Could on-site fuel storage economically reduce power plant-gas grid dependence in pipeline constrained areas like New England?
In the Northeastern United States, natural gas supply constraints have led to periods when gas shortages have caused up to a quarter of all unscheduled power plant outages. Dual fuel oil/gas generators or local gas storage might mitigate gas supply shortages. We use historical power plant operational and availability data to develop a supply curve of the costs required for generators to mitigate fuel shortage failures in New England. Based on 2012–2018 data, we find that the historical fuel shortages at approximately 2 GW worth of gas-fired capacity could be mitigated using on-site fuel storage. For comparison, New England’s average reserve margin was 1.7–2.8 GW over our sample period. Oil dual fuel plants would recoup their investment if compensated with a reliability adder of $\$ 3-7$/MWh during their normal operations, while $\$ 7-16$/MWh would incentivize using onsite, compressed natural gas storage. We estimate that the capital expenses associated with the fuel storage options would be less expensive than installing battery backup for resource adequacy at current battery prices.