US western utilities switch to gas amid low prices

OREANDA-NEWS. October 12, 2015. US western region power generators are finding ways to take advantage of low natural gas prices even as reliance on renewable resources grows.

At current prices, Salt River Project District (SRP), the nation's third-largest public power agency serving parts of Phoenix, Arizona, has boosted its reliance on gas while paring coal use, senior marketing representative Kent Price said this week at the LDC Forum in Los Angeles.

Price said the district is backing down coal units at night to run at minimum load so that gas plants can remain online, saving fuel costs and avoiding daily start-up costs.

At other times, the utility is able to purchase surplus renewable power from California and delay starting its gas units until later in the day when needed to meet peak power demand.

"We need flexibility, so gas gets moved around," said Price. Even so, SRP's gas reliance has risen with lower prices.

The utility burned an average of nearly 353mn cf/d (10mn m?/d) in August, Price said. "We burn so much more than a few years ago because natural gas prices are so cheap."

Power generation is extremely sensitive to gas price movement, accounting for a 5-8 Bcf/d gain or loss of gas demand since about 2011, RBN Energy director David Braziel said at the conference.

Even as solar and wind resources replace gas burn, "you need back up," said Erik Johnson, principal energy trader for the City of Pasadena power and water utility.

"Until (electric) storage becomes truly viable, you are still going to have to have gas-fired generation that you can pull up," he said.

Pasadena is developing a new 71MW combined-cycle power plant at its Glenarm site to replace a 1960s-era steam generator. Because California utilities pay added costs for power imports which are likely from coal plants and for utility-scale renewable contracts which are less reliable, gas becomes more competitive as a way to keep customer rates low, Johnson said.

Colorado Springs Utilities relies on coal units which represent about 60pc of its capacity, said Na Bocangel, the utility's gas trader. While the city council weighs a decision on whether to retire some coal capacity or convert units to burn gas, the utility must maintain sufficient firm pipeline capacity so that it can obtain gas when needed to serve customers. Bocangel wants to maintain as much fuel diversity as possible.

None of the gas buyers is worried about gas prices rising in the foreseeable future.

Once the California drought ends, the return of regional hydropower promises to further displace some gas use, Johnson said. "We haven't seen hydro in two or three years," he said.