Natural Gas: The Preferred Choice

    June 26, 2015 3:16 PM by Russell Ray, Chief Editor, Power Engineering

    There is no global market for natural gas.

    That’s why the gap between natural gas prices in Europe and North America is so wide. Unlike oil, the price of natural gas is based on regional market conditions because large supplies of gas cannot be shipped overseas affordably or easily.

    Over time, that may change.

    The divergence in global gas markets was clearly evident during a recent visit to the Netherlands, where gas is being sold at historic highs. At POWER-GEN Europe in Amsterdam, attendees toured a pristine combined cycle gas-fired unit built in 2012. But like so many other gas-fired units across Europe, the 435-MW unit was idle, made uneconomical by the high cost of natural gas. The coal-fired unit next to it was running near full capacity.

    Combined cycle plants fueled with natural gas are cheaper to build, more efficient, easy to permit and quicker to construct. The only caveat: They are sensitive to the cost of natural gas.

    The price of natural gas is the defining difference between the North American and European power generation markets. America’s access to abundant low-priced gas, public demand for more renewable power, and the retirement of old inefficient coal-fired plants have spawned the construction of several new gas-fired projects in North America. The trend will continue as gas prices in the U.S. hover below $3 per million British thermal units.

    In 2015, More than 6,000 MW of gas-fired generation will be added to the U.S. grid, according to the Energy Information Administration. By 2035, natural gas is projected to be the biggest source of power generation in the U.S.

    As a result, demand for highly efficient gas turbine technology capable of supporting the growth of variable generation such as wind and solar is strong. 

    GE said it has received 16 orders for its new HA air-cooled gas turbines. In addition, the HA turbine has been “technically selected” for 53 new gas-fired units worldwide. A tech-selection means the unit will use GE’s technology if it is commissioned and constructed. GE’s Laurent Cornu said he expects about 90 percent of those tech-selections will lead to real contracts with power producers within two years.

    Cornu is the product manager for GE’s 9HA.01 gas turbine. The 9HA.01 turbine can reach full capacity in less than 30 minutes, and delivers a whopping 61.4 percent net fuel efficiency.

    Virginia Electric and Power Co. recently ordered three gas turbines from Mitsubishi Hitachi Power Systems Americas (MHPSA). The gas turbine manufacturer has secured 39 contracts with power producers to supply its J-class gas turbines, including nine contracts in North America.

    Last year, MHPSA entered into a contract with Oklahoma’s Grand River Dam Authority to supply the 501J for a new combined cycle plant near Chouteau, Oklahoma. The new plant is expected to be up and running in spring 2017.  The 501J is known for its higher firing temperatures and improved efficiency.

    Our cover story on page 14 provides more perspective on the market for gas-fired generation. We sat down with three high ranking executives from American Electric Power (AEP), Electric Power Research Institute, and GE Power & Water to discuss the technology, the challenges and the benefits surrounding this promising market.

    Dan Lee, senior vice president of Fossil Generation at AEP, said most new central power stations in the U.S. will be fueled with natural gas. But, Lee added, the growth of gas-fired generation may not be as great as some are predicting.

    “Within AEP’s service territory, we continue to see relatively flat forecasted demand, and capacity markets like PJM are simply not providing a clear economic signal for new gas generation,” Lee said. “We are aware of newly permitted and proposed natural gas combined-cycle units in the PJM footprint, but ‘permitted and proposed’ does not always result in units being constructed.”

    According to a recent study, just 7 percent of all new generation proposed in PJM’s territory between 2000 and 2014 was placed in service.

    Nevertheless, the biggest trend in power generation in North America is the steady transition to natural gas. Issues related to operations and maintenance, siting and construction, gas turbine design, and gas engines will be featured at POWER-GEN Natural Gas 2015, Aug. 18-20 in Columbus, Ohio. If you have a question or comment, contact me at

Russell Ray

The Power Points blog, written by Russell Ray, Editor-in-Chief of Power Engineering, covers all forms of power generation, including coal, gas, nuclear and renewable. It examines a wide range of issues and advancements in pricing, policy and technology. You can follow Russell on Twitter @RussellRay1.

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