Grid upgrades could allow US to displace gas

Grid upgrades could allow US to displace gas-fired capacity: CERA

Washington (Platts)--9Sep2004


Electricity ratepayers in the eastern three-quarters of the US could realize
annual savings of up to $300-mil if the power industry invested in a group of
"high-potential" transmission congestion-relief projects that would allow
less-expensive coal-fired generation to displace high-cost natural gas-fired
electricity, Cambridge Energy Research Associates said in a report Thursday.

The report identified a number of transmission bottlenecks, that if relieved,
would allow consumers to gain access to lower-cost coal-fired generation,
including power from lower-cost generation sources in the Midwest and
southeast in load centers on the east coast, Florida and in the southern Great
Plains. 

CERA's report put the cost of the congestion-relief projects at about $2.2-bil
by 2010, and said the potential benefits in lower generation costs would vary
with assumptions about demand, fuel prices, environmental regulation and other
regulatory policy. The key driver, however, was natural gas prices and the gap
between gas and coal prices, it said.

The study also showed that when new generating capacity is needed after 2010,
there are some cases in which transmission investment to support construction
of coal-fired capacity close to fuel sources and distant from demand centers
is likely to be more economic than adding natural gas-fired generation near
load centers. Whether the investment needed to alleviate the bottlenecks will
be made is uncertain, the report said, largely because the distribution of
costs and benefits among users, producers and regions is not clear. 

"Enhancing the transmission network will alter market prices across the
Eastern Interconnection," CERA associate director Gautam Mukherjee said.
"Because the net benefits to specific stakeholders cannot be guaranteed, and
the stakeholders are typically spread across several political and legal
jurisdictions...the negotiations typically needed to unleash investment
activity become complicated, if not paralyzed. The report said "creative
solutions to these political and institutional impediments must be found."

This story was first published in Platts real-time news and market reporting
service Platts Electricity Alert (http://electricityalert.platts.com ).

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