In an ideal world, our electricity system
would run on 100 percent clean, renewable energy. Moving toward that
goal means transitioning away from a system of centralized, fossil fuel
power plants, to an intelligent, efficient, networked energy grid that
smoothly integrates vastly increased amounts of renewables and
energy-efficient solutions.
To do that, we have to balance the
intermittency of renewables with our steady need for electricity. That’s
where natural gas comes in: When the sun stops shining or the wind
stops blowing and renewables are offline, gas-fired plants can ramp up
more quickly and efficiently than coal plants. Many policymakers, regulators and industry members believe we
have to build thousands of miles of new pipelines costing $150 billion
or more to feed this need. But that could be an unnecessary and
expensive mistake, not just now but over a very long term.
Nationally, the U.S. has plenty of existing pipeline infrastructure to accommodate significantly expanded gas use, including to replace coal power plants with gas in order to meet the requirements of the proposed Clean Power Plan. In fact, we aren’t even using 46 percent of the pipeline capacity we already have, according to a recent study by the U.S. Department of Energy. In its Quadrennial Energy Review,
DOE concludes that in many areas of the country, enhancing the
flexibility and capability of the existing network is a better
investment than building new pipelines.
Although we will need to build out new pipes
to fill in certain gaps, this should be complemented by an emphasis on
removing the regulatory and market barriers that keep us from making much more efficient use of the massive infrastructure that’s in place today. If we don’t, then billions of dollars of
capital sunk into new pipelines will fall needlessly on ratepayer
shoulders, and potentially constrain the ongoing expansion of clean,
low-cost renewable technologies.
Contracts Lock Out Innovation, Competition
The typical lifespan of a natural gas pipeline is 50 years or more. Because they are so expensive to build, pipelines are financed over decades based on long-term contracts that must provide enough money to pay for the full cost of the new pipeline, plus a guaranteed profit for the pipeline owner. By locking in that demand, however, these massive investments lock out competition from cleaner, more efficient alternatives.
New
pipelines, in other words, inherently create long-lastingincentives to
keep burning fossil fuel. And often those incentives are legally binding
because more often than not, ratepayers (i.e., the public) are on the
hook for the costs. How natural gas is bought and delivered also
creates huge inefficiencies in the pipeline system that are responsible
for today’s substantial underutilization, and which also work against
renewables.
Flexibility is the defining characteristic of
the developing lower carbon, lower cost energy grid. If gas is to be
used to support renewables, pipelines (and power plants) must be able to
accommodate loads that vary by the minute rather than the day. But
pipelines typically schedule delivery of gas in steady volumes over the
course of a 24-hour period.
Starting to Get it Right
New kinds of contracts and better management
would facilitate delivery on short notice, and in shorter increments.
Indeed, some pipeline operators are already providing additional
flexibility and daily scheduling to meet demand peaks. But today,
there’s little market incentive for most pipeline companies across the
country to adopt this approach.
Pipeline operators seeking to modernize
pipeline systems to complement variable renewables and a more dynamic,
interactive grid will distinguish their projects from developers stuck
in the old paradigm of providing base load, unvarying quantities of
natural gas. Companies that are getting it right – with or without
encouragement from regulators – have a substantial opportunity to
position themselves more competitively.
Steps Toward a More Efficient Market
Over the past year, the Federal Energy
Regulatory Commission (FERC) – the agency responsible for managing the
nation’s energy grid – recognized that the current design of wholesale
gas markets is not aligned with the needs of the evolving electricity
market. In a recent order, FERC agreed with EDF and concluded that regional gas pipeline operators should be providing additional daily scheduling opportunities.
In expressly requiring more frequent
scheduling, the Commission said that “additional intraday nomination
[scheduling] opportunities could promote more efficient use of existing
pipeline infrastructure and provide additional operational flexibility
to all pipeline shippers, including gas-fired generators” and directed
the gas and electric industries to develop further mechanisms for faster
more flexible scheduling, including by automating the process. This is a good sign because it signals to the
gas and electric industries that more market refinements are forthcoming
to ensure natural gas pipeline infrastructure does not become a
progressively bigger obstacle to cleaner, more efficient ways of doing
business.
Competitive Renewables Are the Future
In its modeling to support the proposed Clean
Power Plan to reduce carbon pollution from power plants, the
Environmental Protection Agency projects that natural gas demand in the
U.S. will increase for the next ten years or so as gas displaces coal.
But then it is expected to start falling as energy efficiency and
renewable energy technologies – which are already cost-competitive with
fossil generation – continue to work their way into the energy grid.
Recent analysis by the U.S. Energy Information Administration agrees.
A similar conclusion as was reached by The California Low Carbon Grid study
by the National Renewable Energy Lab, which finds that by around 2020,
the cost advantages of renewable technologies, energy efficiency, demand response, and energy storage begin to significantly reduce natural gas’ share of the U.S. electric power market.
All of which means that regulators, investors
and ratepayers should carefully examine proposals for new natural gas
pipelines to make sure that the economics work over the long run
because, in some instances, there’s a good chance somebody is going to
be stuck paying too much, for too long. This is a consumer issue whether
or not you care about climate protection and clean air.
Deployed properly, natural gas can be
part of the climate solution in the near term, but it is only a limited
tool to help decarbonize the energy system. To be beneficial for clean
energy, gas must be used efficiently and with a limited role into the
future. An inefficient overbuild of the regional
pipeline system will lock in fossil fuels and impose unnecessary costs
on customers and the environment. But, a refined energy market design,
along with forward-thinking pipeline developers, can be part of the
solution for displacing coal-fired power and complementing clean energy
resources.
http://www.forbes.com/sites/edfenergyexchange/2015/06/05/how-to-ensure-new-natural-gas-infrastructure-doesnt-lock-out-renewables/?ss=energy