Market monitor says US power grid not gas dependent
Washington, 17 October (Argus) — The monitor of several US central grid operators said that the US power generation sector is not overly dependent on natural gas.
David Patton, president of Potomac Economics, told an Energy Bar Association meeting yesterday it was disturbing that US energy secretary Rick Perry's instructions to the Federal Energy Regulatory Commission (FERC) to make the grid more resilient focused on reliability and not cost.
Patton's firm is the independent market monitor of grids in New England, New York, Texas and the Midwest.
But other speakers on a panel with Patton experienced in electricity market design suggested that FERC's handling of the grid resiliency proposal can be balanced with clean energy goals of states, which use various forms of generation.
"The subsidies are on their way out because costs are coming down," said Peter Fuller, vice president for market and regulatory affairs at NRG Power Marketing. "At some point in the future, renewables and clean energy will be the predominant sources, with gas as a backstop product."
Fuller's recommendations for market design included scarcity pricing, carbon pricing and forward clean energy markets.
Patton said gas-fired combined cycle generation is still the cheapest option under a carbon price scenario, and that frequent policy changes will harm long-term investments.
"The objective should be to maintain price signals for energy, ancillary services and capacity markets," Patton said. "Everything that people want fits into this framework."
Rob Gramlich, president of consultancy Grid Strategies, said that transmission operators should not be the price risk managers and fuel procurers for their generators in their regions. He called resilience a greater concern for power transmission and distribution outages.
Some observers believe the response to Perry's proposed rule will primarily be devised by the country's central grid operators, whose rates are approved by FERC. Perry instructed the commission late last month to make a decision within 45 days on his proposal to give more financial support to power plants that are "fuel secure."
The order focuses entirely on merchant generators and excludes power plants subject to traditional cost of service regulation approved by states.