Aspen Completes Natural Gas Storage Study

Aspen’s natural gas expert Catherine Elder recently completed a more in-depth look at the need for and issues around adding more underground facilities to store natural gas. Performed at the request of the Utility Air Regulatory Group (UARG), an ad hoc group of electric utilities that participates in various regulatory proceedings, and the American Public Power Association (APPA), the review starts by confirming that the findings related to gas storage in Aspen’s 2010 study “Implications of Greater Reliance on Natural Gas for Electricity Generation” still hold.

The new study goes on to find that while 110 individual gas storage projects have been certificated since 2000, working inventory capacity has increased by only 10%, with many certificated projects not coming to fruition.  Most of the new projects are proposed by independent providers and are designed to capture the option value embedded in natural gas futures prices rather than support reliability.  Yet to provide the flexible services needed to support the variable gas requirements of electricity generators, pipelines need storage, under their control, on their systems.  In addition, efforts to develop geologic carbon sequestration use the very same reservoir targets as underground gas storage, and those formations are not located so that all pipelines can have storage to begin with.  As a result, generators face considerable obstacles in replacing coal with gas and thought may need to be given to building more needle-peaking-type LNG facilities or above ground storage tanks within the footprint of generation facilities.                                                                                               

UARG and APPA attached Aspen’s review of natural gas storage issues to comments they filed with U.S. EPA on proposed new source performance standards that would limit carbon dioxide emissions to those of a very efficient gas-fired generation unit likely operating at high baseload-like capacity factors.