Energy event shines a light on changes in power industry
Natural gas: It’s emerging as a key fuel for new plants
It’s easy to turn on a lamp, but keeping power flowing to it reliably is a complex matter that was the hot topic Thursday for energy leaders meeting in Houston.
Some of the same forces roiling the oil and gas business over the last decade also are sparking changes in the power industry, with cheap natural gas emerging as the fuel of choice for producing electricity, executives and regulators said at the IHS Energy CERAWeek conference.
The switch to natural gas has power companies around the country building new plants so they can pull the plug on aging units and insulate themselves as
regulators update current rules and mandate lower carbon emissions.
And because improved energy efficiency is keeping demand from growing as much as it has in the past, existing ratepayers mainly will be the ones charged for those facilities. Rates are poised to increase across most of the country, a panel of executives told attendees.
Texans can expect at least some break on rising light bills because a growing population of ratepayers will share the costs of building a more gas-powered grid, panelists said. Texas’ demand for electricity has been boosted by economic growth, and particularly by the electricity-hungry manufacturers and petrochemical plants flocking to the Gulf Coast.
“We’re going to be in a situation where our rates will not be rising the way they will be in the rest of the United States,” said Leo Denault, the CEO of Gulf Coast area power supplier CEO Entergy Corp.
Also favoring Texas ratepayers are lower fuel costs because of the state’s growing use of natural gas and wind to generate electricity, others said at the conference that runs through Friday at the Hilton Americas-Houston.
Gas generated 41 percent of Texas’ power in 2014, according to the Electric Reliability Council of Texas, which runs most of the state’s grid, while wind generated about 10 percent. The two complement each other because operators can turn gas-fueled power plants on and off more quickly than coalfired generators to accommodate intermittent wind.
Coal-fired plants produced 36 percent of the state’s power last year, with nuclear plants providing most of the rest.
Wind and solar, which provide only a fraction of 1 percent of Texas’ power, have become more popular across the globe as new technology brings down their costs, said Francis O’Sullivan, the director of research and analysis for the Massachusetts Institute of Technology Energy Initiative.
But O’Sullivan said that uncertainty about subsidies and regulations, particularly regarding rooftop solar panels, could slow growth in solar.
Reconciling how rooftop generators work with the broader grid will require some complex rules, he said.
Renewables and natural gas have gotten a boost in the United Sates from forthcoming Environmental Protection Agency rules aimed at slashing greenhouse gas emissions from electric utilities, partly through stricter limits on coal plant emissions.
But while Texas has extensive infrastructure for delivering natural gas to power plants, generators in other parts of the country have warned that the drive to a gaspowered generation fleet could overload their transportation systems and reduce grid reliability.
Steven Whitley, CEO of the New York Independent System Operator, which oversees part of the grid in the Northeast, warned that switching to natural gas generation too quickly could leave generators with “too many eggs in one basket.”
“It’s a big deal in New York when the lights go out,” he said, “People die.”
Gina McCarthy, who heads the U.S. Environmental Protection Agency, which is imposing the rules, said in a luncheon speech that the agency won’t require rule compliance that undermines grid reliability.
“Let me be clear about this. There is no scenario, standard or compliance strateg y I will accept where reliability comes into question.”
Gina McCarthy, Environmental Protection Agency