Beyond the Power Plant: The Hidden Costs of Gas-Fired Generation

As utilities across the country rush to build new gas power plants to meet surging electricity demand from data centers, a new report from GridLab and Current Energy Group reveals that the price tags regulators are approving systematically understate what customers will actually pay. “Beyond the Power Plant: The Hidden Costs of Gas-Fired Generation” finds that mandatory gas infrastructure costs for transportation, processing, and storage routinely add 30% or more to the true cost of a new gas plant, yet are almost never included in the regulatory proceedings where generation decisions are made.

The report examines seven utility case studies from Colorado, Georgia, Kentucky, North Carolina, South Carolina, Virginia, and Wisconsin, each representing a utility with planned new gas generation and associated fuel delivery investments. These studies reveal an urgent need for transparent documentation of the costs and risks of new gas projects for power sector analysts.

This report marks the first phase in a multi-phase collaborative project between GridLab and CEG to investigate the Hidden Cost of Gas infrastructure on electric customers. The purpose of this Phase 1 effort was to explore several preliminary case studies and begin developing a framework for future research. Even within this limited set of case studies, several key trends have become apparent: 

Key Takeaways

1. 1. Power generation needs are an increasingly large fraction of interstate gas pipeline demand.
   2. New gas-fired power plants are now being proposed in tandem with corresponding gas infrastructure projects.
   3. New gas transmission projects are a major component of utilities’ overall fixed costs (e.g., capital investment or long-term contract) supporting new power delivery.
   4. Assumptions for gas transmission costs used in electric system modeling are relatively simplistic and may be underestimated.
   5. Electric utilities directly pass through the costs and risks of gas transmission projects to their retail customers.
   6. It is unclear how the costs of the new gas transmission projects driven by new large loads will ultimately be shared between new large loads and existing customers.

Next Steps

Timely data presented in a consistent format will be critical towards building this body of knowledge and conducting additional research. The next phase of the Hidden Cost of Gas analysis will build upon the initial set of case studies with a comprehensive public database quantifying the costs and technical parameters of gas transmission infrastructure associated with new gas-fired power plants. As this information is being compiled, CEG will also be conducting additional research and analysis to better inform regulators, policy-makers, and other key stakeholders of emerging trends occurring in the intersection of the electric and gas systems. We welcome participation of other stakeholders in developing this information by providing project-specific details or general feedback by contacting Jordan Ahern.

Authors

Edward Burgess, Maria Roumpani, Laura Burford, Jordan Ahern, Alexandria Herr, & Erik Olson

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