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EMF WP 20.3: Fuel Switching Potential of Electric Generators: A Case Study

Working Paper

There has been much debate about electricity generator’s capability to respond to high natural gas prices by switching to petroleum when market conditions dictate. This study addresses that question by using historic performance data during a period of rapidly changing fuel prices (year 2000 through 2001) to analyze the actual behavior of existing electric generators. By using performance data, the study circumvents the issue of potential to switch and determines the extent to which electricity generators did switch from natural gas to petroleum when market conditions warranted.

The study found that 29 gigawatts (GW) of electricity generating capacity actually switched between natural gas and petroleum as prices changed. Approximately 40% of this capacity fired residual fuel oil/natural gas with the remainder firing distillate/natural gas. This generating capacity when firing natural gas consumed on average 2.7 BCFD.

Furthermore, there is about 4.3 GW of electricity generating capacity, which switches from natural gas to petroleum during the winter regardless of relative petroleum/natural gas prices.

Finally, the study found that during the winter months of some years, 20-60 GW of low cost non-fossil electricity generation capacity supplanted a like amount of electricity generation from natural gas fired units. This decline in the use of the natural gas did not appear related to high natural gas prices.

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