Shale gas formations across AEP’s service territory have been a game-changer for the availability and cost of natural gas. As new regulations force a shift away from coal, low-cost natural gas has become the resource of choice for 24/7 power generation. Having a reliable, steady supply of fuel is critical to maintaining grid reliability, especially during periods of peak demand.
Natural gas is an important part of our resource portfolio, especially as we have retired approximately 25 percent of our coal-fueled power plants that provided 24/7 power. We are cautious, however, of relying too heavily on any single resource as the main baseload fuel for 24/7 power needs. Volatility in prices, pipeline capacity issues, and fluctuations in supply and demand could impact the availability of natural gas for power generation. For example, on January 7, 2014, during the polar vortex, 9,300 MW of natural gas generation, which represented five percent of PJM’s generating capacity, was unavailable due to interruption of natural gas service.
The availability of natural gas, especially during peak demand periods and when variable resources are unavailable is why several of our natural gas plants are connected to at least two pipelines. This gives us greater access to competitive supplies and reliable delivery. We also are working with regulators to align the needs and interests of the gas and electric industries to gain more certainty and flexibility when procuring and scheduling natural gas for our units. Learn more about gas-electric harmonization efforts under way.
AEP’s Clinch River Plant, Unit 1 and Unit 2 began operations as natural gas units in February 2016 and April 2016, respectively. Two units of the plant’s three coal-fueled units were converted to natural gas. A third coal unit, at the Big Sandy Plant in Kentucky, is being converted from coal to natural gas and will be in operation in June 2016. These conversions ensure reliability for customers while complying with new environmental regulations. Keeping these plants in operation also supports local communities with jobs and local taxes, while providing low-cost, 24/7 power.
Shale Gas – Growth for the Future
The natural resources in AEP’s 11-state service territory have presented an excellent opportunity to support economic and business development and create new jobs. Since 2011, many shale oil and gas customers tapped into these resources in AEP’s Ohio, West Virginia, Oklahoma, and Texas service territories.
AEP has tracked short- and long-term customer power requests since 2011; today, this data is helping us to plan transmission improvements to meet customers’ needs. In 2015, new customer requests from oil and gas companies slowed, predominately due to the drop in oil prices globally. However, with growing demand for natural gas in foreign markets, including India, Japan, and South Korea, the oil market has begun to rebound here in the United States to meet that demand.
As customer needs increase, AEP is ready with solutions to meet new service requests. For example, AEP is engineering and building transmission system improvements that will further enhance service reliability in the shale regions.
Shale customers require a highly reliable supply of electricity to maintain many of their 24/7 operations, as well as meet their downstream customer needs. In AEP’s eastern service territory, planning engineers developed a transmission shale expansion plan to help us forecast where transmission improvements will likely be needed.
This plan will help us to prioritize our investments and system improvements to maximize benefits to customers and the power grid. A similar effort is under way in AEP’s western service territory. These efforts position AEP to seize growth opportunities in shale regions as they develop.
In addition, we have developed the concept of regional engineering teams that will focus resources where needed in the higher growth shale regions. These teams will also improve efficiencies across AEP’s territory, as well as support our cultural journey through collaboration and engagement.
As oil and gas drilling activities have increased in shale gas-rich regions of the country, the incidents of earthquakes have also been increasing. The U.S. Geological Service and others have tied the process of disposing of wastewater from oil and gas extraction activities to surges in earthquakes in eight states – including states in AEP’s service territory (Arkansas, Ohio, Oklahoma and Texas). This concerns us and, as we rely more heavily on natural gas for power generation, we will look to that industry to insure responsible practices are in place to minimize environmental impacts, as well as address the earthquake concerns.