Electricity Markets

Southwest, So Cal face natural gas disruption risks: report

Partly driven by baseload power plant retirements, the Southwest and Southern California are vulnerable to natural gas pipeline disruptions, which could cause power outages, according to a report released by the Western Electricity Coordinating Council.

“The configuration of the gas-electric system combined with the potential closure of Aliso Canyon creates region-wide reliability issues centered around the markets concentrated in Southern California and Phoenix,” said the report, “Western Interconnection Gas – Electric Interface Study,” released June 19.

Disruption scenarios revolving around a Desert Southwest pipeline rupture or Permian/San Juan basin supply freeze-offs “routinely” result in unserved energy and unmet spinning reserves, according to the report, written by Wood Mackenzie, a consulting firm.

Energy + Environmental Economics, a consulting firm, and Argonne National Laboratory contributed to the report.

The Southwest and Southern California rely on a handful of long-haul pipelines for their natural gas supplies, according to the report, which analyzed natural gas infrastructure in the West and its ability to meet evolving grid needs in the Western Interconnection.

The loss of a desert Southwest natural gas pipeline results in full disruption of gas service to power plants totaling 24,000 megawatts at a cost of about $1.1 billion, according to the report. 

One of the key issues facing the West is the limited operations at the Aliso Canyon natural gas storage facility near Los Angeles, according to the report. After a leak at Aliso Canyon in late 2015, the facility’s storage capacity was cut to 25 billion cubic feet, down from 86 Bcf. The California Public Utilities Commission proposed increasing its storage capacity to 34 Bcf in response to four natural gas pipeline outages affecting Southern California. However, long-term, California regulators are considering shutting the Aliso Canyon facility down.

At the same time, Wood Mackenzie expects system reserve margins to tighten through 2026 as about 12,000 megawatts of coal and nuclear capacity retires and power demand increases.

Renewables and energy storage will replace some of the retiring capacity, but new firm generation will also be needed, the report said.

“Natural gas resources will continue to play a growing role in meeting regional capacity needs, and with the retirement of significant quantities of firm baseload generation, additional investment in gas generation is likely needed within the region to meet reliability needs,” the report said.

Increased ramping in the late afternoon as solar resources stop producing electricity may create strains between natural gas pipelines and generators that must quickly fill in for the drop in solar output, according to the report.

The Pacific Northwest faces fewer natural gas supply risks because of existing storage facilities, hydroelectric generation and transmission interties, according to the report.

The report recommended taking a range of steps to ease the risk of natural gas disruptions, including adding gas storage, such as adding a storage facility near Phoenix. Kinder Morgan has proposed a $370 million, 4 Bcf storage project in the area.

Other options include expanding existing pipelines, adding dual-fueled power plants, increasing demand response programs and installing battery storage and renewables.

The report also recommended a range of improvements to protocol and procedures, including that regional entities work more closely on planning exercises. Another recommendation was to consider classifying critical power plants in California as “core” assets instead of “non-core” so they can maintain their natural gas supplies during emergencies.

The report also called for greater transparency and clarity around procurement and supply of gas to gas-fired power plants. “Having an accurate view of how much capacity and which power plants are covered by firm transport (FT) contracts as well as deals with third-party suppliers allows for better firm reserves analysis and more robust contingency planning processes,” the report said.

The report recommended better aligning the electric and natural gas nomination periods. “Improved coordination of gas and electric industries' operating practices will be critical for maximizing compensation capability and ability to respond to both business-as-usual and sustained disruption scenarios,” the report said.

WECC has been approved by the Federal Energy Regulatory Commission as the Regional Entity for the Western Interconnection. The North American Electric Reliability Corporation delegated some of its authority to create, monitor, and enforce reliability standards to WECC through a delegation agreement.

The report is available here.