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US gas-fired power plants may be next at risk

20 Nov 2017, 8.52 pm GMT

US gas-fired power plants may be next at risk

Washington, 20 November (Argus) — Natural-gas fired power plants are the next type of generation that will feel economic stress, a former federal energy regulator said in Washington last week.

Tony Clark, who served on the Federal Energy Regulatory Commission (FERC) from 2012-16, told the national capital chapter of the US Association for Energy Economics on 17 November that developers of those gas units did not take into account renewable generation with no fuel costs that utilities are required under state law to use.

Clark, who is now a senior adviser at Wilkinson, Barker, Knauer, said underlying market design for central grid operators is not getting easier.

"It is not as simple as a price formation issue," he said. "You do not want a market with just reliability must-run units and non-dispatchable resources."

Reliability must-run units get special payments from grid operators to generate because of their role in maintaining the power system.

Energy secretary Rick Perry in September unveiled a "grid resiliency" proposal designed to keep at-risk coal and nuclear power plants operational. Perry has given FERC until 11 December to act on the proposal. But FERC can reject Perry's plan or come up with its own proposal.

Clark said that grid operators in response will advance their own price formation plans for certain units that can recover their costs.

The trend for generation unit profitability is being determined by technology, he said, because of growth in renewables "at the edge of the network" which are not subject to dispatch.

He said power generation in the future likely will be dominated by utility scale solar and wind, along with natural gas-fired units with fuel costs of $2/mmBtu to $3/mmBtu.


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