The reliability of the electricity grid is a serious concern for the United States, and one that is being amplified by the system’s recent increased reliance on natural gas-fired generation. Over the last decade, the share of natural gas-generated electricity has doubled. Its increasing use is expected to continue as regulators look to reduce carbon emissions by displacing coal with gas, which provides the same amount of power with half the emissions. Additionally, natural gas is a key backup source for intermittent renewables such as wind and solar power.
If the role of natural gas in providing our nation’s power is to increase further, there must be greater flexibility and better integration between the natural gas and electricity markets, according to a new MIT Energy Initiative (MITEI) analysis. The report discusses the challenges that arise from the growing interdependency of natural gas infrastructure and the electricity system, and presents possible solutions for the policy, investment and energy communities. It is based on a 2013 MITEI symposium.
“Substantial policy changes, particularly in the energy sector, don’t happen overnight. That’s why the industry needs a portfolio of solutions, at both the regional and federal levels, to mitigate short-term challenges while laying the groundwork for long-term change,” says Richard Schmalensee, the Howard W. Johnson Professor of Economics and Management Emeritus at the Sloan School of Management, who wrote a report overview for policymakers.
The report noted several special challenges that natural gas presents when it is used for electric power. Unlike coal, where onsite storage is possible, natural gas-fueled plants have limited to no storage capacity and are entirely reliant on pipelines for fuel delivery. Because of geographic constraints, regulatory hurdles, and economic barriers, underground storage and LNG facilities will likely not become a major presence. Additionally, while coal can be delivered by rail from essentially anywhere in almost any quantity, natural gas is limited to the capacity of the given pipelines. To increase deliverability, existing pipelines need to be expanded or new pipelines need to be built. Both options present regulatory hurdles.
“Pipeline constraints can cause dispatch difficulty and in some cases even outages in systems heavily reliant on natural gas,” says Francis O’Sullivan, the director of research for MITEI and a main author of the report. “Natural gas is a just-in-time fuel, exacerbating the challenges between it and the electricity sector. But there are steps that can be taken to add in resiliency and reduce the risks that power won’t be available when it’s needed most.”
To provide more predictable and reliable power at natural gas plants, the report suggests incentivizing dual-fuel capabilities at new power plants, using fuels with separate supply chains. Additionally, with a growing need to meet demand in real time with little or no storage, the report advises improving the coordination and communication between natural gas and electricity markets.
“Currently, the two markets operate on different schedules, leading to quantity uncertainty for generators, price increases for consumers and reliability risks for the grid,” O’Sullivan says. “More effort needs to be made to sync the electricity market with the national gas market, especially when it comes to the market schedules.”
“The supply and demand landscape is rapidly changing. To meet these changing needs, both the natural gas and electricity sectors need to adapt,” says Schmalensee. He notes that the problems, and in turn the solutions, that each region faces depends on local markets, regulations and political will. “While federal actions could help address some overarching challenges, what’s really needed is a portfolio of solutions to address regional challenges.”
This article appears in the Spring 2014 issue of Energy Futures.
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