The formula for developing large load projects has become much more complicated.
Not too long ago, developers of large-load projects like manufacturing facilities and data centers looked for sites that were in close proximity to robust electrical grid infrastructure. Those locations offered service connections that could reliably deliver ample power needed for server banks and networking equipment or automation equipment inside modern manufacturing facilities.
However, those relatively straightforward siting decisions are becoming more complicated. Due to gaps in electrical infrastructure and reliability concerns, there is growing interest in behind-the-meter power generation models for hyperscale facilities that could be fueled by natural gas.
Why Gas?
Access to a stable power source is essential for facilities that must run 24/7 with near-zero downtime while maintaining high power quality with no voltage sags, surges or other issues.
In locations where local electrical service capacity may be limited, or where grid interconnection applications face long delays, natural gas supply is an option that many are now considering. Practical realities are in play during these considerations. There are clear advantages in gaining permits for rights-of-way for gas pipelines, versus the rights-of-way for high-voltage power lines.
The viability of natural gas has developers increasingly looking to locate new manufacturing or data center sites near transmission pipelines. This approach, including a shift to on-site, behind-the-meter power, can help to gain greater control over power supply, reduce impacts from congested grids and may contribute to more stable long-term energy costs.
The pipeline industry is taking note. Midstream companies and gas utilities are pushing forward with several new pipeline projects to meet demand from liquid natural gas (LNG) exporters, industrial plants and power generators.
Securing a Stable Gas Supply
Gas loads for facilities with heavy-usage and high-reliability needs are considered baseload and require 24/7 capacity year-round.
Identifying and securing an adequate natural gas supply for such loads involves a complex set of steps and considerations that go far beyond simply plugging into a nearby pipeline. Both grid operators and facility managers must evaluate supply availability from a variety of regional gas markets as well as current and future pipeline capacities, regulatory requirements and long-term contracts. The process often includes:
- Identification of potential connections with interstate or intrastate pipelines operating within a target region. These should be pinpointed in order to connect to and support the facility’s power generation requirements.
- Preliminary cost analysis with high-level screening of pipeline lateral construction. This will help to understand capital expenditures required for construction and equipment.
- Operational considerations based on discussions with pipeline operators. These should be aimed at gauging availability of firm transportation capacity, mainline pressures, tariff rates and other service details.
Gas Supply Efforts
Locating and evaluating primary natural gas basins and pooling points along interstate pipelines is a critical step toward maintaining ample and consistent supply. Gas supply agreements should be pursued to secure favorable terms and long-term reliability.
Favorable supply agreements that clearly identify supply basins, pooling points and basis differentials will help clear the way for operators and managers to commit to that pathway.
Still, it must be acknowledged that the shift toward natural gas comes with certain challenges, including the reality that many hyperscale facility operators have publicly committed to achieving net carbon neutrality goals within a few years. There is still great interest in buying CDR (carbon dioxide reduction) credits from clean power sources.
Other strategies include using natural gas as a bridging fuel to be used until a grid connection is approved by the regional transmission authority. Once the facility is grid-connected, the gas generator would serve as a backup to maintain redundancy and reliability for uninterruptable operations.
Navigating Complexity
Securing gas supply requires careful navigation through a series of steps that include screening of pipeline options, developing appropriate cost analyses and mapping out firm transportation capacities, tariffs and service offerings.
During the bid process, support from a third-party consultant may be helpful with the bid management process of preparing RFI/RFP documents, evaluating submissions and recommending ultimate winners.
Support also may extend past the selection decision to include negotiations of precedent agreements and gas supply contracts.
On-site power generation is emerging as an increasingly viable option, but don’t underestimate the need for a thoughtful approach to navigating the complexity of gas supply contracts.
Supplying sufficient power for today’s new class of hyperscale facilities is among the foremost challenges facing the power industry.
