Implications of Natural Gas and

Transcription

1 Implications of Natural Gas and Electricity s Convergence Northwest Convergence Summit Portland, OR January 25, 2012 Catherine Elder kelder@aspeneg.com Aspen Environmental Group

2 Study Provides Reality Check on Switching Coal-Fired Fleet to NatGas Sponsored by APPA and UARG with some funding by NRECA and EEI Gas producers telling EPA: switch all coal to gas Have plenty of cheap gas Is EASY; do it NOW Pressure on utilities to close coal-fired plants Boardman + Centralia + elsewhere Sponsors believe replacing existing plants with gas will cost less than complying with range of new EPA rules 2

3 The Reality IS: It takes LOTS of gas 335,000 MW of coal-fired gen 68% capacity factor means 14 Tcf of gas Versus 22 Tcf or so we produce today Means LOTS more drilling even with shale It takes LOTS more coordination 30% gas throughput is to EG today could double Need more communication gas to electric and new operating procedures Need more storage and line pack to provide flexibility 3

4 Not Much of that Coal is in the Northwest Centralia 1460 MW Boardman 600 MW 4

5 Study Identifies Convergence Issues as More Generation Switches to Gas Gas Control, power dispatchers, and control area managers don t talk to each other much Gas nominations on different schedule than power Speed of gas is SLOW; pack system before demand Traditional focus on human needs customers Power plants and large users first OFF the system Becomes harder to do if need gas-fired EG for reliability More plants on/off has bigger impact on system Impacts bigger if no industrial load San Diego 5

6 And When Do Talk, Gas People Confuse by Interchanging Terms 80 MMcf *1.05 = 84,000 MMBtu Pipeliners think in MMcf Suppliers think in MMBtu MMBtu = Decatherm Customers are often billed in cents per therm Core customers are residential and small commercial Mission No. 1 is NO OUTAGES: uncontrolled gas outages are dangerous as pilot lights go out and restoration ti of gas requires house to house effort 6

7 EG Needs Tools to Address Widely Varying Daily Load Day to Day Variation in Gas Load for Utility serving load using 5% Renewables, 32% Nuclear, 32% Coal, 14% NatGas and 17% Purchases MMBtu per Day Swing in Load 7

8 Reality of Gas Balancing Requirements Pipelines and LDCs require: Q delivered = Q nominated = Q burned Suppliers OR End-users can cause imbalances Leaving an imbalance on the system = free storage or can impede safe operations when inventory gets too low or too high relative to demand Some allow 10% tolerance Can cash out/use storage or hub services/trade Operational and Emergency Flow Orders 8

9 Generators Also Need Increased Flexibility To Support Variable Takes 4 NAESB nomination windows for tomorrow s deliveries Timely window before electric scheduling Most tariffs require gas to be scheduled (and burned) in EVEN HOURLY quantities Gas need may change further with change in weather Nomination Hour CCT Day Timely 11:30 AM Day PRIOR to gas flow Evening 6:00 PM Day PRIOR to gas flow Intraday 1 10:00 AM Day OF gas flow, 5pm Day OF Intraday 2 500PM 5:00 Day OF gas flow, Day OF 9

10 But Wait, There s More that Confounds Changes in EG Gas Demand Bump vs. No-Bump IT uses capacity not nom d by FT shippers Bumping allows an FT shipper who adjusts a nom in a later window to bump an IT shipper A No-Bump rule can prevent an FT Shipper from being able to adjust a nomination Again, result is additional cost incurred by generator 10

11 Some Ways Generators May Balance Bt But Impose Higher Hih Costs Could have standing nomination to take fixed quantity every day If don t burn gas supplier resells into market Likely at a discount to index and/or at risk for day to day change in market prices Could have contract to nominate variable quantity, usually an up to limit supplier will add premium for call option supplier may add higher premiums at quantity increases 11

12 EGs and System Operators also Need to Understand d Pack system in advance of predicted cold More about how LDCs and pipelines decide to add pipe and how it gets paid for Pipelines can often offer more flexibility IF they have the facilities to do so: Union Gas Someone has to pay for those facilities or for bigger pipe to pack gas into Peakers tend not to want to pay for 365-day firm gas pipeline capacity 12

13 Other Reasons for Gas Upgrades NTSB recommendations post-san Bruno on hydrostatic testing of pre 1970 s pipeline in HCAs + MAOP reductions and remote/auto valve installs; PHMSA rulemaking EPA rule pending on PCB rule update INGAA says can only be met by replacing pipe and compressors Next step in 2013 EPA rule pending on pipeline and storage compressor engine and fugitive i emissions i 13

14 Impacts During Hydro-Testing Hydrostatic testing of pre-1970 s pipeline and operating at lower pressures until test Reduced PG&E linepack capability by 400 MMcfd On July 1 began calling simultaneous high and low OFOs each day Effectively requires instant balancing or pay penalty Generators e asked CAISO for compensation o 14

15 400 Underground Gas Storage Facilities In U.S. Are Not Evenly Distributed WRT Geo OR Load 15

16 Different Types of Storage used Differently Storage historically developed to meet winter peak load and allowed low summer prices to offset higher winter prices Advent of futures market and direct access between gas suppliers and buyers and greater use in power plants that cycle means high-deliverability storage can be used to arbitrage short-term price changes High-deliverability storage means the facility turns several times per year instead of injecting all summer and withdrawing all winter (only 1 turn ) Value of storage reflects the arbitrage opportunity Arbitragers inject when prices are low/sell when prices high 16

17 Consider Whether Gas Is Best for Backing up Renewables Slow Not an efficient use of gas pipeline capacity Worry most about sudden hourly draw on a low gas demand day Like to see more work on electric side to apply imbalance trading and integrated energy storage to solve Geothermal s ramp capability may help or locate small tank storage near peakers 17

18 Summary Keep Communicating about Needs and SOPs Gas system not built to address wide fluctuation in demand quickly Facilities such as more storage or bigger pipes probably needed to provide more flexible balancing Some SOPs need to change Public policy needs to allow cost recovery AND move EG load to higher priority than industrial load but restoring core service very costly 18