Pipelines, like gas plants, are getting outrageously expensive. SACE is party to dockets across the Southeast, so we know this to be true, even though details are hidden from ratepayers. Pipeline costs used to fly under the regulatory radar as they were quietly passed directly on to customer bills in fuel cost recovery dockets (such as the Duke Energy Carolinas docket currently in process at the NC Utilities Commission).
When Duke Energy proposes new combined cycle gas plants (CCs), the North Carolina Utilities Commission (NCUC) has asked that Duke demonstrate that each plant has “fuel security” – or a guaranteed supply of methane gas in every hour of the year. Duke has historically provided such fuel security through confidential, long-term contracts with pipeline companies to build new pipeline capacity, called “firm transportation.” Through these contracts, Duke’s ratepayers pay for enough space on interstate pipelines to supply each plant at full load 24/7/365, even if they don’t actually run at that level the vast majority of the year. It is important to remember that those fixed costs for firm transportation are incurred (and passed along to ratepayers) over and above the actual fuel costs, which can fluctuate over time. So whenever you hear that Duke is planning to build a new gas combined cycle plant, remember that you will be asked to pay not just the costs of building the plant (plus Duke’s return, or profit), but also for the fixed costs of supplying fuel to those plants plus the costs of the fuel burned in those plants. For Duke’s first three new CCs, they bought pipeline capacity on Transco’s Southeast Supply Enhancement Project and on the MVP Southgate project. But pipeline costs continue to rise, so Duke is testing the waters with a proposal to build an “enhanced” LNG facility as an alternative.
What is ELNG?
Methane gas can be liquefied — super-cooled and converted to a smaller volume of liquid (LNG) for storage and transportation — and the resulting LNG can be vaporized and turned back into a gas. Both processes require energy and time.
To date, stored LNG has been used to provide extra gas to the supply system if needed when demand is high or when methane gas prices are unusually high. They are known as “peaking” facilities, and they are thought of as supplemental. Williams Transco, Piedmont Natural Gas, and PSNC Enbridge (gas pipeline capacity providers) all own peaking LNG facilities in North Carolina.
What Duke proposes is different. Duke is proposing a facility that could provide all of the gas a combined cycle power plant would need for peak burn for an extended amount of time. Duke would need one ELNG facility for each of the proposed new combined cycle plants. Think the Moriah Energy Center on steroids.
Why is it problematic?
There are several problems with Duke’s proposal that both SACE and the Public Staff uncovered in the CPIRP docket.
First and foremost: this combination of running gigawatt-plus-sized combined cycle gas plants using only vaporized LNG has never been done before in the United States. Public Staff labeled it as First-of-a-Kind (FOAK), the same type of label being placed on things like small modular nuclear reactors. First-of-a-kind technologies have wildly unpredictable, even unknowable, costs. Not only does Duke Energy not have experience building or operating a facility combination of this type and size, no one in the US has that experience.
Duke states that they are choosing ELNG over “enhanced” firm transportation because it costs less. But with FOAK technology, this is impossible to validate.
Additional issues identified by the Office of Public Staff:
- ELNG, theoretically meant to take the place of pipeline FT, might still require additional expensive pipeline FT capacity.
- An FT contract is an expense and typically lasts 20 years. An ELNG facility is a capital item that would be on the books (and earning a rate of return) for 35 or more years.
- Duke was unable to provide specifics about where an ELNG facility would be located and how it would actually function — “inside the fence” and connected to a single CC or “outside the fence” serving multiple sites? Who would own and operate it?
- Gas supply sufficiency is uncertain if Duke needs to liquefy gas to fill the tanks while also running the associated CC (hence the potential need for additional expensive FT).
- Duke is proposing ELNG as a solution to intraday (hourly) fluctuations in the need for gas, but they did not show their math. They actually didn’t do the math.
SACE’s witness Roumpani’s testimony also identified many of these same issues. Roumpani also noted that the cost assumptions for EFT, against which Duke is comparing ELNG, were derived from a confidential source, and details were not disclosed in discovery for scrutiny.
So we are left to compare an incomplete and unknowable proposal against a secret and unknowable proposal.
At the end of the day, Duke is proposing an expensive FOAK technology so that it can turn its combined cycle plants up and down during the day rather than running at a full baseload level. It sounds like what Duke really needs is a battery energy storage system to perform this same grid function.
Utility-scale battery storage can be brought online faster than any kind of gas power plant and in smaller units tailored to the uncertainties of load growth. Batteries respond to grid fluctuations in an instant, they are nimble and flexible, and they can be sited close to large loads – or even sponsored by them, saving ratepayers millions in both capital costs and fuel costs. When load growth is uncertain, the more conservative, incremental option is renewables and battery storage, not a headlong dive into methane gas.
