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U.S. natural gas power on the move

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Kent Knutson's picture
Energy Market Specialist Hitachi Energy USA Inc.

Kent Knutson is a market specialist focusing on energy industry intelligence for Hitachi Energy.  He has more than 30 years of experience designing and developing intelligence products for some...

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Gas power is the most economic dispatchable source of electricity in America today. It is the primary reason coal is quickly fading as a major power generating resource. The development of utility-scale energy storage technology holds great promise in replacing some gas power, primarily in replacing peaking capacity, but large-scale batteries are still years away from making a significant impact on the existing and growing fleet of combined-cycle and simple-cycle natural gas units.

Driven by unprecedented low fuel costs and highly efficient new turbine technology, natural gas power continues to grow. The fuel accounted for a record 38.4% (1.58 billion MWh) of all power generated in the country in 2019, and it keeps expanding. In January 2020, electricity production from natural gas plants accounted for 39.2% of all power production – up from 33.3% one year ago.

U.S. natural gas electricity production (MWh), and average annual fuel cost (current $/MWh)

No alt text provided for this image

Source: ABB Ability Velocity Suite

In 2019, the average annual price of natural gas delivered to the nearly 2,000 operating gas power plants across the country was $2.89/mmBtu, and through the first month of reporting in 2020, had even dropped further to an average delivered fuel price of $2.62/mmBtu – down 34.7% ($4.01/mmBtu) from deliveries in January 2019. The last time the monthly average price of delivered natural gas to power plants topped $3/mmBtu was in August of last year. For independent power producers (IPPs), which typically pay less for gas than traditional regulated utilities, the average delivered price in 2019 was only $2.68/mmBTU, and only $2.36 through the first month of 2020.        

Today’s newer fleet of sophisticated turbines has contributed to the continued improvements in average plant heat rates. In 2008, just over a decade ago, the average annual heat rate for operating natural gas power generators was 8,020 Btu/kWh – considerably higher from 2019 when the average heat rate was only 7,578. Meanwhile, the average operating fuel cost in current dollars, during the same period, dropped from $73.44/MWh to $22.91 in 2019, and in January of this year, the average price was just $20.62. 

U.S. natural gas electricity production (MWh), and average annual heat rate (Btu/kWh)

No alt text provided for this image

Source: ABB Ability Velocity Suite

With this cost advantage and the significant efficiency gains in recent years, the expansion of gas as a utility fuel is almost certain to grow even further given the high number of new combined-cycle gas projects that have recently come online, and those projects well along in construction.  According to numbers tabulated by the ABB Velocity Suite research team, there are 7,546 MW currently under construction or testing expected to come online in 2020, with another 7,053 MW currently under construction expected online in 2021 and 2022.

Gas power projects recently brought online

On March 30, Westlake, LA headquartered Entergy Louisiana, subsidiary of Entergy Corporation, announced the company had recently begun operation of their new Lake Charles Power Station. The 994 MW combined-cycle natural gas power project was completed well ahead of schedule. Construction on the facility, sited in Calcasieu Parish, started in October of 2017.  The new plant was equipped with Mitsubishi Hitachi Power Systems (MHPS) advanced class gas turbines (ACGT) which when fully operational will result in about 40% fewer carbon emissions than Entergy’s older fleet of natural gas turbines. The MHPS turbines incorporate new air-cooling technology, three step-up transformers, and use MHPS’s TOMONI digital platform to monitor and manage operations. American based McDermott International served as the EPC overseeing the construction. 

Following Entergy’s announcement, on April 7, Siemens Energy announced they had fired up Duke Energy’s newest generating unit at the 1,200 MW Lincoln County Combustion Turbine Generation Station in Denver, North Carolina. The plant includes 16 simple cycle combustion turbines totaling roughly 1,200 MW and has been in service since 1995. The startup of the new SGT6-9000HL (405 MW) technology marks the first-ever HL-class gas turbine installation. The HL’s engine architecture introduces several technology achievements including the ability to increase firing temperatures which in turn improves the overall heat rate of the unit. The turbine was delivered to the plant site in late November 2019. The new turbine will deliver power to Duke Energy during a lengthy testing period through 2024, and then, when it enters service, becomes part of Duke Energy’s North Carolina fleet. One of the features of the fast-starting technology is that it can support an ever-growing portfolio of renewable resources Duke intends to deploy in the coming years.

Some additional natural gas-fueled projects expected online in 2020 include:

  • Entergy Texas, Montgomery County (1,045 MW), TX
  • Advanced Power, Cricket Valley Energy (1,000 MW), NY, currently testing
  • Hickory Run Energy LLC, Hickory Run Energy Center (1,000 MW), PA, currently testing
  • Rock River Energy LLC, Riverside Energy Center (700 MW), WI, currently testing
  • AES Alamitos Energy LLC, Alamitos Energy Center (693 MW), CA, currently testing
  • AES Huntington Beach LLC, Huntington Beach (640 MW), CA
  • Shell Chemical Appalachia LLC, Shell Chemical Appalachia (251 MW) PA
  • Entergy New Orleans Inc., New Orleans Power Station (250 MW) LA
  • Formosa Plastics Corp., Formosa Utility Venture Ltd (244 MW), TX
  • Michigan Hub LLC, Michigan Hub Clean Power Project (168 MW), MI
  • Lakeland Dept. of Electric Water Utilities, C D McIntosh Jr (135 MW), FL
  • Stanton Energy Reliability Center LLC, Stanton Energy Reliability Center (121 MW), CA     

Until energy storage can scale, and new innovations are introduced, and intermittent renewables can compete on a levelized cost basis, natural gas will remain an important transitional dispatchable utility fuel and continue to dominate the generation fuel mix across the United States.

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Bob Meinetz's picture
Bob Meinetz on Apr 29, 2020

Kent, any idea how much CO2 800,000,000 MWh of additional gas generation have emitted to the atmosphere since 2007?

Kent Knutson's picture
Kent Knutson on Apr 29, 2020

Bituminous coal creates about 205.7 lbs/mmBtu, while natural gas comes in at about 117.0 lbs/mmBtu . . . a tad over half as much.  But there are minimal particulates, sulfur, mercury, and other pollutants which is great for our health.  The beauty of natural gas is that since the great shale boom, gas has afforded us a low-cost domestic energy source that along with increased oil production helped wean America off energy imports . . . it's done wonders for keeping rates down for utility customers.  Natural gas is considered a bridge fuel to the clean energy future . . . and it seems to have been meeting that expectation nicely and will continue to be filling it until more wind, solar, storage, and other new generation technologies meet most power demand reliably and affordably.  

Bob Meinetz's picture
Bob Meinetz on Apr 30, 2020

Kent, though we often hear gas portrayed as a "bridge fuel to the clean energy future,"  it's obvious recent increases in renewable generation haven't reduced consumption of gas - if anything, more of it is required to bridge the intermittency of wind and solar.

No doubt, gas has helped to reduce CO2 emissions by displacing coal, and it's just a matter of time before coal is a distant memory. But post-coal, what will be providing clean electricity at night when the wind isn't blowing? Currently, there isn't a grid in the world that runs on batteries - it's too expensive, by at least three orders of magnitude - and there's no indication, with the cost of maintenance, installation, and replacement, such a grid will ever be remotely practical.

Above, you claim gas has "done wonders for keeping rates down for utility customers," yet residential rates have risen 52% since 2001 (EIA) - faster than any corresponding period since the Great Depression.

Given all of the above, certainly you can understand why some might view promises of a "clean energy future" with skepticism - that more likely, we're headed for an expensive, gas-powered future, one with ominous consequences for climate.

Michael Keller's picture
Michael Keller on May 5, 2020

The increased costs have not been caused by gas turbine combined-cycle plants. The cost of electricity from these plants is the lowest of any generating plant and by a huge margin.

The culprit for ballooning electricity costs is primarily renewable energy, including mandates requiring the use of green energy.

Kent Knutson's picture
Kent Knutson on May 1, 2020

Inflation adjusted rates are pretty flat . . . I think we're headed for a balanced resource future that if markets stay competitive will be good for all concerned.  It's exciting times for power generation. 

Gary Hilberg's picture
Gary Hilberg on May 5, 2020

Kent - Good initial post and follow-up, the facts are the facts, rates are under control.  When you evaluate deliveried costs it would be good to split out T&D vs. bulk power, older FERC data that I have seen has shown a continued increase in the T&D cost share of delivered power.  All of the utility supported programs for renewables, storage, DSM, etc... get rolled into these charges and as such their % of delivered costs goes up and the source/price of bulk power is easier to discuss.  

Michael Keller's picture
Michael Keller on May 5, 2020

Kent, The gas turbine/combined-cycle fleet has a rather unique characteristic that many in the industry have not yet considered.

Combined-cycle power plants typically employ duct burners with their boilers. This feature enables increased steam/electrical generation to meet grid peaking needs.

Solar energy is typically out of sync with demand in the middle of the day. In many cases, renewable energy has near zero or negative prices on the market because of the production/need mismatch.

A steam electrolysis unit can be easily added to a combined-cycle plant to fire the duct burners with hydrogen gas to meet grid peaks that occur late in the day when solar energy is waning to zero.

The unique hybrid combined cycle plant would store energy (as hydrogen) and then shift the excess solar energy to cover evening peaking loads. There are no CO2 (or NOx for that matter) emissions from burning hydrogen in duct burners.

From a technical standpoint, this is an easy and low-cost adaptation.The approach is vastly more cost effective than using batteries to store excess solar energy. Financially, the low (or negative) cost of the surplus solar electricity means the combined-cycle plant is more profitable.

The hybrid combined-cycle plant solves the energy storage problem. Kind of surprising no one has figured this out yet.

Michael Keller

President  Hybrid Power Technologies LLC

 

Michael Keller's picture
Michael Keller on May 5, 2020

P.S. The approach can also be used with excess/mis-timed wind energy.

Stephen Leftly's picture
Stephen Leftly on May 5, 2020

These are good points that you raise.

It seems to me any idea of "curtailing" renewable generation due to mismatch of supply and demand is frankly stupid. 

If we had the proper regulatory framework in place the “excess” electricity, which as you  state effectively has just about $0 variable cost, would be mopped up converting water into hydrogen for later usage.  I am not sure what you do with all the “waste” free oxygen but I am sure there is a market for that too!

Many “anti-hydrogen” people have pointed out the inefficiencies of using electricity to electrolyze water and then burn the hydrogen to generate electricity but that rather misses the point as this energy today is often wasted  and we need to look are the variable costs overall and compare that to alternatives rather than some theoretical efficiency gauge.

As you say given the current state, or even future possible state, of battery technology it seems doubtful even in the long run that the simply massive amount of energy storage needed to support intermittent renewables at the level that will be required (even with a vastly upgraded grid) can be met by batteries.  Some numbers I have seen are that battery technology will need to improve by something close to 2 orders of magnitude in terms of cost effectiveness,  which would put it roughly in the range of $2 per kWh…..

An additional advantage of using hydrogen is that we can probably increase hydrogen percentage in current pipeline technology to about 50% without modification which allows great flexibility in transition. It is not an all or nothing proposition. 

The biggest impediment to moving forward that I see is not really a technology one (although improvements are needed and will help) but rather a regulatory one which is sadly being dominated by vested interests.                     

Michael Keller's picture
Michael Keller on May 6, 2020

We could inject the oxygen into the boiler, as that is what the hydrogen reacts with. I suspect that would increase burner efficiency, but would have to run calculations to confirm that.

From an emissions standpoint, firing hydrogen in duct burners reduces pollution relative to using natural gas. Permitting would be easy. 

The only drawback that I can see is the green energy crowd's "silo" mentality and inability to consider the broader picture.

Stephen Leftly's picture
Stephen Leftly on May 5, 2020

While all for improving efficiency of generation it should not be considered a panacea.  Natural gas is an climate change problem and will remain so.  We need better efficiency incentives all the way through our energy cycle, from extraction through to consumption...but sadly the way the markets and regulations are structured today that is not happening.  

Natural gas companies on one hand keep touting how much cleaner and environmentally better "natural" gas is than coal, which per MWh generated it is.  However at the same time their industry lobbiest have lobbied incessently to roll back any and all environmental regulation in regards fracking and methane release both at the state and federal level and also used those same lobbying muscles to attack renewables via proxies. 

If the natural gas industy was REALLY concerned about the environment they would be support laws that limit methane emissions rather than attacking them.  As it is today their extensive, and expensive,  PR campaigns just appear to be cynical attempt at greenwashing.  

In the short term ( <20 years) methane is much worse than CO2 by about 80 times and inthe long term  (~100 years is about 20 times worse).  Also only looking at straight CO2 emissions hides the total impact of natural gas,  just like only looking at CO2 emissions from coal and neglecting all the other environmental damage mining and burning coal does.

As for levelized cost basis renewables are just about there according to Lazard's analysis (see https://www.lazard.com/perspective/lcoe2019).  If we put an anywhere near reasonable tax on CO2 , to account for the damage it is doing,  renewables are significantly ahead. 

Dumping CO2 into the atmosphere for free is not a sustainable economic model.  

         ​​​​​​​

Michael Keller's picture
Michael Keller on May 5, 2020

100% green energy is not a sustainable economic model. In fact, such a model leads directly to economic collapse because we cannot afford the required trillions of dollars.

What is economically viable is a middle-of-the-road approach that recognizes energy must be reasonably clean and reasonably affordable.

A CO2 tax is a ruse to enrich the government and burden the poor and middle class with ever higher taxes.

Stephen Leftly's picture
Stephen Leftly on May 5, 2020

What is NOT sustainable is dumping CO2 at the current rate into the atmosphere.   If we don't have a livable environment the economy become a moot issue. 

There are no rational macro economic models that support your statement : "100% green energy is not a sustainable economic model. In fact, such a model leads directly to economic collapse because we cannot afford the required trillions of dollars.".

 

Michael Keller's picture
Michael Keller on May 6, 2020

You are assuming that CO2 is dangerous to the planet. It is not and is vital to life.

In point of fact, we simply do not know what the long term climate will be nor can we predict the net impact of CO2 emissions on the planet.

Rather than the near hysterical approach of some green energy advocates, put the emphasis on reasonably clean and efficient production/use of energy. In other, economics is the driver, with technology innovation the solution. That is the path the U.S. has been on and we have significantly reduced CO2 emissions as a happy byproduct. The evolution of gas turbines illustrates the approach.

Bob Meinetz's picture
Bob Meinetz on May 7, 2020

"In point of fact, we simply do not know what the long term climate will be nor can we predict the net impact of CO2 emissions on the planet."

Interesting, Michael. Now that climate change deniers have been forced to accept the fact humans are causing it, they've altered their message: "It might not be that bad."

No, the fact is that very smart climate scientists can indeed predict the net impact of CO2 emissions on the planet, and it's looking pretty grim. Their predictions have been remarkably accurate, notwithstanding efforts by retired meteorologists to find fault with them. Not sure why they're going after what has been established fact for decades, but it seems to be related more to political ideology than climate science. Go figure.

Michael Keller's picture
Michael Keller on May 8, 2020

"Forced" is the operative word, as opposed to "convinced". In point of fact, the models are intrinsically unable to predict the distant future as a result of inherent model construct issues.

Quite telling that the climate change religion cannot     discuss the issue without resorting to the "higher authority" ploy.

Kent Knutson's picture
Kent Knutson on May 6, 2020

Awesome comments Stephen, Michael, Gary and Bob.  I've been contemplating an article titled, "Natural gas, wind and solar, can't we all just get along"?  LOL!  I am a believer in a balanced long-term approach and am excited about all the new technologies evolving every day.  thx again for all of your insights.

Michael Keller's picture
Michael Keller on May 8, 2020

✅ , could not agree more. Balanced approach is the best way to go.

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