Natural gas has become the fuel of choice of power generators operating in the seven independent system operators (ISO) and regional transmission organizations (RTO) across the nation, and demand is expected to grow.
The Midcontinent ISO (MISO) currently serves most of its load with coal and uses natural gas for peaking operations, but “I think the world’s going to change on us,” said Joe Gardner, vice president of forward markets and operations services for MISO, during a FERC meeting on coordination of the gas and power markets.
“We never had to understand it [gas pipeline infrastructure and operations] as much as I think we’re going to in the future,” such as operational flow orders, he said. He said six gigawatts (GW) of coal-fired capacity in the region is expected to retire in the next few years, and 5 GW of capacity is undecided. So there could be a lot more gas units built, he told the Federal Energy Regulatory Commission (FERC) Thursday.
In addition, many coal plants are going to have to modify their equipment to comply with federal rules next year or the year after. As a result, “we’re going to see a lot of units down for maintenance simultaneously.”
Because New England has “vigorously endorsed a cleaner environment,” the region has become “heavily reliant on natural gas,” said Kevin Kirby, vice president of market operations for ISO New England. Unfortunately, it has limited pipeline capacity — five gas pipelines and two liquefied natural gas storage facilities — to serve power generators.
Algonquin Gas Transmission and Tennessee Pipeline serve the majority of gas-fired generators in the region, he said. Kirby estimated that 43% of New England’s generation fleet uses natural gas.
Kirby said that power prices closely reflected gas prices this winter. When the gas system was highly constrained in January and February, wholesale power prices “increased significantly to reflect that scarcity.” Power generation’s growing dependence on natural gas is the “highest priority” in the region, he said.
Brad Bouillon, director of day-ahead market and real-time operations support for the California ISO, said his system works closely with its pipeline providers. California ISO relies heavily on natural gas and provides electricity to about 80% of the state.
The ISO confers formally with its pipelines at least once each quarter, he said. In the first quarter, the ISO met with Sempra, Kern River Gas Transmission and Pacific Gas and Electric and discussed maintenance activities, the need for additional storage and other issues, according to Kirby. It will meet again with the pipelines in June to address summer issues, such as whether adequate fuel supply and pipeline capacity exist to meet electric loads. It also plans to meet with the pipelines serving the system in the fall to determine the winter assessment. Talks to better coordinate the gas and power markets have been ongoing at FERC (see NGI, April 29).
According to Kirby, FERC must recognize that the issues ISOs and RTOs face with respect to natural gas differ across the regions.
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