Since your Missouri Electric Cooperatives built its first natural gas power plant in 1999, gas has become an increasingly important generation fuel for members.
The diversity of your Cooperatives' generation, coupled with flexible, negotiated fuel supply contracts, helps the cooperative take advantage of lower gas prices to serve member load reliably. In fact, when not needed for member load, your Missouri Electric Cooperatives' gas plants can competitively generate for off-system sales. This brings in revenue to help keep member rates as low as possible.
The flexibility of switching between gas and coal, depending on price, supply and demand, has enabled your Cooperatives to sell power to members at a lower average cost than nonmember distribution cooperatives pay in the surrounding eight states.
The selling points of gas add up:
- Plentiful domestic natural gas supply, lower prices and less volatility make gas attractive for generating electricity.
- In addition to its competitive price, gas is the cleanest of the fossil fuels, producing the least carbon dioxide, sulfur dioxide, nitrogen oxides and particulate matter emissions.
- Gas plants are less costly to build, operate, maintain and staff than coal plants, which face increasing costs due to new and uncertain environmental regulations.
- Peaking gas units can start in nine to 15 minutes – much, much faster than coal units – to meet peak energy demand, the fluctuations that come with wind energy and federal reliability standards set by North American Electric Reliability Corp.
- A combined-cycle gas plant can produce a kilowatt-hour of electricity more efficiently than a coal plant.
Your Cooperatives gets in the gas business Natural gas traditionally was a fuel for heating homes, but in the mid-1990s that changed as wholesale generators began building lower-cost, gas-based power plants.
Needing to diversify its power supply and add peaking generation, you Cooperatives saw these indicators and worked with a consultant to broker the construction of St. Francis Power Plant in 1999. In rapid order came Holden, Essex and Nodaway peaking plants; expansion of St. Francis; addition of Chouteau and Dell power plants; and expansion of Chouteau. Today, your Cooperatives' gas fleet is a highly valuable asset that gives the cooperative great flexibility for providing clean, affordable, reliable electricity for members.
Your Cooperatives' gas supply comes from domestic sources connected to the country’s vast pipeline network, ranging from small, locally owned producers to some of the world’s largest energy companies.
Contracts with pipelines also help stabilize delivered cost of gas. Vast new deposits of shale gas – estimated at more than 100 years – being drilled are expected to continue to stabilize gas prices.
How does price affect costs?
Like most commodities – think oil, wheat, corn, livestock – natural gas trades daily on exchanges such as the Intercontinental Exchange Inc. and New York Mercantile exchange. These trades, influenced by supply and demand, establish the price of gas for a given day or future timeframe. Your Cooperatives' fuels department procures and manages gas supply, seeking terms that reduce risk, provide reliable deliveries and minimize costs.
Of course, your Cooperatives must consider current and future prices for all generating resources. The cooperative uses the lowest-cost resources and power plants available to supply members.
Typically, hydropower and wind generation are used first, and that’s partly due to your Cooperatives' contracts that require taking all wind power produced. Then coal, gas or even purchased power, if its cost is lower than your Cooperatives can generate, are used.
Your Cooperatives' diverse resource mix keeps its wholesale rates among the lowest in the country.
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Posted on Wed, November 1, 2017
by Rachel Marston