Natural gas faces happy days in the U.S.

Despite yowls from climate activists, natural gas in the U.S. is doing well and looking at a likely boom in new gas-fired electric power plants.

According to the Department of Energy’s Energy Information Administration, “Five states produced more than 70% of the record 113.1 billion cubic feet per day (Bcf/d) of U.S. marketed natural gas production in 2023.” Those states were Texas (28% of U.S. marketed natural gas production in 2023), Pennsylvania (18%), Louisiana (10%), West Virginia (8%), and New Mexico (8%). EIA also reported, “Henry Hub daily natural gas spot price reached all-time lows in November.

The plentiful supply of gas, combined with the economics of gas-fired power generation, mean gas is attractive for supplying the enormous new electric loads that may come (and the utility industry hopes will materialize) from the computing needs of artificial intelligence. According to the current issue of POWER magazine, the potential for increased electricity demand “is driving construction of new natural gas-fired power plants, with an analytics firm recently saying more than 200 gas-fired units are in development across the U.S.

“That record natural gas production comes as gas-fired power plants are being used regularly to balance the power grid as more intermittent renewable energy, including wind and solar, is deployed. The EIA has said the share of U.S. power generation from natural gas during summer months increased from 29% in 2014 to 45% this year.”

In May, S&P reported, “Nearly halfway through a decade deemed critical for slowing climate change, US utilities and investors plan to add 133 new natural gas-fired power plants to the nation’s grid.”

ExxonMobil on Wednesday (Dec. 11) announced it is developing a 1,500-MW gas-fired power plant with carbon dioxide capture technology at an undisclosed site to exclusively serve data centers. It marks the first time the oil and gas giant will build generation that doesn’t exclusively serve its own operations. No estimated cost was announced for what is likely to be a combined-cycle plant.

At a media call, CEO Darren Woods said, “There are very few opportunities in the short term to power those data centers and do it in a way that minimizes, if not completely eliminates, the emissions.” Dan Ammann, who runs the company’s low-carbon business, told the New York Times, “We’re being driven by the market demand here. It’s low carbon, it’s available on an accelerated timeline and it avoids all the grid interconnection challenges.”

Significantly, Exxon said the plant would not be connected to the electric grid. That could avoid the often-excruciating grid interconnection delays that can hamper conventional new power projects.

In Wisconsin, investor-owned electric and gas utility We Energies is planning to add seven gas-fired internal combustion generators, totaling 128 MW, in Paris, Wisc., to a 1995-vintage gas fired combustion turbine peaking plant. The estimated cost is $211 million, with an estimated in-service date of 2026.

The Milwaukee-based company is also planning to spend $1.2 billion to convert its four-unit, 1,135-MW coal-fired Oak Creek power plant to gas. We Energie’s Dan Krueger, executive vice president of We Energies’ parent company, WEC Energy Group, told Wisconsin Public Radio that the natural gas units will primarily serve as backup power sources for times when the utility can’t count on renewable energy resources. The four coal-fired units came into service between 1959 and 1967.

In central Pennsylvania, a giant coal-fired zombie may seek resurrection as a gas plant, although the details are opaque. The Homer City Generating Station, once the Keystone State’s largest power plant at 2 GW, consisted of three units, two commissioned in 1969 and the third in 1977. The plant operated at high capacity until its various noxious air emissions including sulfur dioxide, oxides of nitrogen, mercury, and selenium in its wastewater collided with federal pollution control regulations over the years.

Homer City went through various owners, eventually running for several years only as a peaking plant at about 20% capacity. It entered Chapter 11 bankruptcy in 2017 and was acquired by private investors, including Knighthead Capital Management, which “focuses on long-short investments and specializes in event driven, distressed credit and special situation opportunities across a broad array of industries,” and the Carlyle Group. The plant was decommissioned and disconnected from the PJM grid last year.

Earlier this month (Dec. 3) at meetings in Indiana County, former Homer City county commissioner Robin Gorman, who abruptly resigned from the county office in order to become a vice president of Homer City Redevelopment LLC, said the closed-mouth private equity venture plans to convert the plant to gas, as well as holding out the possibility of adding hydrogen and solar generation on the large plant’s site.

The conversion will require complete demolition of the plant, Gorman said, starting in February or March and lasting at least two years. She said the new plant could potentially have double the capacity of the now defunct coal plant, some 4 GW. That could make it the largest gas-fired power plant in the U.S., status now held by FPL’s 3,750-MW West County Energy Center in western Palm Beach County, Florida.

–Kennedy Maize

The Quad Report