TOPIC #5
Gas-Power Coordination
Issues persist, but changes in practices prove elusive.
An Energy Industry Panel Convenes after Winter Storm Uri
- In February 2021, a widespread cold event dubbed Winter Storm Uri enveloped the south central United States and Texas. The days-long event brought extreme cold temperatures and freezing precipitation, leading to 34 GW of plant outages at its peak and more than 23 GW of firm load shed. At least 210 people died during the event.
- Key to the failure of generation were outages at natural gas wellheads (production) and gathering and processing facilities that rippled through both gas and power infrastructure.
- FERC and NERC staff issued a report on the event in November 2021, outlining key findings and recommendations. That report suggested holding a forum of representatives of state legislatures and/or regulators with jurisdiction over natural gas infrastructure, in cooperation with FERC, NERC, and the regional entities and natural gas infrastructure entities, to “identify concrete actions to improve the reliability of the natural gas infrastructure system necessary to support the bulk electric system.” Some suggested questions for the forum are shown in Figure 5.1 on the next page.
- FERC and NERC leadership wrote a letter in July 2022 to the North American Energy Standards Board (NAESB) to convene the recommended forum. That forum began work in August 2022 and concluded in July 2023.
Source: National Weather Service
KEY TAKEAWAYS
Recent winter storms and related grid challenges have reinforced the interrelationship between the gas and power sectors and need for coordination of operations of those sectors.
A recent year-long NAESB forum provided improvement recommendations, building upon past examinations of the issue. However, there is no clear path forward.
For now, FERC and NERC will continue to focus on the issue, and FERC may address it in a November 2023 technical conference.
Recent winter storms and related grid challenges have reinforced the interrelationship between the gas and power sectors and need for coordination of operations of those sectors.
A recent year-long NAESB forum provided improvement recommendations, building upon past examinations of the issue. However, there is no clear path forward.
For now, FERC and NERC will continue to focus on the issue, and FERC may address it in a November 2023 technical conference.
Figure 5.1: Questions for NAESB Gas-Power Forum Posed by FERC and NERC Staff (Nov. 2021)
Questions for NAESB Gas-Power Forum Posed by FERC and NERC Staff (Nov. 2021)
- Whether and how natural gas information could be aggregated on a regional basis for sharing with bulk electric system operators in preparation for and during events in which demand is expected to rise sharply for both electricity and natural gas, including whether creation of a voluntary natural gas coordinator would be feasible
- Whether Congress should consider placing additional or exclusive authority for natural gas pipeline reliability within a single federal agency, as it appears that no one agency has responsibility to ensure the systemic reliability of the interstate natural gas pipeline system
- Additional state actions (including possibly establishing an organization to set standards as NERC does for bulk electric system entities) to enhance the reliability of intrastate natural gas pipelines and other intrastate natural gas facilities
- Programs to encourage and provide compensation opportunities for natural gas infrastructure facility winterization
- Which entity has authority, and under what circumstances, to take emergency actions to give critical electric generating units pipeline transportation priority second only to residential heating load, during cold weather events in which natural gas supply and transportation is limited but demand is high
- Which entity has authority to require certain natural gas-fired generating units to obtain either firm supply and/or transportation or dual fuel capability, under what circumstances such requirements would be cost effective, and how such requirements could be structured, including associated compensation mechanisms, whether additional infrastructure build-out would be needed, and the consumer cost impacts of such a build-out
- Expanding/revising natural gas demand response/interruptible customer programs to better coordinate the increasing frequency of coinciding electric and natural gas peak load demands and better inform natural gas consumers about real-time pricing
- Methods to streamline the process for, and eliminate barriers to, identifying, protecting, and prioritizing critical natural gas infrastructure load
- Whether resource accreditation requirements for certain natural gas-fired generating units should factor in the firmness of a generating unit’s gas commodity and transportation arrangements and the potential for correlated outages for units served by the same pipeline(s)
- Whether there are barriers to the use of dual-fuel capability that could be addressed by changes in state or federal rules or regulations. The forum could also consider the use of other resources which could mitigate the risk of loss of natural gas fuel supply
- Electric and natural gas industry interdependencies (communications, contracts, constraints, scheduling)
- Increasing the amount or use of market-area and behind-the-city-gate natural gas storage
- Whether or how to increase the number of “peak-shaver” natural gas-fired generating units that have on-site liquid natural gas storage
Source: FERC-NERC-Regional Entity Staff Report, The February 2021 Cold Weather Outages in Texas and the South Central United States
Several Runs at Addressing Coordination Issues
- Discussion of gas-power interdependence dates back to the early 2000s, as a gas-fired generation build-out was under way across the United States (see Figure 5.2). However, action on the issue over the past 20 years has been sporadic and limited in scope.
- The NAESB, formed in 2002 as a successor to the Gas Industry Standards Board, is an industry forum for the development and promotion of standards, including standard contracts, for wholesale and retail natural gas and electricity. Issues of operational coordination were almost immediately introduced, with the formation of a NAESB Gas-Electric Coordination Task Force in 2003.
- Among the proposed standards for development were increased alignment of gas and power day activities, including possibly adding an additional intraday gas nomination cycle to provide more flexibility to shippers to allow generators to nominate more gas to support their power market clearing times, as well as pricing options that would encourage capacity release.
- Ultimately, NAESB put into place standards to allow for communication of operational information between gas pipelines, electric system operators, and power generators, approved via FERC Order 698.
- NAESB revisited coordination through a Gas-Electric Harmonization Committee formed in early 2012 as the Department of Energy looked at the growing potential for natural gas (post-fracking) and its potential for lower-carbon energy. As with the earlier efforts in the early 2000s, coordination of gas/electric timelines, additional flexibility in scheduling gas transportation, and greater availability of information on gas and power system conditions were noted as areas where standards might be revisited. But NAESB membership could not reach consensus on adoption.
- Despite that, in Order 809 issued in April 2015, FERC moved back by 1.5 hours the deadline for scheduling gas transportation and approved addition of a third intraday gas nomination cycle to adjust scheduling to reflect changes in demand. FERC and NAESB, however, declined to change the nationwide start of the gas day to better align generator needs and gas timelines.
Figure 5.2: Some Gas-Power Interdependence Issues
Continued and growing reliance on gas-fired generation
- The power sector is the largest natural gas-consuming sector in the United States.
- Gas-fired generation continues to provide decarbonization benefits (vs. coal) and operating flexibility for balancing and firming renewable resources.
Limited on-site gas storage capability
- While natural gas is storable, storage is not necessarily near power facilities and may not be available at the volumes needed to run a gas-fired power plant for an extended period, forcing reliance on available gas transportation.
Extreme weather and coincident demand
- During cold weather, power generation and residential end-use demand for gas compete, with residential service taking priority and potentially disadvantaging generation.
Gas shipping priorities and incentives
- Because a generator—especially in competitive markets—may not know whether it will be dispatched, it might not procure firm gas transportation, limiting its flexible operation.
Gas capacity expansion impediments
- Generator reluctance to contract firm capacity also affects expansion of pipeline capacity, since long-term firm contracts are needed to approve capacity expansions.
- Despite increasing electric demand for gas and cold snaps causing spikes in demand for gas pipeline capacity, adding such capacity has become a lengthy, expensive, and uncertain proposition due to siting and other objections.
Fuel assurance concerns
- According to NERC, disruptions to the fuel delivery can result from adverse events that may occur, such as line breaks, well freeze‐offs, and/or storage facility outages.
- The pipeline system can be impacted by events that occur on the electric system (e.g., loss of electric motor-driven compressors) that are compounded when multiple plants are connected through the same pipeline or storage facility.
Timing of gas and power days
- Because of gas operations needs (pipeline capacity and pressure), gas nominations (requests to move gas from one location to another) are made at a few discrete times each day.
- Power systems may have day-ahead and real-time bids where generators may not know whether they will dispatch and need gas, and hourly power demand may change significantly, requiring more gas than arranged.
Source: ScottMadden analysis
Agreement, Divergence, and a Proposal for a Gas Reliability Organization
- As mentioned earlier, after a year of deliberation, NAESB released its gas-electric harmonization forum report (the NAESB Report) in July 2023. The forum arrived at 20 recommendations voted on by different segments of NAESB membership.
- There were both strong agreement and divergent opinions between gas and power industries on various recommendations. Key areas of agreement and divergence are summarized at Figure 5.3. In particular, upstream gas players disagreed with recommendations on certain information sharing and for state authorities to provide guidelines for weatherization and cold weather preparation.
- The forum co-chairs expressed disappointment in the lack of consensus across the recommendations. In particular, they cited the failure to synchronize the electric and gas markets has led to “consequences [that] continue to linger in the face of the crises that emerged these past two winters” in the forms of Winter Storm Uri (mentioned earlier) and Winter Storm Elliott, in which generator non-performance (including for fuel issues) led to load shedding in late December 2022.
- The co-chairs also characterized gas industry resistance to standardized contractual provisions that would encourage weatherization actions (by limiting force majeure claims in the “absence of taking preventative measures”) as “disappointing and unproductive.”
- Gas suppliers disagreed with the co-chairs’ characterization, pointing to the 80% of recommendations that they supported and their collaboration on addressing the issue of cold weather fuel availability challenges for gas generators.
- Finally, speaking for themselves, the forum co-chairs proposed a structural change, calling for the creation of a natural gas reliability organization akin to NERC, which is responsible for electric reliability. According to the chairs, “balanced solutions discussed in [the forum’s] report would find home at an institutional forum empowered to more timely address these and other related matters on an ongoing basis.”
Figure 5.3: Gas Electric Harmonization Forum: Key Areas of Agreement and Divergence
“We simply cannot keep the lights on or heat our buildings if both electricity networks and natural gas production and delivery systems do not operate synchronously.”
- Forward from the Chairs, 2023 NAESB Gas Electric Harmonization Forum Report
Source: 2023 NAESB Gas Electric Harmonization Forum Report
What’s Next?
- There is no immediate action anticipated in the wake of the NAESB Report. However, gas-power infrastructure interdependencies remains a key risk being monitored by NERC and FERC.
- In its latest reliability risk priorities report, NERC notes that energy subsector (gas/power) interdependence continues to increase and creates the “potential for common-mode failures that could have widespread reliability impacts” and points to gas system weatherization needs, a pace of pipeline development inconsistent with gas demand, and electricity needs for gas pipeline pressurization.
- On September 21, 2023, the final report of the FERC, NERC, and Regional Entity Joint Inquiry into December 2022’s Winter Storm Elliott recommended, among other things, reliability rules for natural gas infrastructure that include:
- Rules including cold weather preparedness plans, freeze protection measures, and operating measures during extreme cold weather periods
- Situational awareness by establishing regional gas communications coordinators (similar to reliability coordinators for the power grid)
- Designation of critical natural gas infrastructure loads for protection from load shed
- FERC is scheduled to hold a reliability technical conference in November 2023. While topic areas are broad, one question FERC has posed for discussion is whether it should pursue any specific recommendations coming from the NAESB Report.
Figure 5.4: Natural Gas Fuel Issues During Winter Storm Elliott
Natural Gas Infrastructure Reliability Issues During Extreme Cold Weather Led to Fuel Issues During Winter Storm Elliott
Production Infrastructure
- Wellhead freeze-offs, other equipment freezing
- Poor road conditions due to storm/cold weather, preventing maintenance
Processing Facility Operating Issues
- Reduction in receipt (production) volume
- Producer freeze and pressure issues
- Processing plant disruptions and outages caused by freezing and mechanical issues
Pipeline Infrastructure
- Wellhead freeze-offs, other equipment freezing
- Poor road conditions due to storm/cold weather, preventing maintenance
- Weather/freezing issues (majority)
- Mechanical issues
- Interstate pipelines mitigated other equipment issues to avoid impacts to shippers
There were 63 natural gas-fired unit outages/derates totaling more than 10 GW due to gas transportation curtailments during WS Elliott.
Source: FERC, NERC, and Regional Entity Joint Staff Inquiry
IMPLICATIONS
With each weather event, especially extreme and extended cold weather, generation and gas infrastructure performance reminds utilities of potential systemic risks to reliability. These issues will grow as more end uses—such as heating and transportation—are electrified. Ironically, the potential reduction of gas heating load (and concomitant increase in power demand) due to electrification could exacerbate gas-power interdependence issues at the wholesale level.
Even without FERC or state action or changes to industry standards, utilities, system operators, and gas industry participants are well served to consider regionally appropriate planning, information sharing, and operational coordination to prepare both power and gas systems for weather events.
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