I’m trying to understand the “under utilization” of existing natural gas generation capacity in the U.S. in relation to the increasing proportion of electricity generated from natural gas. More specifically, how much spare room (capacity) does natural gas generation have, and how soon will that capacity get fully utilized?
Some fairly basic and very preliminary thoughts:
How much spare room is there?
From 2000 to 2010, the U.S. added about 29 GW of generation capacity, and of this natural gas accounted for nearly 24 GWs, equaling 81% of the total. This trend goes back further: from 1995 to 2000, over 96% of generation capacity additions came from natural gas.
Why the rush to gas?
The gas build out resulted, as one might expect, from a whole bunch of things. Low prices of natural gas in the 1990s certainly played a role. Throughout the decade, the price for natural gas on the spot averaged a relatively low $2.00 to $3.00 /MMBTu. Most people thought it would stay that way (CRS).
But it didn’t.
Take a look at the red box in the chart above, which shows the low-price trend throughout the 1990s. I’m curious about what happened with the price peaks in 2000 (Enron?), 2005 (Rita, Katrina?), and 2007.
This CRS report has some interesting thoughts on the role of restructuring, IPPs, and risk avoidance in the gas build out of the past decade (see page 7).
Again, how much spare room is there–really?
So we know that gas make up the vast majority of electric generation capacity additions for the past decade and more. But how much of it isn’t being used to generate electricity?
Combined-cycle units accounted for most of the added generation capacity for natural gas over the last several decades.
The CRS looked at the utilization of NGCC plants in 2007. The study group’s aggregate generation accounted for some 98% of all the combined-cycle gas generation from the electric power sector in 2007 (630.4 million MWh; capacity of 170,627 MW). A fair amount. Relative to their theoretical maximum usage rate, the NGCC plants were utilized just 42% of the time.
The chart above shows the average capacity factor of NGCC has consistently increased since 2005. The higher the capacity factor for these NGCC units, the more they are consuming the current surfeit of natural gas supplies.
“For peak hours—from 6:00 a.m. to 10:00 p.m.—capacity factors averaged about 50% (the red line) on a national basis in 2010 compared to about 40% in 2005″ (EIA).
If the average NGCC capacity factor at peak hours is only at about 50%, it seems pretty clear that there is some substantial headroom for natural gas generation capacity.
How long will it take for that headroom to get filled up?