Why Power Plants Should Be Cited Close To Gas Source

While many Nigerian completed power plant are idle as a result of gas supply constraint, as the country continue to grapple with epileptic electricity supply with an average of 4000megawatts for her estimated 180million people, a glut of gas from U.S. shale fields is fueling a power-plant construction boom in several Northeastern states, despite fierce competition that has caused wholesale electricity prices to plummet.
The key for electricity producers is location, according to a report by Wall Street Journal. Having access to transmission lines to move megawatts to market is vital; but in addition by building close to natural-gas reserves, power producers can more easily access cheap fuel supplies.
In Pennsylvania and Ohio, which sit above the prolific Marcellus Shale formation, companies including Invenergy LLC and Calpine Corp. are building gas-fired power plants capable of generating a combined 8.6 gigawatts when they come online between now and 2020, according to federal data. That output, which is enough to power up to 8.6 million homes, would require about 1.5 billion cubic feet of gas a day—roughly the equivalent of the daily flow through a major pipeline.
The build-out comes as American shale drillers continue pumping so much gas that the price of the fuel has plunged from highs of over $13 per million British thermal units in 2008 to less than $3 per million BTUs today.
“The economics are compelling for gas-fired power,” said Andrew Slaughter, head of the Deloitte Center for Energy Solutions.
The power is bound for PJM Interconnection LLC, a power grid that serves some or all of 13 states, including Illinois, Michigan and New Jersey as well as Ohio and Pennsylvania. Competition among wholesale power producers in the market served by PJM—which stands for Pennsylvania, Jersey, Maryland—has become so fierce that a megawatt hour traded for $29.23 last year, the lowest level since 1999, as far back as the grid’s independent market monitor tracks prices.
Though electricity demand remains stagnant overall, the closing of aging coal plants across the U.S. has left some regions in need of new generating capacity. The PJM grid sits at the top of the list. Nearly 9.3 gigawatts of coal-fired electric generation have been retired in the past three years on the grid, while 8.7 gigawatts of gas-fired capacity have been added in that period. An additional 12.5 gigawatts of gas-fired generation is currently under construction and expected online through 2020.
Power producers like Caithness Energy LLC, based in New York, say the new plants make sense—despite the heightened competition—because technological advances have made new gas plants more efficient.
One plant that Caithness is building in northeast Pennsylvania for about $1 billion will be capable of generating more than one gigawatt of electricity. Expected to come online in May 2018, it will be supplied with gas pumped by Cabot Oil & Gas Corp., whose Marcellus drilling operations are concentrated in the same area.
“We can buy the gas at a reasonable price because the [gas] producers are avoiding transportation costs they otherwise would incur to move it further,” said Ross Ain, executive vice president for Caithness.
The cheap supplies of gas coming out of shale fields were also a draw for Calpine, which expects next year to bring on a new facility in Pennsylvania capable of generating more than 800 megawatts.
“We recognize that the abundance of domestic shale natural gas is expected to keep prices low for the foreseeable future,” the company said in a statement. “We are well positioned to take advantage of that trend.”
Building gas pipelines to transport fuel from places like Pennsylvania to other regions can be difficult, and Marcellus gas producers say the new power plants provide an alternative market.
Dynegy Inc. Chief Executive Robert Flexon  said the company has added more than 800 megawatts of new gas-fired generation to its portfolio over the past several years by upgrading facilities that feed PJM and the New England market.
He called the new resources “the cheapest megawatts you can find,” saying his company recently has been able to purchase gas for under $1 per million BTUs on numerous occasions.
In addition to the 8.6 gigawatts of natural-gas electricity already under construction in Pennsylvania and Ohio, companies have proposed an additional 8.2 gigawatts in those states plus West Virginia, according to federal data.
The strategy of citing power plants close to gas source is yielding so much result in the US with new power plants coming on stream in the already efficient energy market, but the disconnect between power plants and gas source in Nigeria has resulted to numerous stalled power projects and missed project completion timeline.
Recently, Mr Emmanuel Anyaeto, Senior Commercial Adviser, Upstream Gas, Shell Petroleum Development Company (SPDC), said six power plants remain idle in the country because of lack of infrastructure to convey gas to fuel their locations.
Speaking on the sidelines of ‘Gas Aggregation Buyers’ Forum’ in Abuja, he said, “The reason why they are not getting gas, even though we are flaring 800million scuf per day is that we don’t have enough pipelines to deliver the gas to the power plants…That begs the question, why were the power plants built far away from where the gas is?
Meanwhile the over $5 billion power plants built under the National Integrated Power Projects (NIPPs) which are almost idle over lack of concrete gas supply terms, include 10 medium-sized gas-fired power plants with a combined design capacity of over 5,453megawatts (mw) at International Standard Organisation (ISO) conditions and 4,774mw as installed capacity. Some are fully completed and commissioned while others are yet to be commissioned.
They include, 434mw Geregu plant in Ajaokuta, 500mw Omotosho Plant in Ondo State commissioned since 2013 As well as the 750mw Olorunsogo plant in Ogun State and 504mw Alaoji plant Phase I in Abia state. Others are 630mw Calabar plant, 378 Egbema plant, 504mw Ihorvbor plant, 252mw Gbarain, 252mw Omoku plant and 504mw Sapele power plant.

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