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EEI: Distributed Power, Kyoto A Boon to Gas

EEI: Distributed Power, Kyoto A Boon to Gas

Distributed generation and mandates of the Kyoto protocol could mean great things for gas demand and are reason enough to make the industry super bullish, according to the Edison Electric Institute's (EEI) Charles Linderman, director of fossil fuels, renewable energy and rail policy.

"I challenge all of you to think not of 30 Tcf as the ultimate goal, as a ceiling, [for gas demand] but as potential for future opportunities.

"There are wonderful opportunities for thermal, gas-based technologies ahead, but not very far ahead. And the implications for both the gas industry and the electric industry are enormous," Linderman told attendees Tuesday at the Ziff Energy North American Gas Strategies Conference in Houston.

As an example, Linderman said Allied Signal is planning to produce 3,000 gas-powered 75 kW microturbines a month beginning this June, and GE Fuel Cell Systems and New Jersey Resources recently announced a joint venture. Despite technological advances, deregulation, environmental and reliability pressures making distributed generation more attractive, there are obstacles, Linderman cautioned.

"Microturbines take a little more pressure than may be generally available on the [local] system. We are in early discussions with AGA [the American Gas Association] about what's the obligation to serve requirement of the gas LDC if somebody has put in a gas-based distributed generation unit. Do they have to serve in times of stress?" EEI and the Gas Research Institute (GRI) are studying application of distributed generation and seeking to overcome cases where distributed generation could not be sited due to constraints on gas supply. Linderman said power grid issues, such as interconnection standards and market timing and load requirements, also need to be worked out.

Distributed generation is attractive as a back-up supply of electricity to businesses such as grocery stores, which need an uninterrupted stream of power to prevent food spoilage, Linderman said. Distributed generation also is seen as politically attractive as it can enhance electric system reliability, he said.

Specifications of the Kyoto protocol - renewable energy requirements notwithstanding - are good news for the gas industry, Linderman said. EEI is completing an analysis of the protocol's impact on the gas market. The institute's base case scenario would boost gas to 25% of the U.S. power generation mix by 2010. A high case has gas taking 48% of the generation mix by 2010. Gas demand could hit 34 Tcf by about 2009. Linderman said. A scenario for generation demand factoring in Kyoto shows gas holding 48% of the generation market versus coal with 24% in 2010. Projections not considering Kyoto show coal with 50% of the market and gas with 25% by 2010.

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