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Natural Gas: Surviving the Winter Without Aliso Canyon (and What’s Next When Winter Ends?)

by Christina Nagy-McKenna, Enerdynamics Instructor

California’s transition to a carbon-free resource mix for electricity generation may have just gotten a momentum boost from a most unlikely source: clean-burning natural gas.

Long at the forefront of the movement to use resources such as solar, wind, and hydro for electricity production, California – the state which as of 2025 will have no large-scale nuclear power plants and doesn’t use oil or coal – may sever its dependence on natural gas as a power generation fuel. This decision comes after last year’s leak at the Aliso Canyon gas storage field in Southern California. In place of traditional gas-fired electric generation, the state will focus on developing renewable energy projects, demand reduction, distributed generation, and energy storage.

On Oct. 23, 2015, employees of Southern California Gas Company discovered a leak at Aliso Canyon, the largest natural gas storage facility in California. Before the leak was finally plugged on Feb.18, 2016, it displaced thousands of nearby residents and became the largest methane leak in U.S. history[1]. The short-term implications of the leak may include curtailments, higher gas prices, and tighter balancing rules as California nears the winter heating season with Aliso Canyon still closed to storage injections. The long-term implications may be profound, and they may change the storage and energy production industries. Safety regulations will be strengthened and natural gas as a fuel for generation may be more quickly supplanted by renewables and energy storage.


Aliso Canyon SS 25 wellhead, December 17, 2015. Note subsidence craters

at center, apparently from the attempts to plug the leaking well [2].

                                                            

 

 

Aliso Canyon plays an important role in ensuring that there is adequate natural gas available to Southern California customers during the peak winter season. It also serves many gas-fired power plants year round by providing an accessible source of gas for quick power plant dispatch. On a daily basis power plants belonging to Southern California Edison (SCE), Los Angeles Department of Water & Power (LADWP), San Diego Gas and Electric (SDG&E), and numerous smaller municipalities including the cities of Glendale, Burbank, Pasadena, Anaheim, and Vernon, all rely on Aliso Canyon to help balance their natural gas needs.

These power plants have no backup fuel as burning oil is rarely allowed in California. When combined, the inability to burn oil and coal, limited hydroelectricity due to four years of drought, and the closure of the San Onofre Nuclear Power Plant in 2012 that wiped 2,200 MW off the grid in Southern California left the region substantially dependent on natural gas. When Aliso Canyon sprang a leak that could not be plugged for four months, natural gas suddenly looked less safe and reliable.

Plans of Action in Response to Aliso Canyon

 

Under order of Governor Jerry Brown, the California Energy Commission, the California Public Utility Commission (CPUC), LADWP, and the California Independent System Operator (CAISO) formulated a plan to shepherd Southern California through Summer 2016 with the intent to minimize gas and electric interruptions to all customers. The plan worked well with results including:

  • tighter balancing rules for non-core through stricter operational flow orders;
  • demand reduction;
  • closer coordination between the ISO and SoCalGas;
  • LADWP operated its system differently as it halted excess energy sales, economic dispatch, and physical hedging;
  • LADWP acquired a waiver to burn diesel if its gas was curtailed; and
  • Aliso Canyon was limited to 15 Bcf of inventory to be used only for system reliability issues per order of the CPUC.

 

For the winter, a recently released plan from the same regulatory agencies added additional measures to deal with the possibility that Aliso Canyon will remain unavailable this winter for anything other than system reliability issues. These measures include:

 

  • a gas demand response program;
  • extending the tighter balancing rules;
  • new balancing rules for core customers;
  • reducing down time on pipelines due to maintenance;
  • preparations to buy liquefied natural gas (LNG);
  • identification and solicitation of additional gas supplies;
  • monitoring gas usage of oil refineries; and
  • modifying the use of Aliso Canyon as appropriate if regulators change the restrictions currently in place.

 

In concurrence with this plan, the CPUC last week ordered SoCalGas to submit a proposal for a demand response program for natural gas that would be implemented on December 1, 2016.

 

What Else Can Be Expected This Winter?

The utility’s own hydraulic modeling shows that under normal weather conditions, without withdrawing gas from Aliso Canyon, it can meet customers’ daily demands by withdrawing gas from its remaining gas storage facilities. Under cold weather conditions, it appears that as long as all facilities remain operational, the utility will just barely meet customers’ delivery needs with very little cushion for contingencies. However, the utility will be unable to meet peak day demands without curtailing customers by approximately 0.3 Bcf as seen in the table below. The worst case scenario would be an abnormally cold winter, no ability to use Aliso Canyon, and equipment malfunctions on either SoCalGas’ pipeline system or those of the interstate pipeline companies that serve Southern California that would limit supply deliveries. If there is not enough supply for the region, then natural gas and electricity prices are expected to rise. Higher natural gas prices will increase rates to customers for gas and electricity if electric generators use the spot market to round out their supplies.


Source: Alison Canyon Gas and Electricity Reliability Winter Action Plan

 

In the longer term, the impact of the Aliso Canyon leak will be codified through more operational and safety regulations that are expected from California's Division of Oil, Gas, and Geothermal Resources (DOGGR), which regulates gas wells, the CPUC, and also the California Legislature. SB 887, which calls for increased testing and reporting for storage owners, is already sitting on Governor Brown’s desk awaiting his signature.

Some of these new rules will impact storage owners’ operations this winter, but it is unknown at this time if and when the Governor will sign the bill into law. Natural gas will continue to play an important role as a heating fuel for most customers and as feedstock for large industrial end users. However, its role as a popular fuel for electricity generation in California seems to be coming to an end.

Source: Energy Information Administration

 

 

The colossal nature of the Aliso Canyon leak will continue to accelerate California’s development of renewable power generation, distributed generation, energy storage, energy conservation, and the move away from electricity generated from natural gas. The scale of the accident, including the thousands of people temporarily displaced from their homes, the record amount of methane released into the atmosphere, and the inability of the utility to plug the leak for four months was simply unprecedented and unsettling. In Northern California PG&E has announced it will shut down the Diablo Canyon Nuclear Power Plant in 2025. However none of the steps it will take to replace the 2,200-MW gap in capacity involves natural gas. Instead, the utility plans to work with customers to reduce energy usage and to use renewables, distributed generation, and other forms of energy storage.

 

Predicting the future is an inexact practice, but given the recent accident at Aliso Canyon, regulators and legislators seem determined to steer power generation in California away from natural gas and toward a cleaner, carbon-free future. While the short-term focus will be on regulations that make gas storage safer and strategies that ensure natural gas supplies and deliveries are adequate to serve customers in the coming winter, the long-term emphasis will be to develop energy projects that do not rely upon fossil fuels, to incent customers to use less resources, and to ramp up the usage of energy storage. Natural gas as a heating fuel will have its place, but natural gas-fired power plants will have a much more limited role in California’s future resource mix.



Footnotes and references:

 

[1] For an explanation of how the leak occurred, see our blog Gas Storage Safety, What is Next After Aliso Canyon?, https://blog.enerdynamics.com/2016/02/23/gas-storage-safety-what-is-next-after-aliso-canyon/

 

[2] Image By EARTHWORKS (Aliso Canyon leak well pad 4 Credit: Earthworks), [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

 

Aliso Canyon Gas and Electricity Reliability Winter Action Plan, California Public Utilities Commission, California Energy Commission, California Independent System Operator and the Los Angeles Department of Water and Power, August 22, 2016.

Bade, Gavin, “After Diablo Canyon: PG&E CEO Tony Early on Renewables, DERs and California’s Energy Future, Utility Dive, June 30, 2016.

Manzagol, Nilay, “California is Using More Renewables and Less Natural Gas in its Summer Electricity Mix, September 6, 2016, US Energy Information Administration

Natural Gas Weekly Update, September 14, 2016, US Energy Information Administration

Southern California Daily Energy Report, September 21, 2016, US Energy Information Administration

Walton, Robert, “Facing Stricter Climate Goals, California Passes 4 Bills to Boost Energy Storage,” Utility Dive, September 2, 2016.

 

 

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