Gas-Electric Interface Study Scope of Work2
Introduction
As the Regional Entity responsible for assuring the reliability of the Bulk Electric System (BES) across the Western Interconnection, WECC is increasingly concerned about the adequacy, security, and risks associated with natural gas infrastructure and its ability to reliably meet evolving BES needs. This past year’s issues surrounding the Aliso Canyon gas storage field in Southern California highlighted the increasing operational strains that high penetrations of variable energy resources (VER) and the increasing need for system flexibility are placing on the natural gas system. As the Western Interconnection continues to add large amounts of asynchronous VERs to the grid and as traditional resources fueled by coal and nuclear fuels retire, the natural gas system will play a key role in ensuring BES reliability. Environmental concerns over hydraulic fracturing (or “fracking”) have activated a number of concerned organizations whose protests have successfully slowed down the development of new infrastructure, even in regions where the development of new pipeline capacity is of paramount importance (e.g., New England).
As a result, WECC intends to structure and launch an assessment of the natural gas infrastructure in the West and identify key risks of which policy makers should be aware and which utility planners should incorporate in their efforts. This assessment will build upon previous and related work conducted on this issue by Energy + Environmental Economics (E3) in 2014 and NERC’s assessment of single points of failure currently underway.
Background and Context
The natural gas and electric industries have had a complicated marriage of convenience, that up until recently provided multiple benefits to both sectors with relatively low risk. With wellhead price deregulation and a massive supply response in the 1980s, gas became a very economical alternative to oil and many oil-based steam plants were converted to be able to burn gas. This benefited both sectors—electric customers enjoyed the price benefits of low-cost gas and gas customers benefited from better utilization of gas infrastructure since electric loads were largely summer peaking.
During the 1990s, gas transitioned from being a supplemental fuel burned based on economic conditions to a primary fuel in many markets, as the environmental benefits of burning gas relative to oil led many utilities to eliminate the dual fuel option. Gas supply was abundant, and air quality regulators restricted oil burns through permit restrictions.
At the same time, the amount of natural gas generation increased dramatically as competitive generation was allowed to be built and nearly all of the independent power producers favored natural gas based on its economics and the efficiency associated with new combined cycle gas turbine (CCGT) technology. The use of natural gas for power generation in the West is the nearly same as its use for space heating (each were nearly 40% of total gas demand in 2015).
As the dependence of the electric sector on natural gas has grown, a number of issues have been felt:
· The security of gas supply has emerged as a major issue in New England, where almost all of the generation relies on interruptible pipeline contracts and has caused significant reliability concerns for ISO-New England.
· In Southern California, the loss of the Aliso Canyon storage facility created significant reliability concerns in 2016/17 because of its critical role as a “shock absorber” to support very high ramp rates of the gas generation in the Los Angeles Basin to balance solar energy production.
· In the mid-2000s, supply disruptions in the Gulf of Mexico and significant price shocks followed a very active hurricane season.
· And increasingly, gas infrastructure is becoming difficult to permit and site, due in part to concerns over fracking.
These issues are all likely to continue to be concerns, although some may not appear in the Western Interconnection. As the West’s coal and nuclear capacity declines and renewables expand, gas will play a more critical and operationally complex role in supplying reliable electricity. A prolonged drought that would restrict the availability of Northwest hydro generation would place additional pressure on the gas transmission and distribution system serving the Western Interconnection. And, as we learned during the polar vortex, weather events in the East can further restrict the West’s access to natural gas supplies.
Study Scope and Deliverables
The study WECC intends to launch will focus on the following major deliverables:
1. Map the Western Interconnection’s BES assets to the natural gas system and identify key points of vulnerability, e.g.:
· How much generation is tied to any particular pipeline?
· Are there other critical storage fields that present Aliso Canyon-type risks?
· Are there other key mid-stream assets that create risk (e.g., large processing plants)?
2. Identify infrastructure required to meet the fuel demands modeled in WECC’s 2026 Common Case under normal and extreme conditions (e.g., cold winter, dry hydro, etc.) in consideration of:
· Forecasted natural gas loads for power generation as well as commercial, industrial and residential consumption under extreme weather conditions;
· Impacts on existing infrastructure from increases from current to forecasted electric loads; and
· Potential gaps in gas transmission, distribution and compression to meet forecasted loads.
3. Identify key planning contingencies that need to be considered by electric utility planners resulting from the natural gas delivery system.
4. Identify supply-side contingencies that also should be factored into utility planning, e.g., price increases/decreases, production changes such as more/less fracking and foreign demand driving exports at the expense of domestic availability.
5. Identify operating protocols/mismatches between gas and electric system planning that could/should be reconciled.
6. Suggest mitigation options that should be considered to reduce those risks, e.g.:
· Dual fuel capability of key power generation assets located in vulnerable geographies
· Additional gas infrastructure development (storage, system networking, etc.)
· Tools for easing the power systems demands on the gas system (e.g., battery development, smart inverters with ride through
· Policy and regulatory changes that should be advocated (e.g., interruption hierarchy in case of restricted gas supplies, operating practices/situational awareness between the two sectors., scheduling protocols, expedited siting/permitting/environmental review for gas projects, other?)
· Joint emergency response drills / operating procedures
· Other?
Other project Considerations
This effort will build on previous efforts (such as the 2014 E3 study–summary conclusions attached) and other work conducted by the California ISO and NERC. It will require support from several state regulatory agencies as well as gas Local Distribution Companies (LDC) in California and potentially in the Northwest as some critical generation will be dependent on behind-the-city-gate gas distribution assets.
In addition, publication of study findings will be very carefully managed as some amount of Critical Energy Infrastructure Information (CEII) will undoubtedly be required and the findings themselves may be sensitive. WECC’s legal team will work with the selected consultant and a steering committee to develop guidelines for sharing findings.
Project Structure
WECC proposes a project structure consisting of an executive Steering Committee, a Technical Advisory Committee and a core team consisting of a consultant skilled in gas and electric system modeling and select WECC staff.
The consultant will be solicited through a Request for Proposal (RFP) and selected based on experience, capability, and cost considerations.
The Steering Committee will be formed and chaired by the WECC CEO. Our goal would be to have members representing:
· Senior leadership from the electric industry (one representative from the Pacific Northwest, the Desert Southwest, the Rocky Mountain Region and California);
· Senior leadership from the gas industry (perhaps Don Santa from INGAA or a western pipeline Senior executive (Trans Canada or El Paso/Kern River, a representative from CAPP and the heads of one or two gas LDCs); and
· Representatives from the policy world (one or two state commissioners including at least one from California).
The Steering Committee would advise on the study’s scope and meet with the core team to review results and suggest next steps, probably every 4-6 weeks initially (to be firmed up based on the project schedule).
A Technical Advisory Committee (TAC) will also be formed with members who work regularly with gas-electric interface issues to help guide the day-to-day work. We would expect the TAC to include representatives of the following:
· Electric utility industry
· Gas LDC industry
· Gas transmission industry
· Generator Owners
· WIRAB
The TAC would meet as necessary to provide technical guidance to the consultant and WECC staff.
Next Steps
Our focus for the next month will be to refine this document and study scope. To that end:
· This document will be shared with the emerging Gas Working Group at WEIL for comment and then discussed with WEIL at the February meeting in San Diego.
· It will also be shared with the WECC MAC , WIRAB, and NERC for input.
We expect to form the Steering Committee and the Technical Advisory Committee in February, review the scope and structure with the WECC Board in March and then launch an RFP after the WECC Board meeting.
We anticipate this will be a multi-month effort spanning 2017 and 2018. The 2017 expenditure will be funded through WECC’s existing budget supplemented as necessary by a draw on reserves; WECC will include some costs associated with this effort in its 2018 Business Plan and Budget.
Key Findings from E3’s 2014 Assessment of Natural Gas System Adequacy
· The natural gas and electric industries are deeply linked such that events and conditions in one may have significant impacts on the other.
· Under the Base Case (evaluated by E3 in 2014), existing gas transportation infrastructure will generally be adequate to meet the regional needs of the electric sector except under extreme winter weather conditions.
· Gas generation that does not contract for firm transportation service may be subject to interruption during times of high gas demand.
· The regions of the Western Interconnection are highly interdependent in their reliance on natural gas transportation and generation infrastructure.
· Interregional coordination will play a key role in responding to gas generation curtailments during extreme weather.
· Events that affect multiple regions simultaneously may pose a threat to regional reliability.
· Continued growth of the West’s natural gas generation fleet will require expansion of natural gas infrastructure to provide fuel security.
· The impacts of new large natural gas loads on the adequacy of gas transportation infrastructure will depend on the extent to which those loads rely upon incremental expansions or existing pipelines.
· Increased coordination between the gas and electric sectors will facilitate the interdependency between the two.
Western Electricity Coordinating Council