Study: Pennsylvania Discount Spurred Spike in Gas-Fired Generation

October 30, 2017

HERSHEY, Pa. — The prevalence of gas-fired generation has skyrocketed in recent years, upending power market structures and leading to nationwide debate over the future of the electricity industry.
FERC Natural Gas Marcellus Shale

Much of that might be attributable to what Christina Simeone, director of policy and external affairs for the University of Pennsylvania’s Kleinman Center for Energy Policy, calls the “Pennsylvania Gas Discount.”

At a conference to analyze Pennsylvania’s electricity markets last week, Simeone unveiled her study on price impacts from the recent expansion in shale gas development.

“The electric power sector is now the natural gas industry’s No. 1 customer both in Pennsylvania and nationally,” she said.

That has come, she said, because production from the state’s Marcellus shale has been prodigious, while “takeaway capacity has not kept up with production growth.” In 2007, Pennsylvania accounted for less than 1% of the nation’s natural gas production and consumed four times more gas than it produced. By 2016, the state had increased its output 2,800%, accounting for 16% of national production — four times more than it consumed.

In-state pipeline construction has not maintained that pace. Simeone said FERC has approved 59 interstate pipeline projects since 2007 that would impact Pennsylvania, but many of them have been delayed. Williams’ Constitution pipeline, for example, was approved in 2014, but construction has been blocked by a permitting battle with New York.

The pipeline constraints have led to an oversupply that has dramatically depressed in-state prices.

“The electric power sector is really where prices dropped..."

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