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.