Inexpensive natural gas is not only altering the
traditionally favorable dispatch position of
coal-fired power but even challenging the economics
of solar and wind power.
That’s one of the points raised in a Dec. 19
industry update by ScottMadden Consultants. Thanks
to increased shale production, estimates of
recoverable domestic gas reserves have surged in
recent years, the report notes.
“As the gas-fired power generation grows, the
linkages between natural gas and power operations
become increasingly important, and regulators and
industry leaders are contemplating how to improve
that coordination,” according to the ScottMadden
analysis.
Natural gas should continue to flex its power market
muscles in the next couple of years as EPA processes
greenhouse gas regulations for new power generation
will “effectively ban new coal-fired power plants,”
ScottMadden said.
“The electric industry is beginning to adjust its
generation complement accordingly, as the shale gas
boom makes gas-fired power compelling for new
generation, at least for the moment,” the firm said.
Aside from the GHG proposal, deadlines for an array
of tougher EPA standards on coal plants “are fast
approaching, delayed only by litigation,”
ScottMadden said.
The nuclear power industry is also facing new
concerns as the Nuclear Regulatory Commission moves
forward with new requirements move than a year after
the Fukushima Dai-ichi meltdown in Japan.
The natural gas industry faces its own concerns,
however, These concerns range from public pushback
over fracking, to the need to address “aging pipes,”
according to the consultant’s report.
Potential unknowns facing the natural gas industry
include regulation of expanded exports of liquefied
natural gas (LNG). With so many of its nuclear
plants closed post-Fukushima, Japan is seen as a
growing market for LNG.
Meanwhile, back in the United States, there is the
potential for natural gas to play a growing role in
transportation fuel.
In addition, recent weather events in Texas and the
Southwest have refocused attention on increased
year-round power-sector gas demand. Pipeline
adequacy and capacity constraints are emerging
issues for the natural gas and power sectors, the
firm said.
To meet a possible doubling of natural gas demand,
an additional 24,000 miles of pipeline could be
required in the new future. Gas companies will be
major players in this future build-out of
transportation infrastructure for power generation.
ScottMadden is a management consulting firm that
specializes in the energy industry.
Wayne Barber is chief of generation for
GenerationHub, now a unit of
Pennwell
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