(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON, March 26 Disruptions to natural gas
supplies pose an increasing risk to the reliability of the power
system in the United States as gas replaces coal and nuclear as
the main source of electricity generation.
"Reliance on natural gas as a fuel for electric generation
has increased in recent years, resulting in greater
interdependence between the natural gas and electric
industries," the Federal Energy Regulatory Commission (FERC)
said in a proposed new rule issued on March 20.
By 2015, gas-fired power plants are expected to supply half
of peak electricity demand. Ensuring that the gas and
electricity industries work together smoothly is becoming
But the number of power plants unavailable to generate
because they cannot get enough gas has been growing since the
turn of the century, according to an analysis performed by the
North American Electric Reliability Corporation (NERC).
Gas-fired generating units were declared unavailable on 292
occasions in 2010 owing to lack of fuel, up from 13 instances in
2001. More than 30 gigawatts of generating capacity was lost in
2011, a 30-fold rise since 2001, according to NERC
("Accommodating an increased dependence on natural gas for
electric power" May 2013).
The problem is a shortage of pipeline capacity to certain
areas rather than any shortage of the gas itself.
Forced outages have lasted from as little as five hours to
almost two days. In most instances, grid operators have been
able to avoid power failures by switching to other plants.
But hurricanes, lightning strikes on gas compressors, burst
gas pipelines and extreme cold have all caused serious
interruptions to electricity supplies in the last 25 years.
The worst problems occur in winter, when electric generators
compete with residential and industrial users for scarce
capacity on U.S. gas pipelines.
EXTREME WINTER COLD
Texas could lose up to 24 percent of its gas-fired
generation if the extreme cold experienced in December 1983 is
repeated, according to a report prepared for the Electric
Reliability Council of Texas ("Gas Curtailment Risk Study" March
In February 2011, bitter cold and high winds caused rolling
blackouts across the U.S. Southwest. More than 250 generators
were declared unavailable. Most outages were directly related to
the weather. But at least 15 percent were caused because power
plants could not get enough gas.
In January 2014, arctic temperatures across the Midwest,
Northeast, Mid-Atlantic and Southeast again strained gas and
electricity supplies to the limit.
Texas appealed for power conservation and came close to
ordering rotating blackouts as spare generating capacity
available to meet demand dropped to less than 2,000 megawatts (2
In February 2014, extreme cold limited the availability of
natural gas supplies to New Mexico and California, forcing the
California grid to issue a system alert and ask customers to
reduce their power consumption.
Federal regulators have grown sufficiently alarmed that they
have ordered the gas and electricity industries to coordinate
A series of workshops have been held and studies published
over the last two years on the growing interdependence between
gas and electricity supplies. Following the gas and electricity
shortages this winter, the pace of regulatory activity has
On March 20, FERC set a six-month deadline for the gas and
electric industries to come up with new shipping and dispatch
timetables "to better coordinate the scheduling of natural gas
and electricity markets in light of increased reliance on
natural gas for electric generation".
FIRM VERSUS FLEXIBLE
The changes FERC is proposing are relatively minor and
technical. But they point to broader operational differences
between the two industries, which are becoming more problematic
as power supplies rely more heavily on gas.
Historically, most conventional gas-fired power stations
have operated on average only 25 percent of the time, with
peaking plants operating less than 5 percent of the time.
For that reason, most gas-fired power plants negotiated
interruptible supply contracts with gas pipeline companies
because they were cheaper.
But many conventional gas-fired power stations are now
operating as much as 50 or even 60 percent of the time as
baseload and daily load-following plants.
The old interruptible supply contracts are no longer
appropriate, but firm supply contracts are far more expensive.
In most states, pipeline companies are required to
prioritise gas deliveries to what the regulators term as "human
needs" customers such as residences, hospitals and nursing
As a result, during periods of extreme cold, supplies may be
cut to power producers, threatening their ability to keep the
The gas supply business is oriented to the long term and to
regular deliveries. Gas companies usually obtain long-term
contracts for most of their capacity, and in most cases they
must do so to get the regulatory approval for construction of a
pipeline in the first place.
By contrast, the fundamental principle in the electric
industry is reliability. To ensure the lights never go out,
power generators maintain a large amount of spare generation and
The electric industry's need for spare capacity is not easy
to square with the gas industry's need for firm committed
"Differences in the structures of the two industries can
result in a mismatch between the availability of gas delivery
services and gas demand for electricity generation," NERC says.
As a first step, FERC is trying to align the planning
schedules of the gas and electricity industries to ensure a
smooth flow of gas to power stations when the electricity grid
comes under pressure.
"Differences between the nationwide natural gas scheduling
timeline and the regional electric scheduling timelines can
create complications," according to FERC.
At the moment, the gas industry schedules the provision of
supplies to customers based around a "gas day", which starts at
a uniform time across the United States called 0900 Central
Clock Time (CCT).
CCT refers to the time on clocks in the Central Time Zone,
whether it is Central Standard Time or Daylight Savings Time.
Most gas supplies are fixed at 1130 CCT the previous day,
and there are limited opportunities to modify the schedule at
1800, as well as at 1000 and 1700 on the day itself.
By contrast, the operating procedure for scheduling
electricity flows varies by region, and in most areas the
"electricity day" starts at midnight local time.
For the most part, power producers complete their planning
by 1800 local time on the day before, at which point they are
committed to deliver a specified amount of power to the grid at
In practice, power producers must contract gas pipeline
capacity at 1130 for next-day delivery, even though they do not
know for certain that they will be operating the next day until
1800 - leaving a gap of around six hours between the two
Alternatively, they can leave the booking of pipeline
capacity until the day itself, by which time they will know they
need it, but run the risk there will be no space available. The
availability of intra-day pipeline capacity is severely limited,
according to NERC.
FERC, therefore, wants to adjust the gas cycle to narrow the
gap and give more flexibility to power producers so they can
respond to changes in the weather and other unexpected events.
The start of the gas day would be brought forward to 0400
CCT, so it begins just before the early morning peak in power
The main gas nomination time would be pushed back from 1130
to 1300 CCT on the day ahead, so power producers can fix their
needs later and closer to the time at which they know for
certain whether they will be running.
Finally, power producers would be given more opportunities
to make last-minute adjustments to their gas deliveries in
response to unexpected changes in demand. Instead of two
opportunities to make intra-day changes (at 1000 and 1700),
there would be four (0800, 1030, 1600 and 1900).
Extra intra-day nomination cycles at 0800 and 1600 would
enable gas-fired power producers to ramp up in time for the
morning and evening peaks during periods of extreme cold,
especially if other generation assets are unexpectedly
FERC's proposed rule is only a small first step. More
regulations are set to follow as the government and industry
figure out how to keep the lights on and gas flowing during cold
(editing by Jane Baird)