DOE electricity grid reliability study examines roles for natural gas

Aug. 24, 2017
Natural gas produced in the US has played a key role in making the country’s electricity grid more reliable and will continue to be an important fuel source, the US Department of Energy indicated a recently released study of the nation’s electric power generation, transmission, and distribution system.  

Natural gas produced in the US has played a key role in making the country’s electricity grid more reliable and will continue to be an important fuel source, the US Department of Energy indicated a recently released study of the nation’s electric power generation, transmission, and distribution system.

“This review is something that was long overdue. The [electric power] industry has experienced massive change in recent years, and government has failed to keep pace,” US Energy Sec. Rick Perry said in a letter accompanying its release. “This report examines the evolution of markets that has occurred over the last 15 years. Policymakers and regulators should be making decisions based on what the markets look like today, not what they looked like years ago.”

Falling prices—resulting from increased availability of gas to generate power because of horizontal drilling and hydraulic fracturing’s opening previously inaccessible domestic supplies since 2008—accelerated the growth of gas-fired power generation since the 1980s for several reasons, the report said.

“These plants have low capital costs and are, in general, relatively less expensive than some competing technologies,” the report noted. “They are also much less land-intensive than many other types of generation, and thus often can be more easily sited in urban areas near electric demand.”

The report said, “Similarly, gas pipelines can be built more quickly than electric transmission lines (in most states) because they have a comparatively streamlined permitting process, which often has made it easier for a plant developer to build a new gas-fired plant near a large electric load than to build a power plant farther away and transmit its electricity to large load centers by wire.”

It said gas-fired power plants also have become more fuel-efficient over the report’s 2002-16 study period. “The gas fleet has become increasingly efficient…as old steam electric plants have retired and many new, highly efficient [natural gas combined-cycle] plants have been built and operated at high utilization rates,” the report said. The gas-fired plants have a lower regulatory burden and costs than their coal-fired counterparts, it added.

Single disruption point risk

The North American Electric Reliability Corp. (NERC), however, has warned that disruption risks are increasing for gas-fired generators because are single disruption points that rely on “just-in-time” fuel delivery, DOE’s report said.

The problem is particularly severe in parts of the US—especially New England and California—where gas-fired generation has grown quickly but not enough pipelines have been built to get supplies to the plants, it said.

DOE’s report said NERC recommends a number of planning and operational changes to address this challenge, including:

• Developing risk-based approaches to study the potential regional reliability implications of greater gas dependence.

• Examining the potential for widespread, common-mode failure events such as interstate gas pipeline or supply source losses.

• Formulating regional mitigation strategies; better information-sharing and coordination between electric generators, gas suppliers, and pipeline operators.

• Ensuring the availability of more flexible resources to mitigate the added uncertainties associated with gas fuel reliability risks.

Gas storage in depleted oil and gas fields, natural aquifers, and salt caverns is one way to reduce the just-in-time deliver problem, DOE’s report said. “The ideal storage facilities are near major gas consumption centers, where storage can supplement gas pipelines to meet high demand levels and fill in deliveries in the event of any delivery disruptions,” it said.

DOE’s report noted that during the 2014 Polar Vortex, many gas-fired power plants were forced offline because of gas production and delivery problems, inadequate supply contracts, and prices that spiked beyond levels allowed under many states’ public utility commissions.

It said NERC recommended that power companies examine supply issues they encountered and work with suppliers, markets, and regulators so that appropriate actions can be developed to let power plants secure firm supplies and transportation at reasonable rates.

DOE said in its report that the US Federal Energy Regulatory Commission has promulgated orders to improve coordination between gas and power industry operations. “While various electric and gas industry groups, including NERC, have had and continue coordination efforts, a significant amount of coordination remains unresolved,” it observed.

Calls for increased coordination

It recommended that utilities, states, FERC, and DOE should support increased coordination between the electricity and gas industries to address potential reliability and resilience concerns associated with organizational and infrastructure differences. “DOE and FERC should support well-functioning commodity markets for gas by expeditiously processing [LNG] export and cross-border gas pipeline applications,” DOE’s report said.

A Natural Gas Supply Association official welcomed DOE’s study. “We commend DOE’s report for recognizing the importance of natural gas to the nation’s electric grid,” NGSA Executive Vice-Pres. Pat Jagatini said.

The Natural Gas Council, which is comprised of the American Petroleum Institute, Independent Petroleum Association of America, Interstate Natural Gas Association of America, American Gas Association, and NGSA, issued a white paper in July outlining US gas systems’ reliability and resilience.

It concluded that the gas industry overall is not susceptible to widespread failure from a single disruption point as the electric power generation system gas production and storage are dispersed, gas’s integrated pipeline and distribution system has redundant characteristics, and the system overall is not as vulnerable to weather-related events.

“The gas industry also has in place robust cyber and physical security protocols to minimize disruptions from manmade or computer threats, and has a resilient, interconnected system that allows it to come back on line quickly in the rare case of a disruption,” NGC’s white paper said.

Contact Nick Snow at [email protected].

About the Author

Nick Snow

NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.