Planning processes that evaluate new gas generation may not fully account for the total system costs associated with gas generation, says a report by Current Energy Group published by GridLab.
Researchers reported two case studies in which costs to deliver gas to gas generators increased the system cost by 25% to 30% beyond the gas units’ capital cost.
Those “hidden” gas supply costs represent a risk of increased bills for electricity consumers, the report says.
The problem of hidden costs arises because of a “bifurcated regulatory system in which generation and fuel infrastructure costs are evaluated separately.”
“This can lead to an incomplete or ‘apples to oranges’ evaluation when gas-fired generation is compared to alternatives such as solar, wind, battery storage and demand side resources.”
Sunlight, of course, is delivered for free to solar generators.
If a gas generation plant is approved first, the report says, the question of fuel security typically occurs in a separate proceeding after the commitment to build gas generation has already been made, when alternative generation options are no longer being considered.
The report counts several types of hidden costs. Physical delivery costs could include onsite or near-site lateral pipelines, on-site fuel storage or dual-fuel capability, compressor stations, or pipeline expansion. Security of supply costs could include firm transportation agreements to ensure that gas is available when demand is highest, or facilities for liquid natural gas (LNG) or underground gas storage.
The report cited another type of bias favoring gas, noting Gridlab’s recent report on gas turbine costs which showed that planning assumptions for gas-fired plants frequently understated current market conditions for generator capital costs.
Another complication arises when a utility company owns both electric and gas utilities. “In these instances, the inherent capital bias may be exacerbated by the prospect of incremental investment opportunities in the gas system, which increases the incentive for utilities to pursue gas fired generation over alternatives.”
Current Energy Group plans to continue studying the hidden costs of gas, and develop a public database quantifying the costs and technical parameters of gas transmission infrastructure associated with new gas-fired power plants.
The report makes three broad recommendations:
The report is titled “Beyond the power plant: The hidden costs of gas fired generation.”
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