Implications of Greater Reliance on Natural Gas for Electricity Generation

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Implications of Greater Reliance on Natural Gas

• Natural Gas Demand & Supply Level Unprecedented

• Infrastructure Requirements: Interregional Pipeline & Underground Gas Storage

• Operational Challenges• Retrofitting Means Replacement

• Permitting challenges• What’s It All Cost?• Download Complete Study at: https://appanet.cms-plus.com/files/PDFs/ImplicationsOfGreaterRelianceOnNGforElectricityGeneration.pdf

Study Identifies Challenges from Large Switch to Gas by Electric Utilities

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Implications of Greater Reliance on Natural Gas

Many Rules Driving Electric Utilities to Gas

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Implications of Greater Reliance on Natural Gas

Gas Demand Varies Depending on Resource Mix, BUT More Gas Required

2008 EPA L-W EPA W-M AEO 2010 NICCPP INGAARef Case

Load Growth 1.5% 0.8% 0.41% 1.00% 0.2% 1.4%

Nuclear 20% 24% 23% 17% 20% 21%Renewables 3% 13% 11% 11% 20% 8%Coal 48% 18% 37% 44% 13% 40%Coal CCS 0% 12% 3% 0% 20% 2%NatGas 21% 25% 19% 21% 20% 23%Petroleum 1% 2% 2% 1% 1% 1%Hydroelectric 6% 5% 6% 6% 6% 5%

Total 100% 100% 100% 100% 100% 100%

Electricity's CO2 Emissions in 2030 1,500 2,306 2,500 700 2,505

Gas Burn for EG in 2036 (Tcf) 6.9 10.80 7.7 8.8 7.4 n/aGas Burn for EG in 2030 (Tcf) 6.9 9.26 6.84 8.3 6.0 9.8Total US Gas Demand 22.9 26.8 23.7 24.3 23.4 27Allowance Prices ($2008) n/a 83.7 38.8 n/a 80 40

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Implications of Greater Reliance on Natural Gas

• To Convert Existing Coal-Fired Capacity to Natural Gas:

14.1 Tcf per year• Is There Enough Supply?

• Not without Shale-deposited supply and/or much higher prices• Even with Record-level proved reserve additions in 2007,

there were not many new discoveries• Objections to hydraulic fracturing create uncertainty

• Uses lots of water• Contamination concern if fracing liquids migrate• Seismic activity• Claims that emissions may be higher

How Much Gas Would We Need & Is there Sufficient Supply?

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Implications of Greater Reliance on Natural Gas

Additional Natural Gas Pipeline Capacity Needed if all Existing Coal Generation Switched to Natural Gas

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Implications of Greater Reliance on Natural Gas

Infrastructure: Pipelines Not Evenly Distributed & Each Pipeline has Different Delivery Capacity

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Implications of Greater Reliance on Natural Gas

Natural Gas Storage: Geography Matters

• Storage needed due to large variation in Electric Generation load and therefore Natural Gas burn

• Must take all gas ordered from pipeline & gas must be ordered the day prior to use

• Best storage is salt cavern because it can be filled and emptied multiple times (“high deliverability”)

• Adding storage is not easy due to geology requirements and other factors

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Implications of Greater Reliance on Natural Gas

Not Every State has Access to Natural Gas Storage

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Implications of Greater Reliance on Natural Gas

Total Cost Close to $750 Billion

Excludes highercommodity costs to expand gas supply, or local pipeline andLDC expansion or higher MDQ costs.