Capital costs to construct natural gas pipelines are about half of those required to build electric transmission wires, according to a joint study by the Bonneville Power Administration (BPA) and the Northwest Gas Association (NGA). Gas pipes also have lower costs per energy unit delivered and total annual costs, it said.

“Based on a fundamental, hard-dollar comparison, natural gas pipelines are significantly less costly to build than electric wires. At the most basic level — capital costs per mile of each alternative — natural gas pipelines average between 50 and 60% of the cost of electric power transmission per unit of energy (or capacity) delivered,” the federal power agency and Pacific Northwest gas group concluded in their study, entitled “Comparing Pipes & Wires.”

With energy demand in the Pacific Northwest expanding, the BPA and NGA undertook the study to determine whether it was more cost efficient to ship natural gas or the resulting electricity produced from gas over long distances.

For the purposes of the study, they created two “generic” scenarios and compared the costs. Scenario One called for the construction of 100 miles of new 500 kV electrical transmission line to deliver energy from a 1,500 MW generation plant located far from a load center. Scenario Two envisioned the construction of 100 miles of new 20-inch diameter gas pipeline facilities to fuel a 1,500 MW generation plant located near a load center.

The study found that the capital costs per mile to build a 500 kV transmission line ($1.998 million) far exceeded the capital costs to build the 20-inch diameter gas pipeline ($1.004 million).

“This implies that, in many circumstances, construction of a gas pipeline would be more economical than construction of [an] electric transmission line,” the joint BPA-NGA study said. But it noted that “because the physics, the associated benefits and the availability of either adjacent pipelines or electric interconnections are so case- and site-specific, it is not possible to conclude that one system is preferable to the other without studying that specific case.”

While the construction costs favor gas pipelines, the study pointed out that the annual cost to operate and maintain the generic power transmission line ($519,000) was a little more than half the cost to operate and maintain the generic gas pipeline ($1 million). However, “this does not change the overall magnitude of cost differences between the two options studied here.” It estimated that total yearly costs (including annual payments over a 30-year period) would be $25.3 million for the generic transmission line, while only $13.47 million for the generic gas pipeline.

This adds up to a cost per MWh with a 65% load factor of $2.97 for the all-electric solution compared to $1.57/MWh for the gas line. The study noted that a 65% load factor was typical of transmission systems in the Pacific Northwest.

The Federal Energy Regulatory Commission’s cost recovery and pricing policies for pipelines and transmission lines “do not appear to have an inherent bias for one system over another,” the study further concluded, but it noted the agency’s electric transmission rules are in a “state of flux.” Because of FERC’s Standard Market Design initiative and the iffy nature of energy legislation on Capitol Hill, it said it was “not possible to predict with certainty what changes might occur.”

The BPA and NGA believe the results of the study raise a number of questions for the Pacific Northwest: “How can the region capture the economics of gas transmission? How might the region benefit from better integration between electric and gas planning and development? What policies might be considered that would facilitate better integration of the Northwest energy system? [And] what transmission pricing policy changes might occur in the future and what changes would benefit the region?”

They noted that the issues explored in the study were “particularly timely” for the Pacific Northwest region and its power suppliers for three reasons:

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