POWER July 2013 - 57

ELECTRIC POWER 2013: FLEXIBILITY AND ADAPTABILITY
that plants also submit their nominations for
gas supply. " Interruptible supply could get
bumped from the queue, " he cautioned.
Gas power station owner/operators also have
to adapt their thinking about their role in ensuring
reliability, noting, as one example, that the
North American Electric Reliability Corp. requires,
among other things, a quarterly checklist
concerning batteries. He then amplified
the capacity-value conundrum. Wind and solar
may be experiencing favorable pricing trends,
but neither brings capacity to the grid, only energy.
Other capacity must be there to support
the renewable energy. Embedding these costs
in the rate base puts more and more pressure on
those " favorable " renewable energy prices.
McCullough posed the question: Are we
in danger of becoming a " one-fuel industry? "
It's somewhat of an unreal scenario. Even at
50% gas capacity, there is still fuel diversity in
the grid. No one talked about a one-fuel industry
when coal was 50% of the generation. But
it's the trajectory McCullough was referring to.
" Baseload coal and nuclear are threatened by
their respective risk profiles, " he said, " we need
to promote balance in the portfolio, and we need
a discussion at the national level about this. "
Swamping Other Fuels
Federal Energy Regulatory Commission (FERC)
Commissioner Philip Moeller amplified the onefuel
note, stating that gas is " swamping " other
fuel options, for five reasons:
■ It's easier to build and finance a gas plant.
■ It's easier to add gas capacity near load
than to build transmission.
■ Gas plant ramping is a solution to intermittent
renewable energy. (He called the
ramping in California that takes place
many afternoons " amazing. " )
■ Coal faces a regulatory tsunami, with Mercury
and Air Toxics Standards (MATS) at
the center of it.
■ Gas prices appear to be relatively stable.
The last bullet point was especially notable
given that only six years ago, gas prices registered
as high as $14/MMBtu at peak times.
However, Moeller noted, shale reserves " didn't
even show up seven years ago, and technology
will allow finding and extracting even more. "
The resource will still be there even if " society
poses additional restrictions on it. "
FERC is taking gas-electric integration seriously,
especially in light of a February 2011
outage in the Southwest when thousands lost
gas and electric supply because of interdependencies.
An official proceeding was
opened on the subject and five planned technical
workshops considered regional issues.
Moeller called the situation in New England
" acute. " Electricity suppliers apparently are
July 2013 | POWER
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57
bidding in without knowing whether they're
going to get gas. Aligning the gas and electricity
trading days is important, he said.
Moeller acknowledged that efforts 10 years
ago to align the trading days failed. Another
challenge is the legal issues surrounding the
two sides talking to each other during times
of stress on the system, he conceded, referring
to gaming the market to unfair advantage.
The fact is, though, there isn't a " 90-day
supply of coal sitting outside a gas plant. " He
described the gas market as not particularly
liquid and as more of a JIT delivery system.
The notion of JIT gas and electric is not quite
accurate. The wholesale side of the gas industry
has significant amounts of storage. However, it is
mostly set up for seasonal, not daily, fluctuations.
The electricity industry also has around 2% of its
capacity in pumped hydroelectric storage (PHS)
and one compressed air energy storage plant,
plus a smattering of small-scale storage demonstration
devices that don't register in terms of
capacity. PHS has demonstrated great flexibility
in helping grid operators smooth out hourly and
even several-minute fluctuations between electricity
supply and demand. There are those who
often state that the electricity industry has plenty
of storage-it's in the gas pipeline and storage
system. But Moeller's message was that it's the
business side that has to be aligned with electricity,
not necessarily the physical.
Gas Swamp Examples
McCullough and Moeller were then joined
by four other industry leaders who offered
prepared introductory remarks (Figure 3).
David Mohre, executive director, Energy &
Power Division, National Rural Electric Cooperative
Association (NRECA) noted that, of
the 56,000 MW of cooperative utility capacity
nationwide, only 26,000 MW is coal, or 46%.
Historically, that figure has been 80%. Since
2007, 15,000 MW of new capacity has been
added, 75% of it natural gas. Mohre did ex2.
Coal makes a comeback. In the span of one quarter, AEP's coal-to-gas ratio changed
significantly in coal's favor, although the change was more dramatic in some AEP regions than
in others. Source: AEP
1Q12
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
1Q13
78.3%
69.7% 71.8%
47.7%52.4%
47.8%
30.3%
22.1%
15.0%
East coal
East gas
East combined cycle West coal West gas
Cycle
3. Popular industry roundtable. Participants in this year's industry roundtable addressed
a full house. Source: POWER
47.8%

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POWER July 2013

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