EYE ON THE GRID BLOG

Where natural gas and power transmission intersect

By Editors of POWERGRID Int'l / Electric Light and Power
By Teresa Hansen
Editor-in-Chief

I recently attended a conference in Washington, D.C. called TransForum East. It was organized by PennWell through one of its latest acquisitions, TransmissionHub, a research, analysis and news portal. As the name implies, the conference deals with electricity transmission , but this year the low price of natural gas and how it is affecting the electric power sector was a hot topic.

Kent Knutson, TransmissionHub 's director of data strategy and content, said transmission investment in the U.S. is growing. During the first nine months of 2013, nearly $6.7 billion was invested in transmission projects, up considerably from the $5.6 billion spent in all of last year.

Knutson expects continued growth through 2015. Most activity is in 345 kV projects being driven by Texas competitive renewable energy zone (CREZ) and Western Interconnection projects. A fair amount of activity is also occurring in the Midwest and PJM independent system operators and the Northeast Power Coordinating Council territories.

As in other areas of the electric power industry, uncertainty is prevalent in the transmission sector. Changing technologies, cyber and physical security threats, regulations, siting issues and customer expectations are to blame for much of that uncertainty.

Cheap gas becomes a transmission driver

The changing power generation mix, however, is perhaps the biggest culprit. Electricity generated by wind and solar energy is rapidly being added into the mix. Coal plants are being retired because they can't meet EPA regulations. Cheap natural gas is resulting in a build-out of new gas-fired combined-cycle generation to replace retired coal plants and back up intermittent renewable energy.

New transmission is needed to connect renewable energy with load centers, plus load forecasting and balancing technologies must be added to manage this intermittent supply. New gas-fired generation being built in areas with inadequate transmission capacity is also driving new transmission construction. In addition, in some areas, especially the northeast, gas-fired plants are being built in areas with constrained gas pipeline capacity.

Transmission operators are concerned that these plants, which they count on for supply, could fall off the grid if pipeline capacity is used for other demands such as home heating. Because many new gas-fired plants are owned by independent investors and merchant generators, differing opinions and uncertainty exist about who will pay for needed electric transmission infrastructure as well as gas pipeline infrastructure.

Will FERC address uncertainty?

Many look to the Federal Energy Regulatory Commission (FERC) for clarity on these issues. FERC Commissioner Philip Moeller, who spoke at TransForum, acknowledged that transmission owners and operators face many hurdles. Moeller said FERC knows the lack of a federal policy allowing transmission owners to build across state lines is a problem, but he doesn't foresee a federal law changing siting issues for interstate transmission lines in the near term.

He also said that uncertainty surrounding return on equity (ROE) exists. He said FERC has created much of this uncertainty, but his only words of encouragement came when he said ROE is a "live" issue for FERC.

Low- to moderate-priced natural gas, which Moeller said will stick around for some time, will continue to drive gas-fired generation and transmission growth. Better coordination between gas suppliers and electricity generators must be addressed, he said.

Longer-term issues, he said, such as who pays for the gas infrastructure to secure supply to generators, are more vexing. A big part of the solution involves the two industries learning more about how the other one works, he said.

Even with the uncertainty, Moeller said he is "bullish" on transmission and "it's an exciting time" in the transmission industry. "If the issues were easy, someone else would have already solved them. You need to stay active and involved," he said.

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