A new report, commissioned by the Eastern Interconnection States’ Planning Council (EISPC) and the National Association of Regulatory Utility Commissioners (NARUC), offers recommendations intended to harmonize electricity and natural gas markets, and raise awareness within the industry and regulatory community about potential challenges that may arise.
In light of the anticipated increase in the use of natural gas as a fuel for new electricity generating facilities, driven by new environmental regulations and a plentiful domestic supply of gas, EISPC believes the report is timely and necessary at a time when state regulators and others are raising concerns about how greater use of natural gas will impact consumers and the integrity of both the electricity and gas systems.
“This report will help regulators analyze these issues,” said David Boyd, president of EISPC — a consortium of state-level government agencies funded by the U.S. Department of Energy (DOE), who are responsible for siting electric transmission across the 39 states, including the District of Columbia and City of New Orleans, located within the Eastern Interconnection. “With gas taking a greater role in our electricity resource mix, federal and state policymakers need to fully understand the risks and benefits moving forward.”
There are a number of differences between the two industries that, if not reconciled, could have unintended consequences for consumers, according to the report, including a lack of firm delivery contracts between local distribution companies and gas pipelines, differences in resource adequacy planning in the gas and electricity sectors, discrepancies in financial trading instruments, and concerns over cybersecurity and potential network vulnerabilities that may result from integrating natural gas and electric systems.
In order to harmonize the electricity and natural gas infrastructures, the report recommends things like aligning daily market schedules; establishing an independent natural gas coordinator similar to an independent grid operator; expanding inter-industry communications protocols during extreme weather conditions; investigating cybersecurity issues in any coordinated systems; and reinforcing education and workforce training.
The reasons for this harmonization are many, according to the report — natural gas has the potential to increase the overall efficiency of energy use, shrink air emissions, cut energy costs, and boost local economic development.
“Earning potential benefits from the revolutionized natural gas market could be stimulated by evaluation of existing PUC and natural gas LDC policies and practices,” the report, written by the Illinois Institute of Technology, says.
Further, substantial regional diversity across U.S. energy markets impedes a one-size-fits-all approach to energy policy, regulation, and business models, as such opportunities to increase the natural gas market share will vary by region and by state who face challenges, including recovering high up-front costs of investments by natural gas LDCs and consumers; contradictory federal, state, and local policy objectives; regulations based on outdated assumptions on natural gas supply and cost; and promoting a consensus as to the new realities of the natural gas market.
The report concludes that while experiences are unique and vary by region, “the common threads of discussion include the need to raise awareness and share information between the two industries, the need to address when communications are permitted between the industries, and to consider changing rules of the markets to simplify coordination.”