EIPC analysis beginning of gas-electric dialogue

Executive Column: Craig Glazer,  vice president – Federal Government Policy

The Eastern Interconnection Planning Collaborative is finalizing a first-of-its-kind analysis of the resiliency of the natural gas pipeline infrastructure to serve the future growing needs of the region to generate electricity using natural gas. The EIPC analysis, the final phase of a multi-year project funded by the U.S. Department of Energy, examined:

  • the need for new electric transmission in response to future scenarios developed by states and stakeholders and
  • the resiliency of the natural gas infrastructure to meet future generation needs under various future scenarios.

The recently completed analysis provides some interesting “take-aways” for future consideration. Overall, the natural gas pipeline infrastructure is quite strong in the study area (which consisted of the regions of ISO-New England, NYISO, PJM, the Mid-Continent ISO, TVA and the Independent Electric System Operator of Ontario). Although the demand for natural gas for electric generation is growing, it is the prolific development of Marcellus and Utica shale gas production that is a substantial game changer for the region.

The study also identifies certain vulnerable areas where generators risk an inability to get gas due to more demand than the current pipeline infrastructure can always serve. In the PJM region, those areas are primarily in the Southeastern Mid-Atlantic region and especially in the Baltimore/Capital region as well as in eastern Virginia.

Equally important, the study analyzes the relative costs and reliability of generators purchasing firm gas service under today’s “anchor shipper” paradigm –where one or more entities invest the capital to fund the pipeline construction and then market the capacity to others. The alternative is generators relying on interruptible gas service and having a back-up of tanks on site with ultra-low sulfur diesel fuel. Almost without exception, installation of tanks and the purchase of ultra-low sulfur diesel fuel were the more cost effective option.

This finding brings into question whether today’s binary model of firm versus interruptible service is a sustainable model for serving the needs of electric generators. For this reason, PJM is  participating in efforts underway at the FERC and within the industry to examine new models for funding new gas infrastructure while also providing more flexible services to generators.

Finally, the study provides one of the most in-depth examinations of the reliability of service to generators located behind local gas distribution utilities (LDCs).  Gas delivery to these generators is regulated at the state level. The study notes that the rules governing this service are much more generator-specific and far less transparent than those involving interstate pipelines. PJM intends to continue to work with state regulators on ensuring that LDC systems are meeting the needs of both gas customers but also the growing electric generation needs of the PJM region.

The study results are open to anyone to review at www.eipconline.org. This analysis is the start, rather than the culmination, of a dialogue on the important policy and operational issues as we look into our crystal balls and ensure a reliable electric grid into the future.