Natural gas storage gives power plants flexibility

Natural gas storage for electric generation is helping to make the resource a flexible fuel for on-demand power production, speakers at a Houston conference said Tuesday.

The abundance of natural gas from shale has filled storage facilities with surpluses of the cheap resource. That has given electric power generators the ability to load up on the resource and ramp up gas-fired plant operations when power markets are strained and opportunities for returns are highest, said Paul Sierer, senior commercial transactor for Constellation, an Exelon company. He and others offered their insights on natural gas storage and electricity at the 11th annual Platts Gas Storage Outlook conference held in the Hilton Houston Post Oak.

The capability to tap into gas in storage has become increasingly important as power markets have become stressed due to population and energy demand growth, increasing the need for on-demand generation that can be called into action within hours or even minutes, Sierer said.

Natural gas power generation is also likely to become more important as the economics for increased coal power generation fade, said Rich Pastore, chief executive officer of Pastore and Company.

Coal is largely more expensive than natural gas and its prices are remaining high because of coal exports to countries like China and India, where demand for the fuel has grown. Additionally, coal plants are old and often more expensive to run than natural gas plants, Pastore said.

More than 73 percent of the U.S. coal power plant fleet is more than 31 years old, while more than half of the natural gas power plant fleet is less than 10 years old, Pastore said.

Coal plants are also less flexible than natural gas plants, and are not as able to start and stop on demand, the speakers said.

“It’s a death spiral when a coal plant starts to do that,” Sierer said. “They weren’t built to do that.”

Natural gas plants, on the other hand, can use their flexibility as an advantage, Pastore said.

“If I can stop my plants from running, store the gas and run it later, I enhance my margin by I think 40 percent,” Pastore said, while citing a specific example. “That’s significant.”

Currently, 3.316 trillion cubic feet of natural gas are in underground storage, according to the latest figures from the Energy Information Administration. That is just below the level of 3.377 trillion cubic feet from a year ago, when huge surpluses of natural gas led prices for the resource to plummet to their lowest levels in more than a decade.