Legal & Regulatory

The U.S. Has a New Dash for Gas

Natural gas has reemerged as the choice for new electric generation, according to the North American Electric Reliability Corp. Does this raise new reliability issues?

Electric utilities are increasingly showing an “overwhelming” preference for building natural gas–fueled plants, a trend that is expected to drive gas past coal as the dominant North American fuel for on-peak power production by 2011, the North American grid watchdog predicted at the end of last year.

The powerful trend toward gas was noted as a potential reliability problem in the annual long-term reliability assessment released October 29 by the North American Electric Reliability Corp. (NERC), which oversees mandatory grid reliability rules for the continent’s bulk power system.

NERC also cited cyber-security concerns, the integration of fast-growing renewable resources into the grid and uncertainties created by the economic slowdown as emerging reliability worries that it faces.

NERC also once again underlined the need for grid expansion and new transmission capacity to handle renewables and ensure reliability, with particular urgency seen in areas of the Southwest.

On the natural gas issue, NERC said both regulated utilities and merchant generators are increasingly favoring gas plants because the fuel has been discovered in more abundance and is cheaper than in the past. In addition, gas plants are easy to site, can be built quickly, and produce less carbon emissions than other types of traditional generation, NERC said.

“These competitive advantages have resulted in an overwhelming preference for the resource over the ten-year period, as installed natural gas capacity is projected to increase 38% over the ten-year period, while coal is projected to increase by only 6 percent,” NERC’s assessment said. Further, NERC said that “on-peak natural gas capacity is projected to grow by more than double the amount of any other resource, and by more than five times any other resource when dual fuel resources (primarily fired by natural gas and another, alternate fuel) are excluded.”

From NERC’s perspective, however, that trend is not all good. NERC said the growing reliance on gas could create power grid system problems if gas usage strains the infrastructure that delivers gas to power plants. “The projected growing reliance on natural gas increases the potential for adverse reliability impacts due to fuel supply and storage and delivery infrastructure adequacy issues,” NERC said.

Gas’s popularity is driven partly by anticipated U.S. legislation to curb production of greenhouse gases, which would favor low-emitting methane over carbon-heavy coal. Additionally, a surge of new production from unconventional resources such as shale reserves has vastly expanded known domestic supplies of the fuel, pushing down prices.

Coupled with mild weather over the summer, increased gas production has already strained gas infrastructure, with the nation’s largest independent gas producer—Chesapeake Energy Corp.—disclosing during the summer that it briefly slowed production because pipelines and gathering systems were too clogged to handle more gas.

Along with concerns about gas usage and its impact on the grid, NERC said several of its higher-priority reliability concerns are related to the current economic slowdown. Among them is heightened uncertainty about demand projections, as businesses and residents seek to trim power usage to save money.

While reduced demand generally boosts grid reliability by increasing power reserve margins, NERC said problems arise when supply gets too far ahead of demand, particularly in regions with heavy penetration of intermittent wind power that can change reserve margins quickly. “In Ontario, such conditions required grid operators to reduce the output of the province’s nuclear fleet in June 2009,” NERC said.

But NERC said the larger problem associated with the economic turndown will be preparing to manage the grid when conditions improve and demand surges. NERC said a “plausible” future scenario involves flat or negative power demand growth for the next seven or eight years followed by an “abrupt change to normal or high demand growth.” Under that situation, “reliability can rapidly deteriorate in the last years of the planning horizon as demand increases rapidly and generation cannot be constructed quickly enough to respond,” NERC said.

NERC stressed the need to build more transmission, saying that 11,000 miles of new power lines, with 200 kilovolts or more of capacity, must be built to ensure reliability over the next five years. In that regard, NERC said that areas of the Southwest and Southeast are showing operational signs of “significant transmission constraints.”

“A particular area of focus,” said NERC, “is the Southwest Power Pool’s Acadiana area” in south-central Louisiana. NERC said that 15 Level 3 emergency alerts—the third-most-serious of five such NERC categories—were declared in that region last June as a result of a generation outage.

NERC said plans are already under way to upgrade transmission in the region, but that energy alerts and other operational tools—including ordering utilities to shed non-firm load—will be needed to ensure grid reliability until the upgrades are done.

—Jeff Beatty is a reporter for The Energy Daily, a sister publication of MANAGING POWER.

SHARE this article