Tuesday April 6, 11:52 am Eastern Time
Natural gas fuels U.S. power sector growth
By Joseph Silha
NEW YORK, April 6 (Reuters) - Faced with rising competition under deregulation, U.S. power producers are stepping up efforts to build cheap, clean, and efficient plants, and natural gas, by a wide margin, is the fuel of choice.
''Gas has everything going for it. Environmentally, it's very benign and efficient, and most importantly, it's cheap. I expect gas consumption for power generation to increase rapidly,'' said Dr. Henry Linden, professor at the Illinois Institute of Technology in Chicago.
The trend is already evident.
According to the Department of Energy, electric utilities burned 3.26 trillion cubic feet (tcf) of gas last year, up 10 percent from 1997, despite a 3 percent overall drop in U.S. gas consumption to 21.3 tcf.
Linden said he expects domestic gas demand for power generation to roughly double by 2015 to seven tcf.
That growth, according to the North American Electric Reliability Council (NERC), is directly tied to the 65,000 megawatts (MW) of new gas-fired generation capacity planned for construction over the next decade, or roughly 8 pecent of the country's current 800,000 MW generating capacity.
While no one expects all 65,000 MWs to be built, industry experts say the bulk of new power plants built here over the next few years will be gas-fired units.
''A few years ago, there was a lot of talk about coal or nuclear, but electric utilities have come around dramatically and are very bullish on gas,'' said Jerald Halvorsen, president of the Interstate Natural Gas Association of America (INGAA), an interstate gas pipeline trade group.
A recent INGAA report stated the power generation sector is expected to provide ''the largest absolute growth and the largest percent annual growth'' as total U.S. gas demand rises to some 30 tcf by 2010.
''Gas-fired plants are projected to make up nearly all of the incremental new electric generating capacity because of their cleanliness, high efficiency and low initial costs,'' the report adds.
Gas has a clear environmental edge over fuels like coal or heavy oil. It emits far less sulphur oxide and particulates, and its nitrogen oxide emissions are easily controllable, putting it closer in line with the stricter pollution standards taking effect this year as part of the federal Clean Air Act.
The likelihood of future constraints on carbon dioxide emissions, or greenhouse gases, will likely also keep gas in focus as a clean-burning fuel. Gas releases about a third of the carbon dioxide as coal, for example.
''One advantage of gas-fired power generation is its lower capital costs. And gas-fired plants tend to take up less space than other types, so siting is a lot simpler,'' said Ben Ziesmer, senior consultant at Houston-based Pace Consultants.
The installed cost of a combined-cycle gas plant is about $450 per kilowatt (kw), versus $1,000-1,500 per kw for a clean coal technology plant.
Combined-cycle plants burn fuel in a standard combustion turbine, then route excess heat or waste gas to a heat recovery boiler to generate steam. The steam is then sent through a turbine to produce additional electricity, improving the unit's overall generating efficiency.
But some industry experts are a bit more conservative in their predictions of gas's future in the power sector.
''We are a little less bullish than some about new capacity construction,'' said Paul Wilkinson, vice president of policy analysis at the American Gas Association, a natural gas utilities trade group in Washington.
''There is a fair amount of surplus capacity that will take some time to shake out, but natural gas should pick up about two-thirds of the new capacity of both IPPs and traditional utility plants,'' AGA's Wilkinson said.
Another possible downside for gas is a lingering concern over delivering it to market.
''Will there be good integration between pipeline capacity expansion and power plant expansion? They're two industries that don't perfectly communicate with each other,'' one analyst said.
For example, announced plans for up to 30,000 MWs of new gas-fired generation in New England could strain gas supplies to the region if all the units were built.
''In certain areas, there's more capacity announced than projected load demand, so some plants may not be financially viable,'' Pace's Ziesmer said.
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