Power study ignores gas

March 20, 2000
The US Department of Energy overlooked something in the recommendations it published last week on the subject of electric power outages: natural gas.

The US Department of Energy overlooked something in the recommendations it published last week on the subject of electric power outages: natural gas.

The recommendations appear in the final report of the department's Power Outage Study Team, which examined problems in several areas of the US last year. The team issued a draft report in January (OGJ, Feb. 7, 2000, p. 21).

Demand threat

Producers of natural gas should worry about anything that threatens demand for electricity, such as unreliable supply and policy overreaction. Fuel for power generation is the high-growth segment of the gas market.

A December draft report on natural gas for the National Petroleum Council estimated that electricity generation will account for half of the 7 tcf gain expected for gas consumption between 1998 and 2010. To meet expected demand for electricity, the report projects, generating companies will put more than 110 Gw of new gas-fired capacity in service by 2010 and 140 Gw by 2015.

Consumption growth won't match expectation, however, if reliability problems become chronic.

The final report of the Power Outage Study Team added 12 recommendations to the January draft. They include support for market-based approaches, customer participation, and mandatory reliability standards for bulk power systems (generation, system control, and high-voltage transmission facilities). Other recommendations cover subjects such as sharing of best practices, emergency preparedness, system monitoring, and energy efficiency-which always means consumption restraint.

There isn't a word about the fuel selected for 96% of the 200 most recently announced power generation stations at the time of release of the report to NPC. It is reasonable to argue that the subject of the study was electricity, not gas. It is just as reasonable to point out that where the federal government has acted with direct effect on gas, the effects conflict in conspicuous areas with reliability of power supply.

If gas is to satisfy projected demand, production must increase, and the transportation system must grow. Both developments require access to land, much of it owned by the federal government.

The government is a stingy landlord. It has essentially precluded drilling and production on most of its holdings on which those activities do not already occur.

The NPC draft report estimates that in the Rocky Mountain region alone, gas resources totaling 29 tcf-what the report projects as a year's worth of total US consumption in 2010-are off-limits to development. Resources totaling a further 108 tcf are accessible with restrictions. Elsewhere, resources subject to access restrictions include 21 tcf off the West Coast, 24 tcf in the eastern Gulf of Mexico, and 31 tcf off the East Coast.

Land-use policies limiting that much potential supply detract from reliability of an electricity system based increasingly on gas-fired generation. Land-access problems also hamper and in some areas preclude pipeline construction. DOE isn't to blame for these restrictions. It simply missed a chance to speak out against them as part of a study in which the point is fundamental.

Impeding competition

DOE can, however, take direct blame for a separate initiative that, if implemented, would work against power-system reliability. It's the mandated market share for renewable generating fuels in the legislation DOE proposed last April for increasing competition in the electricity industry. By their very nature, fuel mandates impede competition and the market principles saluted in the Power Outage Study Team's recommendations. Requirements that generators use fuels they wouldn't otherwise choose cannot enhance reliability of supply.

Gas producers should applaud DOE's attention to the issue of power-system reliability. It's crucial to their future. But they have reason to bristle at what the study team's recommendations ignore.