This article is the introduction to a report from FERC on the integration of natural gas into the other fuels that generate electrical power. It is significant to the wind industry because as utilities switch to relatively inexpensive natural gas ($3.51/M Btu as of Jan 18) they also give themselves the capability to work with wind farms and other renewable energy sources that produce on variable schedules.
The full FERC report is here: http://www.ferc.gov/legal/staff-reports/11-15-12-coordination.pdf
In recent years, reliance on natural gas as a fuel for electric generation has steadily increased. This trend is expected to continue in the future, leading to greater interdependence between the natural gas and electric industries. In some areas of the country, questions have been raised regarding whether adequate market structures and appropriate regulations are in place to support this increasing reliance on natural gas-fired generation. To explore these issues, the Commission convened five regional conferences throughout the month of August 2012, in advance of the winter heating season, to solicit input from both industries regarding the coordination of natural gas and electricity markets. The conferences were structured around three sets of issues: scheduling and market structures/rules; communications, coordination, and information-sharing; and reliability concerns.
A cross-section of industry representatives participated or attended the regional conferences or both, with total attendance exceeding 1,200 registrants. Perspectives varied by region and across industry sectors as to the issues confronting the industries and actions to be taken. Information gathered at the conferences confirmed that gas-electric interdependence concerns are more acute in some regions than others, with the discussion at each conference focusing on the particular circumstances and needs of each region. Notwithstanding the regional focus of the discussions, recurring themes across the conferences were that more attention should be paid to gas-electric interdependence issues and that some matters are appropriate for generic consideration while others are more appropriate for individual regions to address.
This report focuses on several topics that were common to multiple regions. First, conference participants in many regions sought confirmation that sharing information in furtherance of enhancing gas-electric coordination would not run afoul of the Commission’s Standards of Conduct or be construed as engaging in undue discrimination or preference.1
Second, a number of concerns were expressed regarding the misalignment of gas and electric scheduling practices, as well as application of the no bump rule and pipeline capacity release rules. Third, questions were raised in several regions regarding whether generators have appropriate incentives to deliver firm energy. Finally, industry representatives in multiple regions are considering appropriate steps to take to address reliability considerations in the context of gas-electric coordination. Staff addresses these issues by providing guidance where possible and highlighting relevant activities taking place in individual regions.
As the discussion indicates, significant industry attention and resources are
being dedicated to address these and a host of gas-electric coordination issues. Several regions have implemented or are developing practices to improve coordination and communication between the industries during normal operations as well as in emergency situations. Some regions are considering changes to electric market rules to address increased reliance on gas-fired generation, while pipelines have developed flexible products and scheduling protocols for their customers. These efforts have helped participants in each industry identify improvements that can be made to support effective operations within both industries.
By focusing on the subset of cross-cutting issues identified above, staff seeks to
supports the progress being made on gas-electric coordination matters. Staff understands that there are a number of other issues unique to each region that must be addressed to improve coordination across the gas and electric industries. Moreover, staff appreciates that gas-fired generators are only one of many users of the interstate natural gas pipeline system and that any changes to practices or rules within a particular region or the natural gas industry more broadly must be informed by the needs of a broad range of customers.
With these considerations in mind, the staff will be monitoring and engaging industry regarding progress in each region to ensure that gas-electric coordination issues are identified and addressed.
1The Standards of Conduct govern communications between interstate natural gas pipelines and their affiliates that engage in marketing functions, and public utilities that own or operate electric transmission facilities and their affiliates that engage in marketing functions. 18 CFR § 358.1(a) and (b) (2012).
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