Analysis Group Consultants Review Electricity and Gas Sector Interdependence
May 24, 2012
In a May 2012 Electricity Journal article, "The Interdependence of Electricity and Natural Gas: Current Factors and Future Prospects," Analysis Group Vice Presidents Paul Hibbard and Todd Schatzki describe how the interdependence of North American electricity generation and natural gas infrastructures may pose challenges to power system reliability and create vulnerabilities concerning long-term energy supply.
Recent natural gas price stability, coupled with anticipated retirement of oil- and coal-fired generation and the growing popularity of cleaner, renewable fuel sources has intensified the demand for natural gas generation capacity, the authors explain. As a result, the greater strain already being felt in some parts of the U.S. energy system is expected to grow over time, raising issues of system reliability, market efficiency, and operations. Although regulators and operators have become more focused on addressing these challenges, the authors point out that certain regions, namely the Northeast and Southwest, are at increased risk of experiencing service interruptions.
"In regions such as the Northeast United States, where there is no local production and no storage, the interdependence is most apparent," says Mr. Hibbard. "It’s an area that faces physical constraints to drawing on low-cost shale gas supplies only several hundred miles to the west, yet anticipates growing reliance on natural gas both for electricity and for seasonal heating and process needs."
Mr. Hibbard and Dr. Schatzki stress that regions facing the most serious risks should evaluate both infrastructure conditions and economic factors in order to mitigate those risks effectively.
To address these risks comprehensively, they identify five areas for the coordination of natural gas and electricity operations:
- Market planning, capacity procurement and resource requirements
- Natural gas spot markets
- Daily gas and electricity market coordination
- Gas pipeline services and tariffs
- Communicating between system operations
"Commissions and market operators should carefully and consistently assess the scope of gas reliability risks, and thoroughly consider options to mitigate any significant risk that emerge," states Dr. Schatzki. "Because the economics of options for firming up delivery from gas-fired resources depend on system-specific infrastructure and markets, appropriate solutions will vary across regions. Under the best circumstances, new gas services, dual fuel, storage and other technologies can all compete to deliver improved reliability."
Please contact Paul Hibbard or Todd Schatzki for a printed copy of this article.