1、 Impact of Power Generation Gas Demand on Natural Gas Local Distribution Companies Prepared for: American Gas Association Prepared by: Energy and Environmental Analysis, Inc. October 2001 Catalog No. F22001 IMPORTANT NOTICE ABOUT THIS DOCUMENT The AGA and Energy and Environmental Analysis, Inc., the
2、ir members, and those acting on their behalf, disclaim liability for any personal injury, property or other damages of any nature whatsoever, whether special, indirect, consequential or compensatory, directly or indirectly resulting from this publication, use of, or reliance on this document. They a
3、lso make no guarantee or warranty as to the accuracy or completeness of any information published herein. In issuing and making this document available, the AGA and Energy and Environmental Analysis, Inc are not undertaking to render professional or other services for or on behalf of any person or e
4、ntity. Nor are they undertaking to perform any duty owed by any person or entity to someone else. Anyone using this document should rely on his or her own independent judgment or, as appropriate, seek the advice of a competent professional in determining the exercise of reasonable care in any given
5、circumstances. TABLE OF CONTENTS Page Executive Summary . ES-1 1. Introduction 1 2 Projected Gas Use for Power Generation 3 3. Profile of Gas Use for Power Generation. 39 4. Pipeline Operational Challenges. 51 5. Evaluating the Impact of Growing . 65 Power Generation Demand ES-1 Executive Summary Ex
6、ecutive Summary Overview Growth in the amount of gas used for power generation has the potential to affect natural gas markets and natural gas industry operating practices in a number of fundamental ways. Indeed, the use of gas in power generation has already contributed to unprecedented gas price v
7、olatility and capital budget planning. One need only review the experiences of the gas markets in California to understand the potential magnitude of the impacts of power generation gas use. Market price volatility is, however, only one aspect of the changes that power generation gas use will bring
8、to the gas industry. Power generation demand growth could impact operating conditions on the natural gas pipeline network in ways that have the potential to affect LDC operations. The objective of this report is to consider the wide range of potential impacts of the growth in this segment on natural
9、 gas Local Distribution Companies (LDCs). The impact of growth in power generation demand is not the same for all regions of the country and for all LDCs. This analysis is designed to identify factors that could contribute to the impacts between different companies in different regions and different
10、 market conditions. Future Gas Use for Power Generation There is a growing need for new electricity generation capacity in a number of regions of the country. While electricity markets in California and the Northeast have received the most attention from federal policy makers, markets in the Southea
11、st, Midwest, Florida, and the Gulf Coast all require that substantial generation be added over the next five years with requirements continuing to grow through the remainder of the decade. In response to these requirements, a very large number of power generation projects are being planned, announce
12、d, and built. As much as 240 GWs of capacity has been announced publicly in press releases and public filings. Of these more than 85 percent of the capacity is gas-fired. While all of the announced projects may not be built, the majority of the capacity will be needed by the end of the decade. Energ
13、y and Environmental Analysis, Inc. (EEA) is projecting Lower-48 natural gas demand for power generation to almost double within the next ten years, reaching nearly ES-2 8 Tcf in 2010, up from a little over 4 Tcf in 2000. With an average growth rate of 4.2 percent per year, gas demand for power gener
14、ation is expected to increase faster than gas demand growth in any other sector. Figure 2-1 shows the projected growth of power generation gas consumption relative to gas demand in other end-use sectors. The power generation share of the total natural gas market is projected to increase to 24 percen
15、t in 2005, and 27 percent in 2010 compared with 18 percent in 2000. Figure ES-1 Incremental electricity demand is satisfied with increases in both gas/oil-fired and coal generation. Gas-fired generation is expected to account for 68 percent of the increase in total generation. By 2010, gas-fired gen
16、eration grows to 24 percent of total generation, versus 13 percent in 2000. Most of this growth occurs in new gas-fired generating capacity. Lower-48 Sectoral Gas Demand Growth02,0004,0006,0008,00010,00012,0002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010BcfResidentialCommercialIndustrialPow
17、er GenOtherES-3 Characteristics of Gas-fired Generation There are two basic, distinctively different, types of gas-fired generation units: Base and intermediate load units, and Peaking units. Base and intermediate load units are designed to operate at a relatively high annual capacity factor 40 to 7
18、0 percent. New base and intermediate load units are generally combined-cycle units (CC) a gas turbine unit that operates in conjunction with steam cycle generation driven by the hot exhaust gases for the turbine because of the fuel efficiency advantage of these units that result in lower average gen
19、erating costs. A base-load combined-cycle is generally built with the intention of running on a regular schedule. For example, a unit may be designed to operate for 16 hours per day, seven days a week. In almost all instances, the base-load gas-fired generators will be pulled “off-line” during the l
20、ate night and early morning hours, coming back “on-line” in the early morning. Peaking load units are designed to run many fewer hours in the year. In the extreme, some units may only operate less than 50 hours per year during periods of peak electricity demand. Despite the low annual utilization, m
21、erchant peaking units can operate profitably by selling power during periods when the marginal electricity price is very high. However, to capture these opportunities, generators must be ready to come “on-line” quickly, often with little advanced notification. If a peaking generator misses an opport
22、unity to capture extremely high marginal electricity prices on even a few occasions, the projects profit potential for the year may be lost. Ramp-up and Ramp-down Gas turbines can operate in a range of zero to 100 percent of the peak capacity rating, but efficiency levels begin falling rapidly when
23、the turbine is operated below 80 percent of the rated capacity. The relationship between capacity utilization and efficiency means that, even though gas turbines are often used for load following purposes, or are kept online as spinning reserve, the desired mode of operation generally results in a r
24、apid startup. Since the majority of gas turbine power stations include more than one turbine, plant startup can be staged to follow load by staging the operation of the various available turbines. A simple cycle gas turbine can be brought to full speed and peak natural gas consumption within 15 to 2
25、5 minutes of startup. The startup time for a combined cycle unit depends on the design of the unit. Steam turbines take significantly longer to bring to full power than a gas turbine, and typically require a staged startup process. ES-4 Moreover, a power plant may have relatively little advance know
26、ledge that the unit will be dispatched. In a number of regions, the Independent System Operator (ISO) may require units to rampup to replace units that are experiancing unanticitpated outages. Pipeline Service Requirements As a result of these characteristics, power generation load exhibits more var
27、iability within each day than traditional pipeline customers. As pipeline customers, power plants will require services that allow them to manage the hourly swings in gas consumption. Pipelines routinely have to adjust operating practices to meet the challenges of maintaining system pressure and adj
28、usting to changes in rate gas consumption and gas flow patterns. Power plants amplify these changes because the fluctuation in consumption volumes is large and the rate of change is larger for power plants than for any other class of customers. The gas industry has served power plants for years the
29、unprecedented increase in gas demand for this sector, however, points to operational challenges. To meet these challenges, pipelines may have to add facilities and/or change operating practices to compensate for the more volatile pressure conditions. For example: A pipeline may be able to add compre
30、ssion to respond to changes in operating conditions. A pipeline may be able to add looping upstream of the power generation facility to allow for additional gas flow and to decrease the magnitude of the pressure decline that accompanies power plant ramp-up. A pipeline could add flow control devices
31、at key locations and at power plant delivery points to manage system operations. A pipeline could enhance system monitoring to insure that pressure changes are addressed efficiently. A pipeline could utilize state-of-the-art and dynamic flow modeling to evaluate operational scenarios and significant
32、ly reduce the risk of operational disruptions. In addition, LDCs and other shippers may have assets and facilities that can be employed to address the operating changes. LDC assets that could support power generation include: Utility owned storage facilities that could increase the supply available
33、in proximity to a power plant. ES-5 Peakshaving facilities that could be operated to displace pipeline gas. Storage injections into contract storage that could be managed on a daily or hourly basis to support pipeline linepack. The ability to adjust and balance gas deliveries between multiple city-g
34、ate delivery points serving the LDC. Communication between the generator, the pipeline and other pipeline shippers is important to effectively utilize LDC and other shippers assets to manage and protect the operational integrity of the pipeline system. Shippers with assets that are available to main
35、tain pressure and gas flow to generators must be aware that the opportunity exists in the marketplace. When these services are marketed to generators, the communication protocols could help to assure that the assets are being utilized in a similar manner. Likewise, regulatory structures that allow s
36、hippers to effectively compete with pipelines are also important. To utilize existing assets efficiently, LDCs must not be restricted from utilizing their portfolios in a manner that meets the needs of the generator. In addition, competition between the pipeline and shippers can help assure that cos
37、t of services that require new facilities is minimized. ES-6 Introduction 1 1 INTRODUCTION Growth in the amount of gas used for power generation has the potential to affect natural gas markets and natural gas industry operating practices in a number of fundamental ways. Indeed, the use of gas in pow
38、er generation has already contributed to unprecedented gas price volatility, pipeline expansion proposals and capital budget planning. The objective of this report is consider the wide range of potential impacts of the growth in this segment of the market and discuss the implications of these impact
39、s on natural gas Local Distribution Companies (LDC). Gas use for power generation is a major opportunity for companies in the gas industry. By most estimates, gas use for power generation will account for more than half of the total growth in gas markets over the next ten years on a volumetric basis
40、. Connecting new power plants will require investment in new infrastructure and provide an opportunity to offer services such as gas procurement, balancing and load management. While many of the new power plants will likely be connected directly to an interstate pipeline, LDCs want to compete for th
41、e growing power generation market by constructing facilities and using their portfolio of assets to serve the fuel service needs of generators. Moreover, many LDCs are pursuing business models that include power generation and power marketing as part of their core portfolio of energy products. Marke
42、t price volatility and market growth opportunities are not the only changes that gas use for generation will bring. Power generation demand growth will dramatically affect operating conditions on the natural gas pipeline network in ways that have the potential to affect LDC operations. Because of th
43、e large number of power plants slated for several regions of the country and the large amount of gas consumed at a power plant and the rapid and sometimes unanticipated changes in the hourly rate of consumption, gas-fired power plants have the potential to cause significant swings in the operating p
44、ressures on a pipeline. The principal operational concern expressed by LDCs is that pressure drops at the LDCs city-gate that could accompany the ramp-up of one or more power plants could disrupt and reduce the rate of gas flow through the LDCs meter station and into the distribution facilities. Pip
45、elines, shippers and regulators will need to utilize “state of the art” analytic and communication tools to ensure that traditional customers as well as power generation applications receive the quality of service needed to meet gas consumers needs. The impact of growth in power generation demand is
46、 not the same for all regions of the country and for all LDCs. This analysis is designed to identify factors that could contribute to differences in impacts of power sector demand for gas between different companies in different regions and different market conditions. Projected Natural Gas Use for
47、Power Generation 2 To accomplish this objective, the report: Examines projected power generation gas demand growth in the United States on a regional basis, Evaluates the operating characteristics of gas generation and discusses the transportation and delivery service requirements to serve power gen
48、eration load, Considers how power generation service and load profile can affect pipeline operating conditions and the service received by LDCs and other shippers on the pipeline, and Discusses how growth in power generation gas consumption can affect national and regional gas market conditions. Pro
49、jected Natural Gas Use for Power Generation 3 2 PROJECTED GAS USE FOR POWER GENERATION 2.1 Overview of Growth in Natural Gas Use for Power Generation Power generation is currently the fastest growing market for natural gas. New lower cost gas-fired generating technologies, combined with long lead times and environmental compliance difficulties associated with other technologies have made natural gas generation the new capacity of choice for most new power plants currently under construction or in the planning phases. EEA is projecting Lower-4
