Gas pipeline industry lobbyists are missing an excellentopportunity to promote greater expansion of the pipeline network,Commissioner Brent Alderfer of the Colorado Public UtilitiesCommission said at the annual conference of the Colorado Oil andGas Association earlier this month. The power industry apparentlyhas overlooked the relative ease and economic advantage of buildingnew gas pipelines and distributed generation to constrained areascompared to constructing remote generation and new powertransmission lines, said Alderfer.

The role of gas pipelines in serving the generation marketshould be viewed in a new light as the power industry and thosethat regulate it struggle to understand recent reliability problemsand price spikes, he noted. The focus in the power industry hasbeen on building new transmission, opening up the power grid andinstalling ISOs. But in many cases, that either won’t solveexisting constraint problems, or in the case of building moretransmission, is politically and environmentally difficult.

“The national debate on electric markets, market power,reliability and Independent System Operators needs to includepipeline additions and distributed generation as competitivealternatives to exclusive service with new electric transmissionlines,” said Alderfer.

According to his calculations there is a clear cost advantage inbuilding gas lines to gas-fired power plants rather than new powerline from remote plants. Under one example, which he cited, acompany would have a choice of two construction scenarios: 1) builda remotely located 400-MW combined cycle gas-fired power plant atcost of $600 per kilowatt ($240 million), a $4 million switchyard,a new 300-mile (345KV) transmission line at $333 k/mile (or $100million); or 2) build a 300-mile 24-inch diameter gas line (250MMcf/d or the equivalent of 3,200 MW) with compression at a cost of$500,000/mile ($176 million), and build 4.5 new 400 MWcombined-cycle gas-fired power plants and switchyards at the end ofthe pipe located near the demand center. The first scenario wouldresult in a delivered power rate of 3.35 cents/kWh at $2/MMBtu forgas supply. But the second scenario would be 0.51 cents/kWh cheaperwith a power rate of 2.84 cents/kWh.

“If you compare the cost efficiencies, uses and community appealof natural gas pipelines versus electric transmission, [gas winshands down],” Alderfer said.

Rocco Canonica

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