The U.S. is headed for a warmer-than-average winter and natural gas futures prices are lower than last winter, but a variety of electric power generation types that includes coal and oil plants will still be essential to electric reliability this winter, especially in the Northeast, the staff of the Federal Energy Regulatory Commission said Oct. 17.
FERC staff delivered its 2019-2020 Winter Energy Market Assessment at the commission's open meeting Oct. 17.
The staff said natural gas storage levels are close to the five-year average, and pipeline additions in the Permian Basin and Marcellus Shale have allowed additional gas supplies to reach markets. There is still a chance that potential pipeline outages could increase electricity and gas price volatility, staff said.
More than 12 Bcf/d of new pipeline capacity, including 3.9 Bcf/d of capacity from projects under FERC jurisdiction, has been placed in service across the U.S. since last winter, staff said. The new pipeline projects included Columbia Gas Transmission LLC's 2.6-Bcf/d Mountaineer Xpress project and Kinder Morgan Inc.'s 2.0-Bcf/d Gulf Coast Express.
Gas-fired and renewable generation has increased in several regions, offsetting coal and nuclear capacity. More than 3.4 GW of coal capacity retired between March and June, and another 6.2 GW is expected to retire between July and February 2020. Between March and June, 680 MW of nuclear capacity retired, and an additional 829 MW of capacity is likely to retire between July and February 2020.
The staff said sustaining electric reliability will be important even though the National Oceanic and Atmospheric Administration forecast a warmer-than-average winter. A warm winter would moderate fuel and electricity demand, but isolated weather events can still cause short-term spikes in gas and electricity demand, which can create operational and market challenges, staff said.
"Coal and oil-fired generation continue to play an important role in maintaining electric reliability during the winter, especially in the Northeast, where winter demand for natural gas can exceed pipelines' capacity," the staff said.
The staff noted that basis futures prices, which approximate the cost to deliver gas to regional markets, generally decreased across the country compared to 2018. New York experienced the largest decline, averaging $2.92/MMBtu, down $1.56 from 2018. Boston basis futures prices averaged $6.54/MMBtu, a $1.16 rise from last winter. The prices in the Southwest, Chicago, Southern California and the Marcellus Shale region all experienced "moderate declines" compared to 2018, staff said.
In an early winter reliability assessment cited by FERC staff, the North American Electric Reliability Corp. noted that fuel availability, including natural gas and fuel oil, can affect electric operations and should be monitored. NERC expected all regions to maintain healthy reserve margins through the winter.