Assuming the Pacific Northwest soon will have added natural gas pipeline capacity into Oregon’s Willamette Valley and elsewhere, the power sector’s growing use of renewables, particularly wind, in the region promises to revise the roles played by gas pipelines and storage, Northwest Natural Gas Co. CEO Gregg Kantor said Wednesday during a second quarter earnings conference call.
While reiterating that he thinks at least the eastern part of the proposed Palomar Pipeline, a joint venture of Northwest Natural and TransCanada Corp., will get built, Kantor said he is staying in close contact with the power sector utilities in the Northwest. At least two major variables are driving the utilities’ outlooks: integrated resource planning that call for “a lot more gas” and are wrestling with the economic question of how quickly there will be rebound, and how quickly are the region’s major coal-fired generation plants (Centralia and Boardman) going to be “transitioned out?”
“I think we are going to see a lot more clarity by the end of this year on what is going to happen to coal,” Kantor said. “That issue, along with a clearer look at what the economy is going to do are the deciding factors for the electric utilities.”
Both the coal issue and the aggressive shift in the Northwest to reliance on wind-generated power are driving what Kantor said is a lot of discussions between his gas-only utility and the electric counterparts on how to manage gas storage in the region to support the added peaking generation plants that will have to be built to backup all the wind generation being built (3,000 MW of wind operating, 3,000 MW in construction and development and another 3,000 MW planned).
“The choices that a lot of utilities have now include signing up for pipeline capacity, which is a very expensive way to serve peaking gas-fired generation,” Kantor said. “Otherwise, the choice is find out what storage services can support peaking generation.
“This really changes the value of storage from what is storage’s intrinsic value of dealing with price volatility issues to a question of how expensive is storage relative to pipeline capacity, which is a different way of calculating the value of storage.”
So for the Oregon-based Mist Storage Field northwest of Portland, Kantor considers himself bullish about its prospects, given the electric sector dynamics — particularly the way it’s driving additional peak gas-fired demand for electric generation.
Originally opened in 1988, Mist has since expanded to serve an increasing customer base and now has the total storage capacity of 14 million Dth, with 5 million Dth of that capacity being made available to Portland General Electric under a 10-year contract signed with Northwest Natural in 2005 and other partners.
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