NGI The Weekly Gas Market Report
The amount of new gas-fired power generation planned for thenext two years reveals the rather alarming possibility that anadditional 10 Bcf/d of gas demand could be added to the gas marketbefore the end of 2002 from power demand alone, according to areport by Raymond James & Associates.
This should provide significant evidence that the current gasmarket imbalance won’t be corrected anytime soon, Raymond Jamessaid in the report issued yesterday. The report claims that 136,000MW of new gas-fired power generation probably will be added by theend of 2002. “Of course there probably will be project delays andcancellations, but it is reasonable to assume that at least 100,000MW will be added before the end of 2002.” Raymond James calculatesthat every 10,000 MW addition of gas-fired power roughly equates to1 Bcf/d of additional demand.
The Raymond James tally basically is even with what was releasedlast November by the Energy Information Administration (EIA). EIA saida total of 108,374 MW of non-utility generation was planned to beadded over the next two years. A total of 145,417 MW of non-utilitygeneration is expected to be added to the U.S. power grid between 2000and 2004, and 83% of that total should be gas-fired, EIA said (seeDaily GPI, Nov. 30).
Raymond James’ latest tally of total proposed generation shows253,000 MW of announced capacity additions through 2007, up from aprevious total last year of 160,000 MW over the same period.
About 22,000 MW of gas-fired power was put in place last year,somewhat less than Raymond James’ forecast of 30,000 MW and therecord of 26,200 MW of capacity additions set in 1979. But thatdoes not mean high gas prices are slowing down construction.
“Even though natural gas prices have tripled, industryexpectations for 2001 are up slightly to 52,000+ MW of new capacityand… the real explosion in new gas fired power comes in 2002 andbeyond…” Raymond James said at least 150,000 MW will be requiredthrough 2007 to balance supply and demand and maintain a 15% powerreserve. About 109,000 MW should be running by 2003 and 156,000 newmegawatts probably will be installed by 2007 (from 1999), RaymondJames said.
In the near term, the strain on the gas market is going to beconsiderable. With between 35,000 and 40,000 MW of new gas-firedpower expected to be in place next summer compared with summer of2000, another 3-4 Bcf/d of demand will be created. “SOS is right!Where is this additional gas supply going to come from?” RaymondJames asked. “Good question.” The firm expects that much industrialdemand will have to be eliminated by high prices to allow the newpower to enter the market.
There is a common misperception that $9/MMBtu gas prices aredeterring further gas-fired generation development. “The newcombined cycle plants being built today are actually making onaverage over $60/MWh after fuel costs around the United States,”Raymond James said. “In fact we have seen that margin explode upnear $200/MWh during the peak summer months. We expect this trendto continue into 2001. Natural gas sets the price for electricpower — a relationship made in heaven (for now).”
©Copyright 2001 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |