Natural gas marches on despite Supreme Court CPP ruling
The US Supreme Court’s decision to halt implementation of the Clean Power Plan (CPP) is unlikely to curb rising demand for natural gas or investment in natural-gas infrastructure, FC Gas Intelligence has been told.
Matt Stanberry, Vice President of Market Development for Advanced Energy Economy (AEE), a national business organization promoting clean energy, said low prices have kept demand for natural gas high, and that trend is expected to continue throughout the period of CPP litigation.
“While the stay could create some near-term uncertainties around energy investments, our analysis shows that existing market forces are already driving natural-gas pipeline expansion that would likely be sufficient to meet most of the natural-gas needs under the Clean Power Plan. While there are many factors that will affect the role of natural-gas generation under the Clean Power Plan, assuming it is ultimately upheld by the Court, the stay is not one of them,” he said.
A recent AEE report found that ongoing changes in the US natural gas market – independent of the CPP – were driving increases in pipeline-gas infrastructure, prompted by dramatic growth in new gas supplies from areas like the Marcellus and Utica shales. The report found that compliance with the CPP, even under an unlikely “stress test” scenario of unexpectedly high gas usage, would only increase gas-infrastructure needs by 3% to 7%.
Economic factors more significant
The Supreme Court voted 5-4 in February in favor of a request by 27 states and several major business groups to halt the CPP. The decision means the regulations cannot be implemented until its legality is resolved. The Obama Administration’s plan aimed to lower CO2 emissions from power generation by 32% in 2030 compared to 2005 levels. Increased generation from existing natural gas combined-cycle (NGCC) units was named as one of four “building blocks” toward emissions reduction.
Although the decision took many in the energy sector by surprise, various sources pointed out to FC Gas Intelligence that other trends were having a greater impact on energy policies.
“Economic factors have been and continue to be more significant than environmental regulations,” said Marcia Blomberg, spokesperson for ISO New England, the regional transmission organization serving Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.
“The New England states have generally had environmental regulations that were more stringent than federal requirements, and their current carbon policies, as well as potential changes to RGGI requirements [set under the Regional Greenhouse Gas Initiative by a grouping of states in the northeastern US and provinces in eastern Canada], appear to continue that trend, Blomberg said.
For its part, ISO New England will continue to provide support to the New England states as they develop their clean-energy policies, she added.
The Midcontinent Independent System Operator (MISO), serving much of the Midwest and South, predicted in a November 2015 analysis of the CPP that legal or political challenges to the rule would result in partial CPP implementation – but the delays would have no effect before 2022. Emissions reductions in the MISO regions would be identical in a partial CPP future, CPP future, or accelerated CPP future, through to 2022. From there the paths would diverge, with the partial CPP future seeing a 17% emissions reduction, compared to 34% and 43% respectively in the other two scenarios.
Replacing an aging fleet
Kenneth Hall, chairman of the Gas Turbine Association (GTA), listed low-cost natural gas, an aging fleet of thermal plants, and tougher emissions requirements at both the federal and state level, as major forces driving changes in how power is produced in the US.
While acknowledging the industry’s surprise at the court decision, he said the other forces will continue to reinforce the trend toward the deployment of cleaner energy systems.
“Gas turbines are, and will remain, a superior option for new generation and the repowering of older facilities,” Hall said, adding. “Gas turbines play a key role in backstopping solar and wind power generation, as they are ideally suited for the rapid and repeated cycling necessary to stabilize the grid as the power contribution from non-dispatchable renewables increases. Aeroderivatives are well known for this capability. Those as well as larger frame machines with improved cycling and turn-down ability are replacing older, less-efficient base load coal plants.”
As FC Gas Intelligence reported in January, lower costs for fuel and maintenance and reputation for reliability helped propel the use of natural gas in US electricity generation even before the CPP was released. And the Energy Information Administration has forecast that natural gas will account for almost one-third of the new utility-scale generating capacity added to the US power grid in 2016.
Hall, whose GTA represents all the major gas-turbine equipment manufacturers in the United States, is equally confident. He said: “As a result of continuing advances in gas-turbine technology, efficiency increases are enabling our nation to better meet the challenge of reducing the release of CO2 into the environment. Whatever the future might hold for the Clean Power Plan in terms of the judicial process, we expect many of the fundamental drivers for natural gas-fired power generation to remain firmly in place.”
By Nadav Shemer