Washington — Reflecting a multi-year evolution in natural gas markets, 2018 saw a jump in new US gas pipeline capacity and gas-fired generation coming into service, the Federal Energy Regulatory Commission's latest infrastructure report shows.
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About 13 Bcf/d of new interstate pipeline capacity was placed in service in 2018, a 35% rise from 9.7 Bcf/d added the prior year, according to FERC's recently released December 2018 infrastructure report.
But pipelines awaiting approval in the federal regulatory queue tapered off in 2018 from recent peaks in 2016 and 2017. Gas pipeline capacity that FERC certificated in 2018 dropped 70% to 9.2 Bcf from the recent peak of 30.7 Bcf/d approved in 2017, according to the FERC report. The rise in installed capacity reflects the handful of substantial, greenfield pipeline projects proposed in the mid-2010s to unlock nascent production growth in the Northeast and connect it with demand markets farther afield. Most of those projects largely cleared the regulatory review process around 2016 and 2017 and were placed into service in 2018. Five large-scale Northeast production takeaway projects entered service of 1 Bcf/d or more a piece, and year-on-year production growth hit a record 4.8 Bcf/d in 2018, according to S&P Global Platts Analytics.
Basis impacts were noticeable, as three of those projects helped alleviate constraints at regional supply hubs and allowed for more market flexibility. The in-service of the second phase of Rover Pipeline, as well as the NEXUS Gas Transmission project had an immediate impact on Dominion South basis, which rose 58 cents/MMBtu when comparing summer 2017 to 2018. The Atlantic Sunrise project affected Transco Leidy basis as the hub has gained 74 cents/MMBtu when comparing Sept 2018-February 2019 to this same time frame a year ago. Looking ahead, a groundswell of new capacity installations has mostly deserted the Northeast region for Texas, where a glut of gas associated with oil production is spurring a rapid buildout of takeaway capacity to feed LNG export projects along the Gulf Coast. But this growth mostly falls outside of FERC's purview, given the projects are predominantly intrastate greenfield pipelines.
Turning to new or expanded gas generation, there was a steep rise in new installed gas-fired capacity, which climbed to 20 GW in 2018 from 12.5 GW in 2017, the FERC report showed. That surpassed additions of non-hydropower renewables, which tallied 10.4 GW, down from 14.1 GW added a year earlier, according to the FERC report.
The higher gas numbers track a surge in generation added in PJM Interconnection, according to Platts Analytics.
PJM last year saw 13 GW of gas-fired capacity come online, 12.6 GW of which were combined-cycle plants, while 4 GW of coal-fired generation and another 1.3 GW of older oil/gas-fired generation retired.
In PJM, the rise in gas-fired generation was supported by strong capacity market prices for the 2017/18-2018/19 delivery years and healthy spark-spreads, bolstered by falling gas prices, according to Platts Analytics. Those factors strengthened new-build economics when the decision to build these plants was made.
Nationwide, installed wind capacity for the year was about 6 GW in 2018, down from 7.5 GW a year earlier, potentially reflecting a phaseout of tax credits. Installed solar came in at 4.2 GW, down from 6.9 GW in 2017.
RETIREMENTS, CAPACITY ADDITIONS
Looking forward, FERC's report listed proposed retirements by January 2022 totaling 36.5 GW, with 15.2 GW from coal generation, 9.3 GW from gas-fired generation and 9.1 GW from nuclear generation.
Still, that pales in comparison to 266.3 GW of new generation proposed, according to the FERC report.
"It's important to remember that proposed capacity additions include a significant number of plants that will likely never see completion," said Travis Whelan, Platts Analytics power analyst. "FERC lists more than 11 GW of nuclear plants planned by 2022, despite the fact that only two units -- Vogtle 3 and 4 -- are currently under construction. Similarly, wind capacity will be inflated by projects aiming to beat the deadline for the production tax credit, which expires after this year. Some projects are likely to be delayed or deferred if they fail to start construction by the end of the year."
The FERC report cites proposed renewable generation to be added by 2022 exceeding the proposed gas-fired power: 97.5 GW of proposed wind and 70.9 GW of proposed solar, compared with 69.2 GW of proposed natural gas.
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