Half of the new electricity generation plants added in 2013 are fired by natural gas and almost 30% of new generation is powered by solar and wind energy, according to an April 8 report from the Energy Information Administration. This combination is likely to mean even more demands on the already-strained natural gas delivery infrastructure.
A need for more pipeline capacity is an obvious impact of adding more gas-fired generators. However, substantial additions of renewable generation also add demands on pipelines. As reported in a recent edition of the trade publication Megawatt Daily,[1] Frank Brock with ICF International points out that when renewables are not running, such as when the sun goes down and the wind stops blowing, “you have a big surge in the need for replacement generation — and that’s coming from natural gas.” This demand for more gas deliverability is weather dependent, and, according to Brock, there will not be a lot of investment in new pipeline capacity unless the demand is “solid and steady.”
This impact will be especially felt in California. According to the EIA report, nearly 60% of the natural gas generation capacity and 75% of solar resources added in 2013 are in California. The state needs generation just to meet load, and also needs flexible generation resources like gas to complement the renewable resources being added to meet an ambitious renewable resource requirement. Deliverability constraints will also be felt in New England, according to Brock, as a result of the shale gas boom in the region.
Part of a solution may be additional gas storage. This could come from distant traditional storage facilities or close-in LNG peak-shavers. Brock says no one is really thinking about storage now, but a probabilistic analysis based on expected weather over the next 10 years would likely show “a huge need for high-deliverability storage.”
The Federal Energy Regulatory Commission (FERC) encourages new storage facilities by allowing storage providers to charge negotiated, market-based rates. FERC allows market-based rates if the seller shows it has no market power. However, for storage and storage-related services related to a facility placed in service after August 8, 2005, market-based rates are allowed without such a showing if FERC determines that: (1) market-based rates are in the public interest and necessary to encourage the construction of the storage capacity in an area needing storage services; and (2) customers are adequately protected.
[1] Platt’s Megawatt Daily, “Gas fired additions pressure gas deliveries: Analyst”, April 10, 2014 at 1.