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More infrastructure needed to keep power prices affordable

December 14, 2015 By Molly White in

As the United States shifts its electricity portfolio away from coal, it will need more energy infrastructure – namely, electric transmission lines and natural gas pipelines – “but getting that infrastructure in place is getting tougher and tougher,” with likely consequences for consumers, said the Federal Energy Regulatory Commission’s Tony Clark on Dec. 10.

Clark, a commissioner with the Federal Energy Regulatory Commission, explained that if not enough transmission and pipeline capacity is built, the result is predictable: higher electricity prices for consumers. He spoke at the National Press Club in Washington, D.C., at a press event held by consulting firm ICF International.

The Clean Power Plan, the Environmental Protection Agency’s rule to curb carbon dioxide emissions from fossil fuel-fired power plants, is one of the reasons behind the push for more wires and pipes, he noted.

“I think we are moving toward different ways of generating electricity,” including greater use of renewables such as wind energy and solar power, Clark said, but because these sources of power are intermittent, they require backup. And today, as more and more coal-fired capacity is retired, the need for backup power means greater dependence on natural gas-fired generating units, he said.

The biggest sources of renewable power tend to be located a long way from urban load centers, the FERC commissioner said, so more transmission lines will be needed to carry the power.

Also, “even in a relatively resource-rich part of the country, you have to have renewables built over a large footprint,” he said. This is because, in any given area, the wind might not be blowing, and the sun might not be shining.

“California is finding that out,” he told reporters at the press conference. “That is one reason why you are seeing a push for a broad West-wide [electricity] market.”

Baseload coal “is going away,” and is being replaced by fast-ramping natural gas-fired plants, Clark noted.

“You can’t talk about electricity without talking about natural gas, and you can’t talk about natural gas without talking about electricity,” he said. In past years, these two energy sectors were bifurcated, but they “have been on a convergence path for some time.”

The term “game changer” is overused in the energy sector, but over the last 15 years, there are two developments that deserve that name, Clark said. The first is the proliferation of low-cost natural gas in recent years, which no one had anticipated, the FERC commissioner said. The second “game changer” is the emergence of energy storage as a significant player in the electricity industry.

“It’s not quite there yet,” but storage “makes a lot of things that have potential much more achievable,” Clark said.

In April 2015, the percentage of the nation’s generation derived from natural gas eclipsed that of coal for the first time, with 35 percent of U.S. electricity fueled by natural gas and 34 percent fueled by coal, Clark said.

The number of pipeline projects in the works also has taken a big leap ahead, he said, with plans for 4,600 miles of pipelines pending at FERC.

‘The trend is clear if we don’t get the infrastructure built’

“The reason that infrastructure is so important is, we know that if you make quick transitions in the electric industry and don’t have the infrastructure to support it, really bad things happen,” at least as far as cost is concerned, Clark said.

“The trend is clear if we don’t get the infrastructure built,” he said.

Depending on how states decide to build their state implementation plans under the Clean Power Plan, “there could be market impacts,” Clark noted.

“From the FERC perspective, the biggest concern I have is about compliance timelines,” he said. Most states are likely to start rolling out their state implementation plans, or SIPs, in 2018, he said, and compliance with the Clean Power Plan is required starting in 2022.

But, “if you look at any major gas pipeline, it’s three to five years” to build one, he said. For transmission lines, there is even more reason for concern, Clark said, because it generally takes five to 10 years to site and build a transmission line, and if the line crosses federal land — as can happen in the West — “you’re looking at 15 years.”

“To me, the greatest challenge for affordability [of electricity] is the difficulty of building infrastructure in time for state plans to comply with the Clean Power Plan,” Clark said.

In places such as California and New England, where the transition toward greater use of both renewables and natural gas has occurred — but where the infrastructure is not yet in place to fully support this transition — electricity rates “are two  to two-and-a-half times what they are elsewhere,” Clark told an energy conference in October.

At the Dec. 10 event at the National Press Club, Clark pointed out that ratepayers in California and New England are already feeling the pinch of significantly higher electricity rates.

Earlier this month, at a hearing held by the House Energy and Commerce’s Subcommittee on Energy and Power, Clark said, “If you change the generation fleet, you can end up costing consumers.”

Source: APPA