Electric/Gas Coordination in the Northwest

Transcription

1 Electric/Gas Coordination in the Northwest Presentation for Mid-C Seminar July 25, 2012 Presented by Malcolm McLellan Greg Junge Van Ness Feldman

2 The Issue Greater reliance on natural gas has increased the importance of coordination between gas-fired generators and the natural gas pipeline companies that supply them. Source: FERC, 2011 State of the Markets at p. 12 (Apr. 19, 2012) 2 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

3 How We Got Here Coal-to-gas switching increased use of natural gas as fuel for electric generation. Coal-fired generation (as a percentage of total output), declined from 51% in 2002 to 44% in Over the same period, natural gas-fired combined cycle generation grew from 10% to more than 20%. Source: FERC, 2011 State of the Markets at p. 12 (Apr. 19, 2012) Why? 1. Shale gas revolution/increased pipeline infrastructure - lower gas prices. 2. Environmental pressure on coal. 3. Use of gas-fired generators to back up wind and solar. More Switching/Growth Anticipated. EIA: By 2035, 235 GW of new generation to be added (60% gas) 3 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

4 How We Got Here (cont.) Electric reliability questions. Southwest Power Outage (February 2011) New England Near Miss (January 2004) FERC request for comments. Approximately 80 entities from all areas of the electric and gas industries submitted comments. 4 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

5 Comments Revealed Key Differences between Industries Differing physical characteristics of natural gas versus electricity create operational differences. Different scheduling practices. Different vocabularies. What does firm mean? 5 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

6 Areas of General Consensus Issue important, but not urgent (at least for now). Regional differences should be considered. FERC should take lead. NAESB and NERC should provide input but not lead. Reliability of gas transportation not significant issue. Pipeline position: Ready to serve whatever level of gas demand identified by electric market. Over past decade, added 15,000 miles of new pipeline at cost of $8 billion. 6 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

7 Regional Technical Conferences FERC to hold regional technical conferences on electric-gas coordination issues. Technical conference for West Region (including Northwest) scheduled for August 28 in Portland, OR. Issues to be addressed: (1) Communications/Coordination/Information-Sharing; (2) Scheduling; (3) Market Structures and Rules; and (4) Reliability. 7 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

8 Issue 1: Communications/ Coordination/Information-Sharing Do current FERC rules re information exchange between gas pipelines and customers create reliability problems? Pipelines required to provide service to all customers on a non-discriminatory basis no unduly preferential communications. Potential Standards of Conduct issue for certain affiliated entities. Transmission provider-to-transmission provider communications. Northwest: There currently appears to be sufficient pipeline and storage capacity to meet gas generation needs in crisis, if proper communication is permitted. 8 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

9 Issue 2: Scheduling Some concern that electric scheduling day (pre-schedule and real-time) is not aligned with natural gas scheduling day. Electric generators must submit gas nominations based upon forecasted needs. Different scheduling may reflect physical differences in commodities. Costs of scheduling changes. Pipeline services designed for generators may be able to overcome scheduling differences. Must avoid potential undue discrimination issues. Contracting practices may make scheduling changes less necessary. Pipelines have operational flexibility. 9 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

10 Issue 3: Market Structures and Rules Some concern that organized electric markets do not provide proper incentive for generators to contract for sufficient firm transportation service on pipelines to ensure electric reliability. Northwest: Predominance of hydro limits use of thermal generation (including gas) as baseload facility. Combined-cycle gas generation may be used as an intermediate resource sufficient incentives to contract for enough firm capacity to ensure reliability? 10 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

11 Issue 4: Reliability Concern that over-reliance on gas generation could impair electric reliability. Northwest: Hydro means relatively less dependence on coal. Load growth in Northwest likely to be met by gas-fired plants. Northwest faces coal plant retirements replacement with gas combinedcycle plants. Proper incentives to ensure new plants contract for sufficient firm capacity with sufficient lead to ensure necessary infrastructure is in place? Hydro also means less overall concern regarding reliability of natural gas peaking units. Potential issue in spring runoff season. Use of peaking units to back up wind may require some additional level of firm pipeline capacity. Little concern about natural gas supply issues. 11 Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012

12 Questions? Thank You! MALCOLM MCLELLAN GREG JUNGE Electric/Gas Coordination in the Northwest Mid-C Seminar July 25, 2012