POWER July 2013 - 62

ELECTRIC POWER 2013: FLEXIBILITY AND ADAPTABILITY
What Does the Market Expect
from Gas Plants?
With the country awash in natural gas and new construction dominated
by gas-fired plants, one would think that integrating these plants into
the grid would be simple. Like politics, integration problems appear
to be local.
By Thomas Overton
I
n a world of conflicting priorities,
uncertain demand, and uncertain fuel
price trajectories, what does the electric
power market need from gas-fired
power?
In a word: Everything.
That was the message from a panel
of industry representatives assembled to
discuss the future of natural gas plants at
ELECTRIC POWER 2013 in Chicago.
Dr. Paul M. Sotkiewicz, chief economist,
markets, for PJM, began by telling
attendees, " Our objective is to maintain
reliability and operate fair and efficient
nondiscriminatory markets. " Nevertheless,
while PJM is fuel-neutral, he noted that the
ISO is facing 20 GW of impending coal retirements
by 2016-about 10% of installed
capacity-most of which is likely to be replaced
with gas-fired power.
Competitive markets value efficiency,
he said: the more efficiently you can run,
the more money you will make. That provides
an incentive for building newer,
more efficient combined cycle plants.
The market also places a premium on
operational flexibility and reliability.
" The quicker you can move, the more accurately
you can follow dispatch signals, "
the more profitable you will be. " The market
will reward those resources that can do
this, " he said.
The newest gas-fired plants are capable
of responding more quickly than older assets.
" That makes gas very competitive, "
he noted.
Gas-electric coordination is not the
pressing issue in PJM that it is elsewhere,
he said, in part because of the substantial
existing gas infrastructure. It is important
in winter, though, because of the increased
domestic demand.
Still, Sotkiewicz argued that it's not
hard to ensure you have the gas you need
with responsible planning. " It's just a
matter of being willing to pay the price
for it. "
62
Environmental Issues Are Also
Important
With increasing attention to emissions, the
market is demanding assets that can meet
regulations efficiently. Modern combined
cycle plants have substantial advantages
over fossil-fuel plants. " It's a no-brainer, "
he said.
Sheryl Torrey, director of trading analytics
and operations for NV Energy, reviewed
the laundry list of demands on the
typical gas plant: optionality, flexibility,
efficiency, cycling, load following, and
reduced outages (Figure 1). And of course
all of it, she said, needs to be delivered at
low costs.
David A. Frederick, manager of fuel
procurement for FirstEnergy, noted that
the massive influx of shale gas from the
Marcellus shale play has changed the economics
of gas-fired power in the PJM region.
Consequently, coal generation has
fallen 33% since 2008, while gas generation
has grown 173%. Both trends are
ahead of national changes, substantially
so for gas.
www.powermag.com
The result has been to markedly flatten the
supply curve in PJM. While the $50/MWh
point in 2008 was at 112,000 MWh, in 2012,
it had stretched out to 162,000 MWh.
" We aren't spending as much money for
reliability, " he said.
And though PJM is facing a large number
of coal plant retirements, the new capacity
being proposed should be enough
to replace it, particularly since PJM is arguably
oversupplied at the moment, with
baseload capacity currently at 90% of load,
leaving peak units in excess. The expected
retirements will leave about 5% of the load
for peaking units.
Consequently, despite the influx of
cheap Marcellus gas, " It's going to be hard
for merchant players to enter the market, "
at least in the short term. The current economics
will struggle to support new plant
construction.
The situation for gas power in California,
however, is quite different, reported
Clyde Loutan, senior advisor for renewable
energy integration for California
ISO. The large amount of renewable
POWER | July 2013
1. A wide range of needs. Panel members for the " What Does the Market Expect
from Gas Plants? " session, left to right: Sheryl Torrey, NV Energy; Mark Harrer, Wärtsilä; David
Frederick, FirstEnergy; Paul Sotkiewicz, PJM; and Clyde Loutan, CAISO. Source: POWER

http://www.powermag.com

POWER July 2013

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