2011 Special Reliability Assessment:

A Primer on the Natural Gas and Electric

Power Interdependency in the United States

2 RELIABILITY | ACCOUNTABILITY

Timeline

Sept 13-14 Report sent to PC for review and comment

October 25 Report to be considered for approval by PC

November 18 Report to be considered for approval by BOT

Mid November Publish Report

Phase I

Phase II

• Under development

• Comments on the study design/scope received from PC

• Expected during Q1, 2012

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Highlights

• Key differences exists between gas and electricity producers; regional differences also exist

• Increased coordination and communication is needed

• Nearby gas storage and dual-fuel switching options diminish interdependency issues

• Electric loads present unique challenges to gas pipeline operators

• Future expansion of pipelines to accommodate electric sector growth

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Gas Storage in North America

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Gas Demand Growth by Sector

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2010 US Gas Consumption

Areas of no gas

storage

Areas where

significant

potential

retirements may

occure more

gas-fired

generation

expected

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What We’ll Need

• Demand projected to increase by 55 to 65 percent by 2020; and potentially more than double by 2030

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2010 2015 2020 2025 2030

High, Likely, and Low Scenarios Electric Sector Gas Demand

High Case

Base Case

Low Case

(BCFD)

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What We Have

1,003 1,001 1,028 1,067 1,038 1,091 1,127 1,119

1,321

1,836

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

(TCF)

Source: Potential Gas Committee.

2010

1,898

Total Potential U.S. Natural Gas Resources

• Over 100 years of potential shale gas at current rates

• Uncertainty in environmental regulations will affect gas prices

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How We’ll Get it There

• 8.3 BCFD of gas pipeline capacity built in last 10 years

• 24k miles of gas pipeline built in last 10 years

Reference: Electric industry took 17 years to build 24k circuit miles of transmission greater than 200 kV

• More pipeline capacity will be needed to support new gas-fired capacity

8,460

6,517

6,983

9,262

12,848

10,423

7,661 8,198

12,705

14,859

28,938

19,532

13,882

18,606

10,080

-

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000

22,500

25,000

27,500

30,000

32,500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(MMCFD)

Note: Excludes Storage Pipelines after 2007

Natural Gas Pipeline Capacity Additions

Announced

Likely

Under Construction

Complete

2,432 2,338

1,998

2,391

3,571

2,243

1,459

1,152

1,582 1,663

3,554

3,347

1,787

2,714

1,189

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(Miles)

Natural Gas Pipeline Mileage Additions

Announced

Likely

Under Construction

Complete

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How Much Gas-Fired Capacity

Are We Expecting?

• As provided in the 2011 Long-Term Reliability Assessment: Approximately 45 GW of Planned; 48 GW of Conceptual

More expected due to not yet announced retirements of coal-fired gen.

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Do the Math…

• Assuming: For every 1 MW of coal-fired generation replaced with gas-fired generation (baseload; running 24 hours a day), approximately 0.168 MMCFD of gas supply is needed.

• Assuming: The most recent five-year average pipeline capacity/mile is 7 MMCFD/mile

• 24,000 miles of additional gas pipeline may be needed for about 50 GW of displaced coal-fired generation

This is the same amount of miles built in the past 10 years

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Need Closer Coordination and Enhanced Communication

Nominations Scheduled For Next Day –Timely

Timely Nominations Confirmed

Nominations Scheduled For Next Day –Evening

Evening Nominations Confirmed

Effective Gas Flow

Day 1 –Morning

Day 1 –Afternoon

Day 1 –Evening

Day 2 –Early Morning

Day 2 –Morning

Nominations requested for Day 2, but changes in load forecast, system conditions, and, ultimately, generation schedules continue during Day 1

Day-Ahead Forecast and Unit Commitment

Commitment and Generation Schedules Confirmed

Generations Schedules Adjusted, Reliability Analysis

Real-Time Economic Dispatch

Gas

Day

Elec

tric

Day

Planning Gap

• Gas-Day vs. Electric Day

• Long-standing issue between the two industries

• Both sides have “dealt” with it, and aware of the potential issues

• Increasing concerns and challenges loom

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Status of 2004 Recommendations

• Update since 2004 Study

• Significant progress has been made

• Recommendations for Reliability Assessment are implemented and continuing

• Coordination between pipeline operators and electric system operators is closer

• Identifying pipeline outages that can affect reliability

• More needed on planning front

• Firm contracts vs. pipeline expansion

• Many recommendations related to a “tracking” system

• Not formal in NERC process, but liaison activities between stakeholders and gas associations in place

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Recommendations

• Natural gas storage expansion to meet unique electric sector demand characteristics (i.e., unexpected swings)

• Vital information needs to be shared with system operators from both industries.

• Communication between industries is essential

• Vulnerabilities should be identified and mitigating strategies implemented by both industries (i.e., coordinated action)

Questions?