Risk of Relying on Natural Gas for Base Load
It’s now clear, relying too heavily on natural gas for base-load power generation is a risk associated with the decline in the number of coal-fired power plants.
While there are ample supplies of natural gas, the natural gas pipeline infrastructure doesn’t align itself with the new demand by power plants for natural gas.
Most electric utilities using natural gas have interruptible supply contracts with their suppliers of natural gas. This means that a shortage of natural gas, which can occur during cold weather when there is insufficient pipeline capacity to handle the demand, will result in electric utilities having their supplies cut off, in favor of residential customers who rely on natural gas for heating their homes. Regulators have generally favored homeowners in this regard.
Such an event happened in New England in January, 2004. The situation in New England hasn’t improved since then.
There is also a threat of cascading failures.
Natural gas pipelines may use electric motors to compress natural gas for distribution. A cutoff of natural gas to power plants would cause them to shut down, which could, in turn, result in the loss of power to the pipeline’s electric motors and the resulting collapse of a region’s natural gas distribution system.
It’s also true that new, larger natural gas power plants require greater volumes of natural gas, which existing pipelines, even those built to serve older and smaller natural gas power plants, were not designed for.
In the past, firm supply contracts by electric utilities have not made economic sense. (Theoretically, firm contracts mean users won’t be cut off. The inherent conflict between homeowners and electric utilities could upend this concept.)
In today’s environment, where the grid becomes increasingly reliant on electricity from natural gas power plants, it may be necessary for utilities to sign firm agreements for their natural gas supplies. This would mean higher prices for natural gas and higher prices for electricity.
It could also result in coal-fired power plants regaining their competitive advantage sooner than might otherwise be the case. However, it’s no longer possible to build coal-fired power plants in the United States because of EPA regulations, so fuel competitiveness no longer matters.
It’s also doubtful that regulators will allow homeowners to be shut off from natural gas supplies in the winter.
Given these factors, one wonders whether firm supply agreements by electric utilities are even possible.
If not, we face an increasingly greater risk as natural gas power plants produce an even larger portion of our electricity as more coal-fired power plants are closed.
This raises the question as to whether pipeline capacity can be increased quickly enough to mitigate the threat. Building new pipelines means higher prices for homeowners, for both natural gas and electricity, as regulators allow increases in rates so that pipeline or natural gas distribution companies can obtain a return on their investment.
This is a totally unnecessary risk created by the EPA, brought about by the EPA’s attempt to cut CO2 emissions 80% by 2050. The risk could be completely eliminated by allowing the construction of modern, more efficient ultra-supercritical coal-fired power plants.1
- Ultra-supercritical coal-fired power plants are 45% more efficient than the existing fleet of coal-fired power plants, and produce CO2 levels nearly as low as natural gas power plants.
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