With the backdrop of high and growing reliance on natural gas for power generation driven by the continuing shale gas expansion and resulting low prices, a conference room filled with gas industry representatives Tuesday discussed ways to better coordinate regional and national gas and power grids during a daylong FERC conference in Portland, OR.
An analysis from the FERC’s fourth in a series of five regional workshops on gas/electricity markets described the West as relying on gas increasingly by 2020. Robust gas and electric systems exist throughout the western region, representatives agreed, but they spent much of the time discussing the challenges and opportunities for better using and coordinating the two energy infrastructures.
Noting that the Federal Energy Regulatory Commission does not need to take any action as the result of its ongoing series of conferences on the gas-power issue, FERC Chairman Jon Wellinghoff said the nation is in a “transition in our fuel mix.” With air quality regulations changing, a reduction in coal-burning and the upswing in domestic gas supplies, Wellinghoff emphasized that a “much different fuel mix” is coming.
“With that said, I want to also indicate that this doesn’t mean that FERC is looking to do something here. Maybe there are issues we can help with, but we certainly don’t want to intrude [on states and the industry] where that would be unnecessary. We are just here to learn and find out what the interface between the gas and electric systems is and if there is any potential future role for us.”
Wellinghoff said that everyone would benefit from finding ways to operate the two systems more efficiently, cost-effectively and reliably. Commissioner John Norris also attended and echoed the chairman’s thoughts, noting that the conferences are to “help define the problem, if there is a problem, and what it may take to address the problem.”
The two FERC commissioners and various industry representatives underscored that gas-electric coordination is particularly important in the West because of the large amounts of large-scale solar and wind power projects that have come on line, putting added stresses on the gas system.
With FERC-articulated statistics showing 42% of the West generation capacity being gas-fired and nearly 60% of the new capacity being added in California being gas-fired, Tuesday’s conference assumed as its basis that “a significant portion of new generating capacity installed in the next 10 years will use natural gas as its primary fuel.”
How do the gas and electric systems accommodate this growth?
There were no clear answers, but there was a day full of discussion talking about injecting more flexibility in the two systems, particularly the interstate gas pipeline system. Procurement of transportation and storage gained a lot of discussion as did the potential need to build more pipeline capacity.
How diverse (or consistent) are nominations, scheduling and commitment practices across the region? How do the region’s utilities and generators manage the mismatch between the scheduling and commitment timelines on the electric side in local time and national standard pipeline practices? There were no clear answers, but lot’s of input for FERC’s staff.
A representative for Phoenix-AZ-based Arizona Public Service Co. (APS), Justin Thompson, said more than half of APS’s generation capacity is gas-fired, burning about 46 Bcf annually, but that is expected to grow substantially by 2020, hitting 104 Bcf annually that year.
“We expect to more than double the gas burn for power during the next six or seven years,” said Thompson. “That will add to the volatility of the gas burn for us.”
The different structures of the natural gas and power markets, disparate scheduling cycles and interstate natural gas pipeline constraints are the chief barriers to the efficient coordination of the two markets in the Northeast, regulators and industry officials said Monday.
Earlier this month at a workshop in Boston, FERC Commissioner Cheryl LaFleur said the Northeast “is facing the issues of gas/electric interdependency more sharply and with more urgency than any other region due to [its]…strong dependency on natural gas both for electric generation and for home heating and other end uses” (see Daily GPI, Aug. 21).
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