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Gas-Fired Electric Growth Raises Reliability Concerns, NERC Says

Count the North American Electric Reliability Corp. (NERC) among those concerned about the implications of increased natural gas-fired generation on system reliability.

“Natural gas-fired generation surpassed coal this year as the predominant fuel source for electric generation and is the leading fuel type for capacity additions,” NERC said in its recently published 2015 Long-Term Reliability Assessment. “A growing reliance on natural gas continues to raise reliability concerns regarding the ability of both gas and electric infrastructures to maintain [system] reliability, despite substantial progress made in addressing the interdependencies between these two industries.

“There is a need to enhance planning approaches to consider fuel deliverability, availability and responses to pipeline contingencies that are unique to each area.”

NERC said a heavy reliance on gas generation could be of particular concern “during extreme weather events, when there is high demand on both the natural gas and electric systems and the likelihood of natural gas deliverability interruptions is heightened. Vulnerability to these concerns varies by region and are particularly apparent in areas with a generation mix that is increasingly dominated by natural gas-fired capacity with interruptible supply.”

As gas-fired generation increases, the existing pipeline infrastructure could be put under significant stress, NERC said, noting that “as more gas-fired capacity is added, the system will be further strained as demand swings from generators could lead to pressure drops in pipelines that subsequently could jeopardize service to customers on the entire system.”

NERC said it also sees a downward trend in reserve margins across many of North America’s regional grids “despite an ongoing decline in the growth rates of electricity demand.” It said it projects adequate resource levels in the 2016-2021 window.

FERC Commissioner Tony Clark spoke recently on the need to build out new infrastructure as the power industry undergoes a period of rapid transformation. At a breakfast talk in Washington, DC, this month, Clark said the margin of error on the electric grid has narrowed with the retirement of traditional coal baseload assets (see Daily GPIDec. 10).

"I think we’re running a much tighter system than we have in the past. We’ve had the luxury of having really large operating reserve margins … If the backbone is coal, and the coal unit runs with a 30-day coal supply out front, that obviously gives you some operating flexibility that you don’t have if you’re primarily running on natural gas,” Clark said.

Reliability concerns have also been a key part of arguments in support of a pair of controversial proposals submitted to the Public Utilities Commission of Ohio (PUCO) by subsidiaries of American Electric Power Co. Inc. (AEP) and FirstEnergy Corp. In both cases, settlements have been reached between the utilities, PUCO staff and other stakeholders that would guarantee profitability for certain older coal and nuclear assets, which critics say would shield them against competition from lower-cost natural gas in Ohio’s deregulated generation market (see Daily GPI, Dec. 17).

AEP Ohio President Pablo Vega described the utility’s respective agreement as a “comprehensive plan that helps ensure more stable electricity prices for Ohio consumers and promotes reliable and diverse generation supply to support the Ohio economy.”

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