Design and Analysis of a Natural Gas Micro-Grid in Clearfield County, PA Case Histories
Principal Investigator: Dept. of Energy and Mineral Engineering. Penn State
An alternative business strategy for gas producers that cannot secure transmission pipeline access would be to sell natural gas locally, direct to selected end-use customers under long-term contracts. Depending on the location of the gas wells and the end-use customer, such a business strategy would require a traditional gathering system, but the gathering system might feed into a distribution pipeline, or direct to a customer co-located with the natural gas producing area. Following a similar system in the electric power sector, we will refer to such a local gas production and distribution system as a “micro-grid” for natural gas.
First, gas transmission capacity through Pennsylvania has become scarce, and smaller producers (producing from the Marcellus or from shallower gas resources) have had difficulties securing gas transmission capacity. In addition to being economically dis-advantageous for these companies and the natural gas market, companies without firm pipeline access may choose to abandon their wells for economic reasons (rather than end-of-life abandonment). This type of economic abandonment can create economic and environmental problems since such wells are not always properly plugged.
Second, export demand for Pennsylvania Marcellus gas has bid up natural gas prices in Pennsylvania. Whether market prices for natural gas remain high or decline (as in many other shale-gas producing areas) depends on the speed of Marcellus development and the speed of new gas pipeline investment.
The scenario we propose to investigate would involve the delivery of shallow gas owned by a partner of Little Pine Resources in Clearfield County to a large industrial consumer (such as a metals plant or industrial park) within the County.
While the Little Pine field in Clearfield County will act as a convenient case study, the project aims to develop a general model to evaluate the economics of natural gas micro-grids, and to devise general engineering principles governing the design of this emerging potential system architecture. Our study could thus be used as a framework for evaluating other potential natural gas micro-grids in Pennsylvania and in other states facing similar issues related to the rapid development of natural gas resources.
We propose to perform the following tasks:
The final report will be made public. In addition, the economic analysis performed in the project will be the basis for an undergraduate honors thesis in the Energy Business and Finance program.