Boilers, Coal, Gas

Natural Gas: The New Face of U.S. Power Generation

Issue 7 and Volume 120.

By Russell Ray, Chief Editor

Sharp spikes in natural gas prices appear to be a thing of the distant past.

With little volatility in natural gas prices projected for the foreseeable future, forecasters say the amount of electricity produced with gas will continue its steady ascent in the U.S.

Nearly 19,000 MW of power generation fueled with natural gas is expected to be built and commissioned in the U.S. between 2016 and 2018. Not surprisingly, much of that capacity (52 percent) is being built near shale formations containing large amounts of low-priced natural gas.

What’s more, natural gas is expected to overtake coal as the leading source of power generation in the U.S. in 2016, according to the Energy Information Administration (EIA). The agency projects natural gas will account for 33.4 percent of U.S. generation this year, while coal will be used to fire 32 percent of the nation’s electricity.

Meanwhile, gas-fired power plants in the U.S. are running longer and harder as power producers retire more coal-fired units and deploy increasing amounts of intermittent renewable power. For the first time, capacity factors for gas-fired plants in the U.S. exceeded capacity factors for coal-fired units in 2015, a recent EIA report showed. Gas-fired combined cycle units ran at 56 percent capacity, on average, last year, up from 35 percent in 2005. Some combined cycle units were running 80 percent of the time in 2015, EIA said.

In addition, today’s heavy-duty gas turbines can reach full power in just minutes and have energy-conversion rates exceeding 60 percent in combined cycle operation. These abilities are vital as the grid becomes more reliant on intermittent resources such as wind and solar power. Modern combined cycle gas turbine technologies are helping power producers and grid managers bring balance to supply and demand, a task made more difficult by the rapid growth of renewable power.

The transition to more gas-fired generation creates several benefits and challenges for the U.S. power sector.

The editors of Power Engineering sat down with three executives to discuss the transition to gas-fired generation, the technology, and the operations and maintenance challenges related to higher capacity rates for gas-fired plants.

Executives participating in this year’s roundtable discussion on natural gas are: Roger Lenertz, executive vice president of Power at Black & Veatch; Barry Nicholls, president of Power & Gas at Siemens USA; and Thomas Alley, vice president of Generation for the Electric Power Research Institute.

Roger Lenertz
Tom Alley
Barry Nicholls

What follows is a transcript, edited for style, clarity and space, of that discussion:

Power Engineering: According to the Department of Energy, 2016 will be the year we crown a new king of power generation in the U.S. For the first time, annual generation from natural gas is expected to surpass generation produced with coal. Besides low gas prices, what are some of the factors driving this slow but steady transition to natural gas?

Nicholls: The combined-cycle plants we’re building now are 60-plus percent efficient. It wasn’t that long ago when we were in the low 50s. The age of the existing fleet is another reason. There is going to be 200,000 MW of capacity in the country that will cross the 50-year operating service threshold just in this decade. A lot of machinery is coming to the end of its useful life. Increased regulation, of course, is another factor. Also, natural gas-fired plants are great partners for renewable generation, with the ability to start fast and change load quickly to stabilize the grid.

For example, on the evening of May 4 in Germany, the power available from renewable generation was only about 5 percent of the demand, so most of the electricity had to be provided by conventional plants. Four days later on May 8 at 12:45 midday, more than 90 percent of the country’s energy was provided by renewables. Only a few hours later when the sun set, conventional generation had to ramp up 18 GW in less than two hours to meet demand. Clearly, the ability to load follow against renewables is a pretty important reason to be switching to natural gas.

The Panda Temple I and II Generating stations in Temple, Texas, each have a capacity of 758 MW and are equipped with gas turbines and steam turbines from Siemens Corp. Temple I was completed in 2014 and Temple II began commercial production in 2015. Photo courtesy: Siemens

Lenertz: In the last five years, solar and wind capacities have grown quite substantially, far outstripping any other major power technology. Solar and wind are growing in double digits, whereas no other technology is growing more than 2 percent a year. It’s kind of ironic but that growth in renewables introduces some stability issues and needs for that backup power and quick-starting, fast-ramping fossil fuel. That’s a major driver for gas generation. If and when large-scale energy storage becomes available, that may change things. But right now, those flexible gas turbines provide that stability.

Another factor would be the reduced greenhouse gas emissions from natural gas combustion turbines compared to coal. There are several regulations that make operating an existing coal plant harder and harder. Those plant owners are making decisions based on those regulations.

Alley: Gas is easier to permit, has fewer emissions, requires less workforce and O&M, in many cases can be installed on the same site as an existing coal plant, is less capital-intensive, and overall is an attractive fuel supply. When all those things converge, it makes a very strong case when choosing generation assets.

In the end economics will prevail. It’s currently more difficult to make decisions other than gas because the economics typically don’t place a high value on the diversity of the generation fleet.

Power Engineering: Equipping power plants with more sensors and using advanced analytics software to lower costs and improve efficiencies are big topics of discussion among power professionals nowadays. Is the digitalization of power generation a central focus for power producers? Or is this an over-hyped market?

Lenertz: Black & Veatch has been involved in this market for more than 20 years. It’s not really a new trend for us. But we have seen an increased interest in the analytics market due primarily to specific OEMs making this a strategic growth area. There is certainly a lot more information available to plant operators than ever before. It’s easy to underutilize all of that data, and we see an increased interest from power producers.

We’ve been investing resources in strategic growth areas in what we call smart integrated Infrastructure (SII) for a number of years now. We work real hard to stay ahead of that curve. We have some developing technologies. We have what we call ASSET360 to help operators mine through that big data and control their plants to the optimal level.

Nicholls: Calling it a central focus for investor-owned utilities is a little strong. For our company, digitalization is most definitely a central focus. In fact, we believe it’s a disruptive shift and an inevitable progression of the data-driven industrial revolution into our industry. We believe digitalizing power generation is most useful when you can combine data on the turbine generators and other generation equipment and analytic know how. As everybody knows, sensor data is not worth much until you turn it into information and actionable insights. It’s definitely a central focus for us and a growing focus for our customers. It’s an accelerating trend.

Alley: Sensors are not over-hyped. They will be critical for the future of power generation, in a wide variety of ways. For example, the industry is experiencing the retirements of many highly skilled and experienced workers. The opportunity we have is to augment and build proficiency in the new workforce through deployment of sensors and the digitization of tasks.

There is increasing pressure on O&M costs. As sensor costs continue to decrease, this opens the doors for new monitoring, diagnostics and prognostics that facilitate more cost-effective, just-in-time component run-repair decisions and make O&M activities for cause and not just for practice. It’s the difference between changing the oil in your car every 5,000 miles versus when it’s actually needed.

EPRI and other companies are developing detailed visions of tomorrow’s power plant, which will feature seamless integration of data, autonomous communication of information, and corresponding response, action, or control. EPRI calls its vision of this future I4GEN — Integrating Information for Insight and Intelligence. Sensors are an enabling technology for I4GEN, and our members and the people we work with know that sensors and the diagnostics and prognostics they support are key to the future of power generation.

Power Engineering: Much of the new generation in the U.S. is being fueled with natural gas, and the most dominant technology being used to burn the fuel is combined cycle. Modern-day combined cycle systems operate at higher temperatures and higher efficiencies. The energy conversion rates for combined cycle plants range from 50 to 61 percent. Is there room for more efficiency improvements?

Nicholls: There’s always room to improve on today’s technology. Clearly, it gets tougher and tougher. With our machines, we broke the 60 percent net combined cycle efficiency mark back in 2012. We set another record of 61.5 percent earlier this year. As these efficiencies get higher and higher, it obviously gets more challenging. But the real challenge is how do we improve efficiency without trading off other plant benefits like robustness and flexibility? That’s a concern that we put a lot of focus on. We’re also trying to leverage the digital technology that we discussed a moment ago. This technology enables more detailed analysis, better measurement systems, and more precise manufacturing.

For example, we developed an infrared camera measurement system that allows us to look inside the hottest sections of an operating engine and see where the cooling air is actually going during operation. Ten years ago, you would have said that was impossible. Our ability to do that is used to improve designs. One of the ways you get more efficiency is to use cooling air more efficiently. Combined heat and power is another way to produce significantly higher efficiencies. We are seeing in this country increased interest in CHP as well.

Lenertz: We believe over the next decade the combined cycle efficiencies realized in the field will increase to more than 65 percent. That’s going to benefit operators all over the world. Those advances will come through materials advancements, additive technologies, and manufacturing techniques. The OEMs have used 3D printing for certain components and that helps boost efficiency. We see bigger and better gas turbines getting tested all the time. I also agree with Mr. Nicholls’ comment about combined heat and power. We see an increased level of activity there.

Alley: We’re starting to see deployment of the J-class machines with efficiencies in the low 60s. Technically, there is room for increased efficiency; if you increase the firing temperature, you can increase efficiency to 63-65%, but you need innovations in metallurgy, thermal barrier coatings, and cooling technologies to enable that boost in temperatures.

But there are market forces to consider. The industry needs more flexibility, and when you’re operating at part load, efficiency decreases. Yes, there’s room to increase efficiencies, but it’s contradictory to how we’re going to have to operate the units to support grid flexibility.

Power Engineering: For the first time, capacity factors in 2015 for gas-fired power plants exceeded capacity factors for coal-fired plants, according to the Department of Energy. Combined Cycle units in the U.S. are running at 56 percent capacity, on average. That’s up from 35 percent in 2005. Some of these combined cycle units were running 80 percent of the time in 2015. As these plants run longer and harder, how are strategies for operating and maintaining gas-fired plants changing?

Lenertz: Combined-cycle plants are highly dependent on the health of the gas turbines. They are the heart of the plants. Therefore, there’s more emphasis on long-term service agreements, renewals and extensions. The gas plants that were installed in the early 2000s are due for major overhauls. We see more clients considering major upgrades to existing plants. We help clients study reliability and redundancy in the BOP, in addition to upgrades to the combustion turbine. Other upgrades they look at and consider are improving the emissions compliance, load following capability, the ramp rate, and reducing startup time to be more responsive. In addition, there is an increasing penalty or benefit to reliably being able to deliver that capacity on demand. That’s becoming more important all the time. We’ve seen new plants develop some strategies to make sure they can deliver when they need to.

Nicholls: The good news is that the R&D investments that advance gas turbine designs are having a positive impact on operating plants. We’ve made a lot of advancements in component designs and durability. That can be implemented back into the operating fleet, as Roger just mentioned. He also mentioned, and I agree wholeheartedly, there have been significant advancements to improve the operational flexibility of those plants in terms of low load turn down, emissions compliance, and power and efficiency optimizers. All of those things contribute toward higher capacity factors.

In fact, the analytic advancements we discussed earlier provide operators the knowledge they need to address maintenance activity in a more proactive approach. If you can push an outage out or know when something is going wrong and can avoid either a forced outage or delay a scheduled outage, that helps to enhance the capacity factor.

Alley: Maintenance intervals and replacement part intervals for the combustion turbine typically are start-based or hours-based. I expect the frequency of outages and the costs of replacement parts will increase with higher capacity factors. EPRI and its members are evaluating how to use sensors, combustion dynamics, and inspections of critical components to assess the rate of damage and incorporate equipment condition in outage planning. Using sensors and inspection techniques, you’re able to make better-informed decisions. If we can better understand how the components accumulate damage and the risks associated with continued operations, we can develop better maintenance strategies and scheduled outage plans, and reduce forced outages.

Power Engineering: The industry’s three major gas turbine manufacturers have launched some very innovative designs. These new machines are extremely efficient, very flexible and very fast. According to GlobalData, the global gas turbine market is expected to remain steady over the next five years at about $58 billion. Do you agree with this projection? How would you describe the future of gas turbine sales in North America and abroad?

Nicholls: We wouldn’t describe the local market over the next five years as steady. In fact, our forecasts for both the global and North American markets have shown some significant year-over-year shifts. Whatever the absolute number is, there is certainly shifts in demand around the world into and out of the different regions. We have some very big infrastructure recovery projects in the Middle East. We have a continuous shift from coal to gas in China. But some of these big projects, once they’re done, are not going to be repeated immediately. Demand shifts throughout the year.

In North America, the market has been driven by large utility purchases and the shift from coal to gas. We expect a little decline in the short term and then rebounding in the mid-term. Again, “steady” is maybe too strong a term to describe what’s going on in individual markets as demand shifts throughout the world.

Lenertz: The global market is different from the U.S. market. We see gas turbine sales in the U.S. are going to cool down some, but on a global basis, the gas turbine market is going to be strong. We see significant development activities in Africa, South America, and Indonesia with respect to LNG. It’s kind of a mixed bag, as Barry indicated.

Alley: It’s difficult for me to address gas unit sales. For all reasons we’ve talked about, I’m confident we will continue to see gas build out as new gas capacity replaces retired coal plants. Flexibility again will be the key. The new designs are definitely more flexible. Our focus at EPRI is on technologies to expand flexibility of older units that weren’t designed for today’s operations.

Power Engineering: Once upon a time, the natural gas market was renowned for its volatility. In the past, it was not unusual to see prices spike from $3 per thousand cubic feet (mcf) to $13 per mcf in a fairly short period. In recent years, though, gas prices have remained consistently low. Will this trend continue for the foreseeable future? Or do you see a return to volatility down the road?

Nicholls: It depends on your definition of volatility. Bouncing around between $2 and $4 is a big percentage. That’s double. But it’s certainly not the absolute range we saw in the past. According to estimates I’ve seen, there is enough gas available at a production cost out of the ground at $3 or below to supply North America for 25 years. There’s another 40 percent on top of that available at $4. Based on what I read, there seems to be plenty of gas.

Lenertz: Black & Veatch routinely publishes our view on natural gas pricing futures in the Strategic Directions: U.S. Natural Gas Industry report. The report is available for download at our website at www.bv.com. It forecasts a stable gas market pricing trend.

Alley: It still makes people in the industry pause, but there’s increased confidence that $4 to $6 per mcf gas for foreseeable future is a solid number. Volatility is a good question, but the preponderance of data suggest it will be $4 to $6 for well into the future. People are becoming comfortable with the convergence of supply and demand we’re seeing now. Even if it becomes $7 to $8 gas, the gas fleet probably will be viable, especially with the recent retirements of coal assets.