Shale gas, renewables and the smart grid

April 19, 2013 | By Barbara Vergetis Lundin

The U.S. shale gas revolution is having a major impact on the energy market, with new energy production expected to bring the country closer to energy independence. This development is also having an impact in a more surprising area: the smart grid.

The shale gas boom in the U.S. will play a key role in the development of the smart electricity grid, affecting almost every part of utility infrastructure decision making in the coming decade, according to research from IMS Research, part of IHS.

"Natural gas is optimal for use in smaller distributed-generation operations, which can form the basis of microgrids," said Donald Henschel, senior analyst, metering and energy management, IHS. "The rising attractiveness of flexible, adaptive microgrids will help the smart grid grow to overcome the serious challenges faced by this region's utility sector, and will drive growth in sales of required equipment in the coming years."

In the late 2000s, the availability of natural gas in North America increased dramatically with the refinement of shale gas extraction techniques and the discovery of further tight gas resources converging to allow for the rapid increase in domestically available natural gas. Subsequent discoveries and field developments have made natural gas extremely affordable, with low prices driven by a lack of short-term export potential, as the infrastructure to compress or liquefy and ship natural gas to markets overseas is still being built.

Natural gas affects the utility grid in several ways. Its increasing role in centralized generation is critical, but the opportunity for natural gas also extends to more affordable and environmentally sound microgrid development, providing energy security on distribution networks.

The proliferation of shale gas has caused industry concern over the effect on renewable energy sources, suggesting that the shale gas boom will defer investments in wind and solar and cause the renewable to compete with each other. A recent Citigroup report, however, says this just isn't so.

The Citi report contends that rather than push away renewable energy, the shale gas industry will, in reality, depend on its deployment. The reason: Over the short term, gas will be priced out of the conventional market but will need to fill in the gaps over the long term as wind and solar are deployed more widely, and coal generation is retired.

The co-dependence will stem from a move away from the decades-old utility base load model, according to Citi.

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