Presenting an option to solving electric transmission congestion.

A recent FERC study of transmission constraints concluded that there are a number of significant electric transmission constraints in the contiguous United States that have the effect of increasing costs of power to consumers.¹ If alleviated, the study concludes that the "benefits in overall energy bills are potentially quite large."

The foundation of existing natural gas pipeline and local distribution company (LDC) systems in the U.S., together with associated expansion investments, can hold a key that provides a viable option to address existing transmission constraints in the power industry. This foundation includes not only the physical assets of the gas pipeline and LDC systems, but also the regulatory, commercial, and operational aspects of those systems. Gas systems can be used to support the development of new generation in power-constrained areas, placing the gas industry in an advantageous position. Gas companies can capitalize on electric restructuring by developing a deeper understanding of the electric grid in their markets and more proactively monitoring the planning process of regional transmission organizations (RTOs).

Power Transmission System Constraints

The power industry is confronted with the issue of developing transmission systems that give it the ability to transport power to the market from the points of actual power generation. Total transfer capability is defined for individual power transmission lines and transmission interfaces. Transmission interfaces usually define the transmission paths between electrical zones within a larger region, or between regions.

Transmission constraints can occur whenever the potential exists for more power to flow over a transmission line or transmission interface than should flow. Limits are set recognizing the transfer capabilities and taking into account the criteria established to ensure reliable operation of the grid. The transfer capability over a transmission line or transmission interface can be based on 1) thermal limits, 2) stability limits, or 3) voltage limits.

Thermal limits are established so that the current level flowing over the transmission facilities does not reach the maximum current-carrying capability of the facilities. Voltage limits are established so that the power flow over transmission facilities does not exceed levels where, given the impedance of the system, voltage levels diminish to unacceptable levels. Stability limits are established to prevent power flows from exceeding limits that would trigger a fault somewhere on the system, resulting in the potential loss of synchronization and the tripping of generators that could lead to system separation. The transfer limit for a particular transmission line or transmission interface is based on which of the three transfer-limiting criteria (thermal, voltage, or stability) is the most limiting under specific system conditions.

Two possible options involving new infrastructure exist in the long term for eliminating the power transmission constraints. One involves new construction of transmission facilities to increase the transfer capability. The second involves the construction of additional generation in zones requiring additional power.

The Gas-Power Vision: Five Obstacles

For the natural gas infrastructure and the available pipeline system capacity to be utilized as a foundation for the reduction in power transmission congestion, there are certain issues that need to be addressed. These issues relate both to the power industry's ability to dictate power generation locations, and to the gas industry being able to meet the power industry's needs in terms of cost, delivery, and supply operation. 1. Alignment and Synchronization of Interests The regulatory, commercial, and operational aspects of natural gas industry and power industry participants, and their interrelationships, need to be understood and joined to achieve the lowest delivered cost of energy to natural gas and power consumers. This joining may necessitate a coordinated and consistent regulatory framework and jurisdiction between the power and the natural gas industries. For example, gas transmission system transportation rates are designed to provide compensation to the gas companies for the delivery of natural gas, and are not specifically designed to provide compensation to the gas companies for the financial benefits that may be achieved in the market through the elimination of power transmission constraints. 2. Power Generation Developers' Commercial Drivers The development of power generation is in the hands of private investors and developers whose main considerations are commercial, not the elimination of power transmission constraints. Those commercial aspects relate to the installation and development costs of the generation facility and the anticipated price of the generated power. At the present time, the open access of the power transmission systems allows for competition which, in turn, limits the discretion of the system operator in dictating the locations of needed power generation. Identification of the constraint is usually far down the list of priorities, with the system operator crafting a solution through the use of a gas transmission system. To the extent possible, regional transmission operators should strive to influence and promote commercial incentives that encourage investors and developers to site power generation facilities in locations that can alleviate transmission constraints. These operators should also monitor the electric transmission planning process within the emerging RTOs to ensure that they are aware of opportunities to capitalize on potential solutions to electric transmission constraints. Because of the similar locations of markets, the gas infrastructure and the gas transmission systems are viable options that can be utilized to help solve transmission constraints of the power industry. Gas system operators should proactively monitor the electric transmission planning process within the emerging RTOs to ensure that they are aware of opportunities to capitalize on potential solutions to electric transmission constraints. In this way the electric and gas service providers can begin to address the regulatory, commercial, and operational aspects and requirements needed to effect the coordination of the two markets. 3. Gas Transmission Operators Pricing of Capacity Issues In many cases, the development of transportation rates for natural gas pipeline systems are based on the delivery of gas supply to the primary market that the investment was made to serve. Because the capacity of the gas transmission systems exists from the supply area to the market, utilization of that capacity by markets other than the primary market can be detrimental to the cost recovery rate structure of the natural gas pipeline. Therefore, if siting a power generation unit at that point eliminates a power transmission constraint that is located in a region midway along a gas transmission system, the rates associated with pipeline delivery may not fully recover the costs of delivery. This issue needs to be addressed. 4. Gas Transmission System Design Natural gas transmission pipeline systems historically were designed to supply gas to consumers at fairly constant rates. This was because, for the primary customers (i.e., the residential buyer), utilization of the gas supply was at a constant rate and varied mainly as ambient temperature changes occurred. In many cases, the very nature of the power generation requires frequent and fairly rapid changes in gas flow from the transmission system. Use of gas pipeline capacity to eliminate power capacity constraints would subject the pipeline to load requirements and variability for which they were not originally designed. Generally, pipelines historically have felt that the variability in load created a high element of risk to the gas system operation, and thus made their operating tariff parameters fairly rigid. This rigidity, however, limits the ability of the gas transmission system operator to sell services to the developer of generation and hinders the ability of the generator to bid into a fairly fluid power market. Natural gas transmission companies now are starting to offer more flexible services, including a few that now offer firm hourly transportation services. 5. Regulatory Obligations To Ensure Equality of Services Natural gas pipeline regulations are designed and intended to ensure equality of the system's services to all its existing and potential users, even though the needs of the users are not necessarily the same. This can hinder the use of gas transmission capacity to reduce capacity constraints on power transmission systems. Designing services to meet the specific needs of certain customers can lead in many cases to questions regarding the alteration of gas transmission rates in order to ensure that the costs associated with the operation of the system equate, and are allocated comparably, to the services being provided. Regulatory and rate proceedings at FERC can be time consuming and expensive, but this hurdle can be overcome. It may, however, require synchronization of the regulatory frameworks and drivers between the power and natural gas industries. -R.H. and D.S.

The establishment of open transmission access and the increased development of power generation by independent developers has created a situation where the physical location of generation facilities does not always align with the load requirements of the power market. Power generation development by independent investors has centered for the most part on the investors' commercial view of the market integrated with the current intersections of gas pipeline and electric transmission facilities, and not on the overall efficient and effective operation of the power system transmission capabilities. This commercial view of independent power producers (IPPs), which may be skewed due to immature markets or market design flaws, contributes to congestion. Additionally, congestion drives volatility in commodity prices, which provides power traders the opportunity to profit when power is most required by consumers.

The map in Figure 1 identifies major points of transmission constraints identified and analyzed by FERC.²

Natural Gas Infrastructure as Part of the Solution

The key to explaining how the natural gas infrastructure can become a part of the solution to surrounding power system constraints is to recap the similarities and differences between power transmission systems and gas transportation systems. By understanding these differences, gas/power development strategies can be set to assist in economically elevating the concern over power transmission constraints.

The individual markets for electric and the individual markets for natural gas are, for the most part, located in the same geographic areas. Although the actual load requirements may be different and occur during different seasons of the year, their market areas are still the same.

The generation of electric and the supply commodity needed by power markets can be equated to the development of natural gas reserves, which is the supply commodity needed by the natural gas markets. In both cases the commodity must be transported to the ultimate consumer.

The major difference between the two commodities is the location where the commodities are developed, how they are produced, their ability to be stored, and the distance and method that the commodities are transported. Relatively speaking, the commodity of power is produced in the general area where the electric load requires it, while the commodity supply for natural gas is not located near the geographic area of market consumption. Natural gas must be transported greater distances from its point of origin to the point of consumption, and in some cases stored prior to consumption.

It is the differences between electric and natural gas that can be leveraged to address and potentially solve the transmission constraints.

Natural Gas Transmission Systems

Gas transmission systems are comprised of pipe systems, compression facilities, and storage facilities, all used to transport the gas commodity from the production areas to the consuming markets. The basic design of these transmission systems allows for the peak-day requirements of the market to be delivered on an as-needed basis.

This ability of gas transmission systems to meet peak-day requirements is accomplished through sizing the pipeline system, compression facilities, and storage facilities to meet the peak-day requirements of their designated market. Conceptually, gas transmission systems have the capacity required to meet their required load demand through the total length of their system from the production area to the market. This may not be the case for all systems because of different configurations, but in general gas transmission systems are all designed to meet peak-day load requirements.

These gas transmission systems, which extend across the contiguous United States, are only fully utilized during high natural gas load requirement periods. At other times, they are available to the power generation market during periods of decreased usage by the gas market. These gas markets could be geographically overlapping with power markets that are faced with insufficient generation capacity and constraints on their power transmission systems. Because of the geographic location of these pipeline systems, they also traverse the power transmission paths between electrically defined zones. In many cases, where no pipeline infrastructure presently exists within electrically constrained and/or high cost power markets, the potential for pipeline expansion is very high.

Storage facilities encapsulate a large portion of the peak-day capacity of the gas pipeline systems in the country. These storage systems, as well as potential expansions, also have the ability to supply capacity to the gas market during periods of high gas demand. Again, the gas storage markets overlap the power markets that are faced with power constraints and insufficient generation capacity on their power transmission systems.

Given that the markets with potential power transmission capacity restrictions have access to the same gas transmission capacity in the form of pipeline capacity or storage capacity, the power industry could utilize the physical gas infrastructure serving the same geographic area to enable the strategic placement of new generation that would reduce their electric transmission constraints.

1. Electric Transmission Constraint Study, Division of Market Development, Federal Energy Regulatory Commission, presented at FERC Dec. 19, 2001 meeting. The study analyzed data for the summer months of June, July and August of 2000 and 2001. Study team members acknowledge that their data was limited, but indicated that congestion during the summer months has a greater impact because the demand for power is high. Thus, the study team could present conclusions for the data analyzed.

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