Gas pipeline industry lobbyists are missing out on an excellentopportunity in the power generation market to promote greaterexpansion of the pipeline network, says Commissioner Brent Alderferof the Colorado Public Utlities Commission. And the power industryas well is overlooking the importance of gas pipelines indistributed generation in creating greater power reliability.

The role of gas pipelines in serving the generation marketshould be viewed in a new light as the power industry and thosethat regulate it struggle to understand the causes behind therecent price spikes that sent the cost of power skyrocketing to$7,000 per MWh in the eastern half of the United States in lateJune, and the causes for the rolling power outages that occurred insome western states, such as Colorado, he noted.

The gas and power industries have overlooked the fact thatbuilding gas pipelines to demand-located, gas-fired merchant powerplants is more cost effective and more politically andenvironmentally feasible than building remote generation and newlarge power transmission lines to demand centers, Alderfer told the10th annual Rocky Mountain Natural Gas Strategy Conference andMarketing Fair sponsored by the Colorado Oil and Gas Association.

“If you compare the cost efficiencies, uses and community appealof natural gas pipelines versus electric transmission, [gas winshands down],” Alderfer said Wednesday. The focus in the powerindustry has been on building new transmission, opening up thepower grid and installing ISOs, but in many cases, that eitherwon’t solve existing constraint problems, or in the case ofbuilding more transmission, is politically and environmentallydifficult, he noted.

Alderfer thinks the delivered-cost advantage of building gaslines to gas-fired power plants should be examined more closely.Under one example, which he cited, a company would build a 400-MWcombined cycle gas-fired power plant at cost of $600 per kilowatt($240 million), and a new 300-mile 345 kv line at $333 k/mile, or$100 million, with a $4 million switchyard. Given thesecircumstances and allowing for a gas purchase cost of $2 MMBtu, thepower rate would be $3.35 per kWh, he estimated. In contrast, ifthe same company were to opt for a 250 MMcf/d gas pipeline (at$500,000 per mile and $176 million of compression), which wouldcarry the equivalent of 3,200 MWs of electricity to 4.5 new 400 MWgas-fired power plants, the power rate would be $2.84 cents perkWh.

The conclusion is building new power transmission to transportdistant gas-fired generation results in a average cost that is 51cents per kWh more than constructing a gas pipeline to localgeneration.

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