The issue of gas-electric interdependence is not a reason to panic, but it is absolutely a reason to plan and to do so now, FERC Commissioner Cheryl LaFleur said on March 19.
“Viewed in the larger perspective, it’s a byproduct of an American success story, which is the growth of domestic natural gas resources,” she said during a hearing of the U.S. House of Representatives Committee on Energy and Commerce Subcommittee on Energy and Power.
The hearing was titled, “American energy security and innovation: The role of regulators and grid operators in meeting natural gas and electric coordination challenges.”
“The nation’s generation fleet has historically experienced large turnovers in fuel mix and large building cycles and they inevitably require adaptations of supporting infrastructure and operations,” she said. “I believe with diligent and timely effort, we can make this adaptation as well.”
The nation is experiencing a substantial growth in the use of natural gas to generate electricity due to several reasons, including the increased availability and affordability of domestic natural gas, LaFleur said.
Additionally, natural gas is the cleanest burning fossil fuel, making it an attractive option for new generation and for repowering generation that is uneconomic to retrofit for new environmental regulations. Furthermore, the flexible operating characteristics of natural gas work well with the nation’s growing fleet of renewable resources, which, in the case of wind and solar, are intermittent, she said.
“This steady growth in natural gas generation has led to concerns about the interdependence of the gas and electric markets,” she said. “Because natural gas is generally delivered in a pipeline network rather than stored on site like other generating fuels, it’s important that we have both an adequate network of pipelines and operating practices to support reliability.”
At FERC’s technical conferences held last summer in different regions of the country, two basic issues emerged, including the issue of making sure enough pipelines exist in the right places to support electric and gas reliability.
“It’s not a supply issue, we have plenty of gas, it’s a pipeline issue,” she said. “In some places, the pipelines are constrained in specific regions or localities.”
Since deregulation of the gas network by Congress several decades ago, FERC has permitted pipelines based on long-term commitments for firm supply and that system has worked well, she said, adding that FERC permitted 10,000 miles of gas pipelines in the last decade.
However, in regions with competitive electric markets, gas generators often do not enter into long-term firm contracts.
The need for infrastructure is a regional issue that varies by geography, the existing pipelines, fuel mix and market structure, she said, adding that the conference participants urged FERC to work with the regions on their issues, rather than impose a national solution.
ISO New England (ISO-NE), for instance, is working on short-term and long-term enhancements to better ensure that it builds fuel security into its generation markets.
“The second basic issue is operations, making sure that we coordinate the use of the pipelines we have to make sure that we get the best use of the infrastructure that’s in place,” LaFleur said.
The supply from the Marcellus Shale formation under portions of New York and the Appalachianshelps with regard to New England’s problems in that “the Marcellus means pipelines have a shorter way to go,” for instance, she said.
She also noted that any major critical network that is run by computer systems, including gas and electric, are vulnerable to cyber attacks “and that’s why both voluntary, and in the case of electricity, mandatory standards are very important.”
On whether issues in the Northeast related to the siting of pipelines are a constraint or primarily a matter of needing to speed up investments in natural gas infrastructure, LaFleur said it is more of an investment issue.
“[P]ipelines are harder to build in urban areas, but we’ve had a number of them built, so I have confidence that they’ll be constructed if the investment comes forward,” she said.
ISO-NE, for instance, is working on ways to structure the generation markets to motivate the generators to build in more fuel security, “so, invest or increase their commitments to pipelines or other dual fuel commitments or other gas storage,” she said.
LaFleur also said that state-level renewable energy policies are driving a lot of renewable investment, including in upstate New York near Niagara Falls where “you just see windmills as far as the eye can see.”
The effects of renewable portfolio standards are starting to be felt, she said in response to which state policies have been the most effective in deploying renewable energy. Also, states as diverse as California and New Jersey have heavy penetration of home and business-level solar. “[T]he programs they have in place appear to be very effective in getting those done,” she said.
FERC Commissioner Philip Moeller, also speaking at the hearing, said, “I think the [state renewable portfolio standards] that have been most successful are the ones that have adequate transmission infrastructure to make sure that that power can move around from typically where it’s generated to where it’s consumed, and have the kind of flexibility that don’t overly favor one or two sources.”
In response to Rep. Paul Tonko’s (D-N.Y.) question on whether upgrades in interconnection are important in that regard, Moeller said they are vital, adding, “It’s usually difficult to site this transmission, so that’s part of the challenge as well.”
LaFleur said federal production tax credits are having an impact on investment in renewable energy deployment. Federal and private R&D have also helped bring down the cost of some of the technologies, she said.