The Cost of Natural Gas [was Re: The Cost of California Liberalism]

[Raymond D. Mereniuk]

auto58194 at hushmail.com wrote

> Huh?  Let's make this simple.  How is California's lack of power plants 
> causing natural gas prices to rise?  Plants that don't exist don't use gas 
> and don't contribute to shortages. 
>
> California's importing power from elsewhere, so why didn't these other generators 
> commit to natural gas suppliers?  

In the energy business it is commonly assumed there is lots of 
natural gas in Alberta and BC.  So much that most exploration 
companies do not bother looking for it until they has a market.  In 
the business it is often jokingly stated that natural gas will be 
obsolete before we release it all from the reservoirs.

If you decide to build a natural gas powered electrical generation 
facility to provide full-time capacity you are looking at a lead-time of 
at least a couple of years.  With a lead time of two years the supply 
would be available.  The delivery system may be a problem as in 
this day and age it can take more than two years to get approval to 
build pipelines in populated areas.  Put your power plant in the 
boonies and you solve part of the problem.

Basically there are two natural gas delivery systems coming out of 
Canada.  The main system starts in northeast British Columbia on 
the east side of the continental divide, runs through Alberta 
collecting more capacity and then heads east.  There is a branch 
going to Toronto and Montreal, the main population centres in 
Canada.  There is another branch which heads to the Chicago area.

If you check your commodity prices you will note buyers attached to 
this system pay much lower prices than those offered to California 
buyers.  There is no shortage of supply in this system, you can tell 
by the prices.

California is not directly connected to this supply system and can 
not benefit from this abundant supply.  On this side of the 
continental divide there is no longer an abundant supply.  One of the 
local gas transmission companies wanted Canadian consumers to 
pay CAN$500 million to increase supply through increased 
residential and industrial rates.  We the consumers refused as we 
didn't need the capacity for our own use.  The transmission 
company wanted the consumers to assume their risk with our 
dollars.  

The transmission company invested some of their own capital to do 
part of the connection.  If you want to give them CAN$325 million 
they will finish finish the link between the two systems and there will 
be a glut of natural gas on this side of the continental divide.  They 
know if they invest the money themselves they will loose their 
current price premium so they ain't doin it with their money.  
Commit to some long-term supply contracts at today's prices and it 
would completed within a year.

I live out in the burbs in what was once a rural area.  No one ever 
thought the city would grow this big.  Many years ago they built a 
coal fired power plant less than a couple of miles away.  It was 
down wind from the city and no one cared about the pollution back 
then...   Around about 10 years ago they changed from coal to 
natural gas fired boilers.  

This power plant sits there mainly unused.  The local tree hugger 
types whine too much about the pollution.  The facility is not small, 
probably enough capacity for a city of 250K.  It is used only at peak 
times and in emergency situations.  When there are low reservior 
levels (which is part of your problem) it is used more often.

In a properly planned electrical system this type of extra capacity is 
considered essential.  These plants were never intended to be 
used fulltime so they tend to have low natural gas storage capacity 
and smaller inbound pipelines.  In your system you are using 
facilities such as these for full-time power generation.  

In your state these plants has a quota of pollution they are allowed 
to produce on an annual basis.  A number of these facilities had 
reached their annual quota of emissions so they shut down for 
maintenance.  Since they were never intended to be used full-time 
they require some down time.  Within the last two weeks your state 
government lifted the pollution quotas and pressured the operators 
to bring these plants back on stream.

> Hint: transmission losses aren't a recent discovery.   

You caught me by surprise on this one.  I assume you are talking 
about electricity as if a gas delivery system has losses you tend to 
very quickly become aware of it.
 
> Either you're confused or you're trying to use the cold winter as an excuse 
> to create a strawman for your anti-Californian views.  

I don't believe my view is anything other than an accurate 
description of what is plainly stated between the lines.  In this part of 
the world there are very detailed analysis printed in the local media 
describing the mechanics of what is happening in the energy 
market.  Just from your reaction you can see why this view would 
not be popular in your neighbourhood.  

Energy production is big business in western Canada and a lot of 
people are making big dollars from the consumers in the northwest. 
The actions of the California voters have made this possible.  I just 
wish I was still in the energy business rolling in dollars rather than 
whining about paying an extra $1,000 per year for heating.
 



Virtually


Raymond D. Mereniuk
Raymond at fbn.bc.ca
"The Physical Layer Experts" 
http://www.fbn.bc.ca/cable1.html