asbury and Fruita fields in Mesa County; they are operated as one field). Two more are being planned: NGS Investments' Windy Hill project, which would be the region's first bedded salt storage field; and AES' Totem storage project in Arapahoe County, which has been sitting in the planning stages for many years.

"We don't have a specific project in mind right now," said Haeger. "We're really letting the existing projects dictate what might be available." However, he said the Windy Hill project looks promising, and the company is considering supporting an expansion of the Young storage field, owned by Colorado Interstate Gas, if that is determined to be feasible.

Westport, CT-based NGS Investments LLC purchased Windy Hill from Chevron about a month ago and is preparing to launch an open season soon for that project, which would be Colorado's first high-deliverability salt storage operation. FERC approved Windy Hill in May. When fully developed it would provide 6 Bcf of working gas capacity and 400 MMcf/d of deliverability under market-based rates (see Daily GPI, Nov. 2, May 23, Nov. 9, 2005).

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