Gaining in power Latest PUC report shows ascendancy of natural gas as power generation fuel
Natural Gas Deliveries in Pa. by end use (1997) *NGV = Natural gas vehicles
Natural gas deliveries in Pa. by end use (2013) *NGV = Natural gas vehicles
One of the first things that jumps out of the recent “Pennsylvania Gas Outlook Report” from the state Public Utility Commission is the dramatic ascendency of natural gas in the power generation market.
The report, released this month, uses information filed by the state’s natural gas distribution companies, the U.S. Energy Information Administration and other sources, and provides the most recent data available, most of which is from 2013.
It notes that national storage inventory peaked prior to the 2015 winter season at a total of 3.6 trillion cubic feet in the beginning of November, despite fears earlier in 2014 that there would not be sufficient injections to provide adequate storage this winter.
It also notes that natural gas production has been on the rise nationally for nearly a decade.
“Natural gas production in the U.S. increased by 5.2 percent from 2013 to 2014, to 86.5 billion cubic feet per day, marking the ninth consecutive annual increase in U.S. domestic production. Domestic consumption increased 2.8 percent from 2013 to 2014 to 73.6 Bcfd, marking the fifth consecutive annual increase in U.S. domestic consumption.”
The biggest change within Pennsylvania – which has become one of the country’s biggest producers of natural gas because of the Marcellus Shale – is in the area of the fuel’s use for power production.
Two charts, one for 1997, the other from 2013, show gas being used for electric power at 3 percent of all natural gas deliveries for end use 18 years ago, moving to 38 per cent of all deliveries by the end of 2013.
As the executive summary of the 44-page report notes, there are about 2.8 million natural gas customers in Pennsylvania, of which 2.6 million are residential customers.
As the authors note, the reasons for the dramatic increase of natural gas usage for electric generation include more supply of natural gas and the resultant lower cost, the advancement of efficient natural gas generation technology and retirements of older coal-fired plants.
“As the composition of the generating fleet changes to more gas-fired units, pressures on the natural gas industry to augment production and transportation capacity will continue to increase,” the study states.
While natural gas usage among Pennsylvania’s residential, commercial and industrial markets has remained relatively steady over the 16 years the charts cover, consumption of the fuel for power generation in the state is another story.
Total natural gas consumption in Pennsylvania has increased from 706.2 billion cubic feet in 1997 to 1,090 Bcf in 2013, while total gas consumption for electric generation has increased from 21 Bcf to 414 Bcf over the same time period.
As the PUC notes, As of January of this year, there were 18,609 unconventional drilling permit applications filed with the state Department of Environmental Protection. Of those applications, 8,827 unconventional wells had been drilled. The U.S. Energy Information Administration estimates that the total number of producing shale and conventional gas wells in Pennsylvania was approximately 57,000 in 2013.
As the report notes, Marcellus shale production, which began in 2005, ramped up appreciably from 2008, and over the past five years, moved from 2.7 billion cubic feet per day in October 2010 to more than 16 Bcfd in January of this year.
By the end of 2013, Pennsylvania had 10,033 megawatts of natural gas fired electric generation, or 24 percent of the state’s generating capacity, second only to coal at 14,489 MW, or 35 percent. Nuclear was third at 9,649, or 24 percent.
Natural gas is poised to continue its ascendency as a power generation fuel in the Keystone State, according to information provided by PJM, the regional power transmission organization that coordinates the movement of wholesale electricity in 13 states, including Pennsylvania.
In a chart showing “queues” for proposed new power generation projects in Pennsylvania. As of December 2013, there were 11,609 MW of proposed new natural gas fired capacity for Pennsylvania. While PJM notes that only about 25 percent of the queue actually gets built, the natural gas segment represents 94 percent of the entire queue. Other proposed power projects in the queue included nuclear, 369 MW (3 percent); wind, 207 MW (2 percent) and “other,” 139 MW (1 percent).
There are no proposed coal-fired projects in the queue chart, reflecting the recent regulatory atmosphere which has many power generating companies switching from coal to gas, and the retirements of older coal-fired plants.
The PUC notes that the dramatic shift in the use of natural gas from primarily residential and industrial uses to electric power generation has been occurring steadily from 1997 to 2013, with a market acceleration beginning in 2008 as Marcellus Shale production ramped up.
“In addition,” the report notes, “it is important to note that although the share of natural gas going to different end-uses has shifted, all uses other than power production have remained rather steady. The resultant increase in electric generation has come from an increase in the total amount of gas being delivered in Pennsylvania, not a shifting of resources away from other uses.”
The report notes that despite the dramatic increase in production from the Marcellus Shale, many portions of eastern Pennsylvania and New England remain subject to higher-priced gas, as well as dramatic spikes in price during cold snaps in the winter heating season.
“These price differences are mostly caused by a lack of pipeline capacity to transport the glut of supply to the markets where it is most needed,” the report states.
“There are almost 12 Bcfd of pipeline projects slated to come online in 2015 in the Northeast region, to help move gas to market. Additional pipeline helps remove the above-mentioned constraints and stabilize regional prices, helping to move the vastly increased Marcellus Shale gas production to consumers.”
At the beginning of this year, nearly all natural gas drillers in the Marcellus region announced cutbacks in new well projects, due to the continued low prices for natural gas caused by the production glut.
But the same drillers expressed confidence that the glut will be alleviated with the completion of new pipeline projects, with many expected to come online by 2017.