FERC Will Coordinate the Natural Gas and Electricity Sectors
Among all other energy resources, natural gas has the longest list of promises to fulfill. Promises of affordable fuel have been given to the power sector, the chemical industry, manufacturers, the transportation industry, and anybody who needs to heat space. I wrote about factors supporting this demand a year and a half ago; ironically, not much has changed since then, so in this month’s issue of ZE DataWatch, my article on U.S. shale gas demand from September 2012 has been reprinted. Now, new models of natural gas vehicles have been added to the mix of consumers, factories re-opening their production, utilities switching from nuclear and coal to natural gas-fired generators, and even more gas-fired generation supporting renewables.
What could ever go wrong with growing demand? Isn’t that what any business looks forward to? Apparently, natural gas is an instance when too much demand can be not that good. The natural gas industry has just started to deliver on its promises and is already facing difficult times. The first dilemma surfaced when revenues started dropping for producers. Really, historically low natural gas prices, which were so attractive for consumers, played a dirty trick on producers. Some producers, discouraged by sustained losses, have been pushed out and away to more lucrative oil fields. At the same time, delivery pressure has mounted. Limited pipeline capacity emerged as a major stumbling block in transporting this cheaper fuelling option to consumers. Dramatic winter temperature drops –which not only pushed demand for natural gas drastically higher to serve space heating and power production needs, but also impacted actual natural gas production by freezing equipment–kept aggravating the situation. Inadequate infrastructure created severe headaches for the market, and this did not put an end to the grief. Another problem emerged: the disparity in scheduling practices between the natural gas and power industries. Read more about this in an in depth article from last year.
The decision to eliminate the misalignment in scheduling practices between the natural gas and power industries has resulted in the largest intra-industry cooperation to be resolved on a national level.
FERC initiated an assessment of interdependence between the two sectors and the lack of alignment between their business and operational practices in 2012 and started working with both industries. Ever since then, the Commission has been releasing quarterly progress updates on improvements to gas-electric coordination. Those updates, sorted by region, reflect a somewhat expected issue: each region faces its own unique challenges caused by local peculiarities, some of which might include a shortage of pipeline or storage capacity, an increase in renewable generation, or the substitution of other generation sources with natural gas. Consequently, each region has its own set of initiatives, possesses different solutions, and is on different stages of their implementation.
It is no surprise that regions with the most intertwined co-dependence between the two sectors have been making more efforts to remove these obstacles and are on faster tracks to synch these two sectors. In some cases, individual pipelines offer scheduling opportunities additional to standard ones in order to accommodate power generators. Power balancing authorities are doing their part–some of them are adjusting operators’ day-ahead bidding and notification schedules. NYISO has moved ahead into an area that is especially dear to me: software solutions for energy markets. The ISO opened a new power control center in December 2013 with gas visualization tools in the power control room’s video wall. This new tool has a static map visual which includes an overlay of major gas pipelines in the state and highlights directly connected generators. Next, this map will be enhanced with more dynamic information, such as pipeline system operational data that is linked with known generator fuel capability and supported by a system of alerts.
To read more about how this will be handled on a national level, click here to read the full article.