Natural gas is becoming more important in the power generation industry each year. With increasingly strict regulations on emissions controls and growing concerns about the environment, more companies are looking to natural-gas fired generation as a reliable, clean source of energy.
Natural gas-fired plants can also quickly increase to peak load, making it a good complement to renewable energy sources, and are also faster and less expensive to build than many other power sources. With the growing use of natural gas, however, many questions remain to be answered about the fuel source’s cost, the increasing reliance on natural gas over other fuel sources and upgrading natural gas pipelines to cover the increased usage, among other issues.
Power Engineering recently moderated a roundtable discussion with executives from American Electric Power (NYSE: AEP), Electric Power Research Institute, Alstom and Bechtel. The discussion centered on the future of gas-fired generation, the sustainability of today’s low gas prices and the potential impact of increasing environmental regulation.
The participants were: Tom Alley, vice president of generation for EPRI; Scott Austin, manager business development for Bechtel’s thermal business line; Amy Ericson, vice president gas product platform for Alstom Power; and Toby Thomas, vice president generating assets for AEP.
What follows is a transcript, edited for length and style, of that discussion.
POWER ENGINEERING: With the recent increase in the price of natural gas, do you see power plants continuing to turn to it as the preferred fuel choice as they have for the past several years?
AMY ERICSON: There’s one thing that we know for certain, and that’s that fossil fuel prices are uncertain and will remain uncertain. It’s interesting particularly over the past several years that we’ve seen, not just in the US but globally, an obvious connection between coal and gas usage and pricing. We’ve seen gas generation go up in the US on the heels of the low prices, and we’ve seen that usage temper while there has been a comeback a bit in coal. I think these fluctuations are what we’re going to continue to see. In fact, we hear from our customers that at this point, they’re taking a long-term view. There’s no doubt that their interest in using natural gas for electricity has grown steadily for the reasons that aren’t likely to go away, which would be the matching of renewables and the speed with which they can be constructed and commissioned. Personally, from an Alstom perspective, we definitely see the trend toward natural gas continuing.
TOM ALLEY: I think that the pricing change we see here for units that are operating on the margin, the coal units that are operating right on the margin, may come back into play, but for a regulated utility, I don’t see that impacting their business very much. For the unregulated generators out there, it may open up a little opportunity for a highly-efficient, environmentally controlled coal plant to come back into play, because they’ve been under a lot of pressure with the low gas prices. I don’t see this pricing change really influencing the industry much.
SCOTT AUSTIN: Based on the information that we’ve received and interaction we’re having with our customers, I would echo Tom’s comments that what we’re seeing here in the U.S. is a predominately lean toward new builds from a natural gas perspective. Given the outlook of the relatively stable $5 to $7 range in the long term, we would see the gas-fired generation being the mid-term selection.
POWER ENGINEERING: EPA regulations are making it more expensive to operate coal-fired power plants. With some of the rules coming out, it may be almost impossible to build new coal-fired plants. With more companies building natural gas-fired facilities to compensate for that, does that raise concerns about maintaining fleet diversity?
TOBY THOMAS: We certainly do have concerns from a fuel diversity perspective. In any long term view, if you focus too much on one fuel or one technology, you’re going to potentially have problems long term. You definitely want to be diversified. The other side of it id that is the more of the power plants you have relaying on gas pipelines, the more potential risk you have to grid reliability. On those warm summer days, you’re starting to get closet to peak flows on the gas pipelines, similar to what you see with the winter heating load, and sooner or later somebody’s going to have to get cut. You can build a gas-fired power plant, but you do have to line up the fuel supply – not necessarily the commodity but the transportation to make sure you can get gas when you need it. Also, if the pressure on that gas pipeline goes too low, all those gas plants are coming off.
ALLEY: I would say I’m definitely concerned about diversity. I think the industry is being led down a path toward natural gas as a “destination” fuel source. We hear it in the president’s recent State of the Union Address. We see the EPA rulings for Mercury and Air Toxic Standards putting extra pressure on the coal plants and coal plants closings. We see the EPA proposed rulings for greenhouse gas emissions for the New Source Performance Standard, which put a lot of pressure on coal. I think the very efficient natural gas combined cycle plants can meet that standard at least as its proposed, but not coal plants. Plus, a gas plant is about one-third the cost of a nuclear plant and half the cost of a coal plant, so when folks are trying to plan and build, gas is certainly one of the least cost options. Smaller staff, easier to site – gas is just an easy decision, and it really concerns me that the industry doesn’t have the flexibility to provide more diversity. Again, I think everybody is kind of being led in that direction.
ERICSON: I can tell you from a technology development perspective that we preach diversity. We invest in diverse technologies, and it’s exactly for this purpose, and for the protection of supply and price and policy – and even public attitudes – because they change in time. But I would have to say that the prospect of all gas and renewables in the future is probably not the optimal prospect for the U.S. and for the industry, and I think people probably agree with that.
AUSTIN: From a Bechtel perspective, we’ve been around for about 115 years. We’ve seen the peaks and the valleys of gas pricing over that time and the desire to move forward with gas in the current environment. I would concur with Amy’s comment that maintaining diversity from a capability perspective is an important element that we strive for, to be able to facilitate the diversity that’s needed in our energy mix as a nation. We look to our customers to make those decisions as demand warrants, and we stand ready to implement those technology solutions as they’re appropriate.
Be sure to read the rest of the roundtable in the upcoming May issue of Power Engineering.