Pipeline, Electricity Representatives Seek Regional Solutions

CARMEL, Ind., May 10, 2012 /PRNewswire/ -- Today, MISO hosted another workshop on interdependencies in the gas and electricity industries to provide better understanding of how both sectors can work together to offset potential infrastructure issues as the region's power generators attempt to meet the requirements of new federal air quality standards. Representatives from the two industries presented studies that outline options and challenges in light of the new regulations.

MISO first commissioned a Gas and Electric Infrastructure Interdependency Analysis study, released earlier this year, to assess how the shift in the electric fuel mix may impact the gas and electric industries over the next 20 years. MISO's initial study found that gas supply availability at the wellhead for use in power generation is not an issue. However, the analysis indicated three major areas of concern: storage, pipeline capacity and timing.

Today's workshop presented additional findings on whether the existing gas pipeline infrastructure in MISO's region will be sufficient to meet the grid operator's needs as the industry anticipates a greater reliance on gas turbines and gas-fired combined cycle facilities to meet regional power needs. The study concluded that the Midwest will need expanded pipeline capacity or additional storage to meet the expected rise in demand due to greater reliance on natural gas as a fuel source. The study also notes that greater regulatory coordination on a regional level will be needed to strengthen the gas and electric power infrastructure.

"If compliance with new air quality rules become cost prohibitive, utilities may turn to natural gas as an alternative fuel source to meet their needs. Today's workshop is a proactive step in bringing together the natural gas and electricity industries to seek regional solutions," said John Lawhorn, Senior Director, Regulatory and Economic Studies at MISO.

Natural gas fired power plants represent the second-largest generation source in the MISO region.  In the near term, MISO will work with state regulators to preserve reliability as power generation owners' comply with the environmental regulations. In the medium and long term, natural gas infrastructure will require significant investment to meet resource needs in addition to harmonizing with the electricity markets. MISO estimates the increased demand for natural gas as a fuel for power generation could cost at least $2 billion in additional gas infrastructure needs.

In addition to analyzing gas infrastructure capabilities, MISO's supply chain analysis, conducted by The Brattle Group, examined supply chain feasibility and associated maintenance activity as owners of coal plants decide whether to retrofit or retire units. The results of that study were also presented at the workshop. The study indicates that the March 2015 compliance timeline will require more construction than the industry has seen in the past, and an unknown risk is the amount of skilled labor available to perform the retrofits.  In addition, the type of technology necessary to bring a unit into compliance may require lengthy unit outages that may run past the compliance deadline.  Key conclusions:

• To meet the deadline, and taking into account units that will be retired, the Midwest will need to meet or exceed its busiest year ever with a combination of retrofits and replacements, and that productivity must be maintained for 3-4 years.
• Historically, the Midwest has seen up to 14.5 GW of retrofits per year.  The MATS rule affects 60 GW of generation, with three years to comply.
• Still not well known, but probably ok, is the availability of a skilled labor pool to perform retrofit work.
• Some retrofit technologies are riskier than others because of the length of time it takes to complete the work and the timeline for compliance.
• Traditional spring and fall maintenance outage time periods may need to be supplemented with limited winter outage windows.

Lawhorn also said that MISO is an industry leader in establishing discussions between the pipeline industry and electricity suppliers in light of the new regulations. "We are pleased to be in a leadership position to help facilitate greater coordination between the electric and natural gas industries. It is important to have everyone on the same page as we move toward compliance. MISO will continue to assist with providing opportunities for continued dialogue between the electric and gas sectors."

For more information, see the Gas-Electric Interdependency Workshop meeting materials posted on MISO's website.

About MISO
MISO ensures reliable operation of, and equal access to high-voltage power lines in 11 U.S. states and the Canadian province of Manitoba. MISO manages one of the world's largest energy markets, with more than $23.6 billion in gross market energy transactions annually. MISO was approved as the nation's first regional transmission organization in 2001. The non-profit 501(C)(4) organization is governed by an independent Board of Directors and is headquartered in Carmel, Ind., with operations centers in Carmel and St. Paul, Minn. Membership is voluntary.

SOURCE MISO