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IN BRIEF
The outlook for increased use of LNG for peak shaving in the North American gas utility business is excellent. LNG has been in use for peak shaving for several decades and is a proven technology. Peak shaving is accomplished by gas utilities by eliminating the need to contract for long-haul pipeline capacity for supplying their peak-day gas loads. Because of its specific advantages over rival methods, LNG will continue to expand its role as a peak shaving method of choice.
Several important changes in the gas industry point to this increased use of LNG. The most important of these is the recently-implemented Federal Energy Regulatory Commission ("FERC") rule changes known as Order 636, which substantially improves the overall economics of peak shaving. Two other major changes include (1) the Clean Air Act and the consequent increasing emphasis on gas for electric generation and (2) the general growth of the use of gas in cold climate areas of the country.
BIOGRAPHY OF AUTHOR
Craig Taylor is President of HNG Storage Company in Houston, TX, where he specializes in the application of gas storage technologies to gas utility needs for peak shaving, reliability of supply, and gas supply timing services. HNG Storage Company develops, owns, and operates gas storage facilities. Mr. Taylor was formerly President of International Gas Consulting, Inc., a leading natural gas consulting firm with specialization in underground gas storage, LNG, pipelines, and utility economics. He also served as Engineering Superintendent at the P.T. Badak base-load LNG plant in Bontang, Indonesia.
WHAT IS "PEAK SHAVING"?
Peak shaving means shaving off or eliminating the peak gas demand requirements. For purposes of this discussion, it refers to the need to transport natural gas from a supply region to a consuming utility's franchise distribution area via a long-haul pipeline. The basic structure of the gas business in North America is for long-haul pipelines to connect supply region gas to consuming region gas distribution utilities.
Peak shaving is a way to cut the overall cost of using long-haul pipelines for delivering gas to customers during very cold weather. Figure 1 shows a typical cold-climate gas utility sendout over a one year period.(Figure 1 omitted) The winter peak-day load of 970,000 MMBtu is two or three times...