With natural gas gaining ground as a baseload power fuel, regulators need to think carefully about policies and market structures that bolster power producer's access to the fuels they need and reward reliability, according to the U.S. Department of Energy's recent grid study.

Gas-fired generation's gains were mainly won in the marketplace because of economics, not because of undue favoritism by regulators, the report concluded. But power producers may now need policymakers to help assure stable supply access, the report said. Whether that means supporting gas-focused market changes and infrastructure developments or pursuing incentives that push power producers toward other options remains to be seen, industry observers said.

"On the one hand, this report has underscored the impact of gas on coal and nuclear — two big priority energy sources for the administration. On the other hand, the report seems to recognize the reality that gas has come to dominate the grid," David Victor, a professor of international relations at the University of California at San Diego, said Aug. 24.

The DOE report pointed to gas' competitive prices as the "biggest contributor" to coal and nuclear plant retirements in recent years. Victor, whose research focuses on the future role of natural gas and electric power market reform, dubbed the report's results a "real paradox" for the administration, whose rhetoric surrounding the coal industry has focused on regulatory burden but has concluded that coal's struggles are largely free-market-based.

"I suspect that the administration itself has many different views about the right role for gas and its competitors," Victor said. "What the report itself says is that much more attention is needed to making sure gas supplies are reliable."

Energy Secretary Rick Perry in an Aug. 23 cover letter underscored that resiliency and reliability should be the grid's core objective but conceded that "consumers should know that a resilient electric grid does come with a price." Utilities, states, the Federal Energy Regulatory Commission and DOE should support increased coordination across the gas and electric sectors, the report said. The Energy Department recommended exploring the potential for using existing federal authorities to ensure system reliability and resilience.

Gas-fired power plant operators cannot stockpile the fuel as easily as they can with coal or nuclear plants, but FERC can take steps to compensate for the differences in accessibility, Mark Brownstein, the Environmental Defense Fund's vice president of climate and energy, said in an Aug. 24 interview.

Modernizing wholesale gas markets to be more responsive and flexible and focusing on making the grid more robust would be time well spent at the federal, regional and state levels, he said. These would be improvements on a functioning system, he said, adding that the report "has the feel of a solution in search of a problem."

The DOE report pointed to the polar vortex of 2014 as an example of a breakdown in gas reliability. Brownstein and Pat Jagtiani, the Natural Gas Supply Association's executive vice president, both took issue with that example.

"The fact that everyone keeps citing the one example of the polar vortex ... maybe tells you something about how rare these problems are," said Brownstein, who previously worked in the utility sector at Public Service Enterprise Group Inc.

"I can remember times when we had problems ... when the coal pile froze, or deliveries to the coal plant were held up because rivers had frozen and barges couldn't get through," he said. "There's no generation source out there where you can't cite an example of extraordinary events inhibiting operation, but they're extraordinary events."

Jagtiani noted that power plants' inability to get gas during the cold snap was because they were relying on spare pipeline capacity rather than firm transportation agreements, and not because pipelines were unable to connect supply to demand. "Those things get grouped together. Whether it's a contractual ... or physical outage, they're all lumped together, so no one can see which is what," she said in an Aug. 24 interview. "I think people misconstrue it as, 'The gas system was not performing.'"

Increased pipeline capacity in the Northeast could have alleviated some of the polar vortex constraints. Large-scale pipeline projects proposed in the aftermath of the polar vortex that would have connected Appalachian shale supplies to New England have all floundered in recent years. Gas advocates and regulators could use the DOE report to again push for infrastructure expansions, Kathryn Clay, the American Gas Association's vice president of policy, said in an Aug. 24 interview.

"I see a lot of support in the report for the need for continuing to invest in pipeline infrastructure, in particular transportation to the Northeast," Clay said. "The [report] authors stopped short of drawing the full conclusion … that system resiliency would be improved by building some more pipelines … but I see this report as, in that sense, yet another data point for how important it is to build pipelines."