Natural gas remains plentiful and the Environmental Protection Agency’s (EPA’s) Clean Power Plan will drive more electricity generation toward gas. Yet, some regions of the country have experienced bottlenecks in gas deliverability in the past because pipeline capacity is insufficient to meet demand. Close to one-third of gas demand in the United States is for residential use, followed by just over 24 percent for industrial use and 22 percent for electric generation.
With limited exception, almost all of the gas used in electric generation is under interruptible purchase contracts. When gas markets are tight in the coldest winter months to accommodate space heating, power generators are not able to source gas. First-use of gas is to residential heating, health care facilities, and emergency responders. Several times in the recent past, the electric system was vulnerable to disruption due to gas deliverability limitations.
With increasingly stringent environmental regulations, it is getting difficult to site any new generation unless it is gas-fired or renewable. This trend appears likely to continue as coal-fired generation is retired or ramped down, nuclear units threaten to close, and as renewable resources dominate new generation, which might likely require backup by natural gas generation until storage becomes more feasible.
As Infocast’s recent Northeast Natural Gas Supplies and Pipelines Conference in Boston revealed, pipeline companies and utilities alike recognized the need for more gas deliverability to the Northeast and New England. The industry is meeting the challenge for more gas deliverability by proposing a number of high value pipeline projects delivering gas into New England to meet their projected demands. However, not everyone agrees that the Clean Power Plan and other drivers of gas demand will require new pipeline capacity to maintain electric system reliability.
Massachusetts Attorney General Maura Healey announced the results of a recently commissioned study on November 18, concluding that the region is “unlikely to face electric reliability issues in the next 15 years and additional energy needs can be met more cheaply and cleanly through energy efficiency and demand response” – demonstrating that increased gas capacity is not needed to meet electric reliability needs.
Time will tell what the need is for new infrastructure investments to meet the growing demand for natural gas. One thing is clear. The difference of opinion will likely delay approval of many proposed pipeline projects driving the region closer to the ledge of needing gas and not being able to have it delivered.
Paul A. DeCotis