Dec 6 (Reuters) - The U.S. Midwest power grid operator said Friday the region has enough natural gas to meet growing demand as the price of the fuel remains relatively cheap and coal-fired units are forced to shut due to increasingly strict environmental rules.
The Midcontinent Independent System Operator (MISO), the grid operator, forecast in a report that natural gas usage in the Midwest will rise from 11.1 billion cubic feet per day in 2013 to 13.4 bcfd in 2032.
In the report, the MISO examined gas flows on the major interstate pipelines in the Midwest and the ability of those pipelines to deliver the fuel to the region’s existing and planned gas-fired plants over the next 20 years.
Currently, residential and commercial users account for most of the gas demand in the Midwest, but MISO said power generators and industrial firms are slowly increasing their use of the fuel.
Gas burned in Midwest power plants is expected to rise from 9 percent of the region’s daily average in 2009-2013 to 14 percent by 2028-2032, MISO said.
The grid operator estimated it could cost up to $1.08 billion to connect new gas plants to the pipeline system.
MISO said most of the existing interstate pipelines should have enough capacity to meet the region’s needs, but warned a few pipelines - Northern Natural Gas north of the Ventura Hub, Northern Border and Alliance Pipeline - could suffer constraints under certain circumstances.
Berkshire Hathaway Inc’s MidAmerican Energy Holdings owns Northern Natural, TransCanada Corp operates Northern Border and Enbridge Inc and Veresen Inc.
A few years ago, about a third of the gas that flowed into the Midwest from Western Canada and the U.S. Rockies and South Central states was destined for the U.S. Northeast and Eastern Canada, the MISO said.
By 2020, growing production from U.S. Eastern shale plays will allow gas to flow into the Midwest from the Marcellus in Pennsylvania and West Virginia and Utica in Ohio in addition to gas from Western Canada and the U.S. Rockies and South Central regions, MISO said.
MISO also said shale fields in the Bakken producing region in North Dakota will displace some imports from Canada as new processing plants enter service at the end of 2015 and 2016.
Record shale production has kept gas and power prices relatively low over the past few years as generators burn more of the relatively cheap fuel to produce electricity.
The weak power prices have made it uneconomic for generators to upgrade several of their older, less efficient coal plants to meet increasingly strict federal environmental rules.
“Over the past two years, growth in shale gas production has dramatically altered the natural gas supply landscape,” John Lawhorn, Senior Director of Policy and Economic Studies at MISO said in a release.
In the Midwest, MISO said generators expect to shut about 12,000 megawatts of coal-fired generation in 2015 to comply with the federal environmental regulations.
One megawatt powers about 1,000 homes.
MISO oversees the power grid in parts of 15 U.S. Midwest and South Central states and the Canadian province of Manitoba.
The biggest power companies in MISO include units of Duke Energy Corp, Xcel Energy Inc, Ameren Corp , Berkshire Hathaway’s MidAmerican Energy, DTE Energy Co and CMS Energy Corp.