Virginia and
the Carolinas are experiencing high power demand that is set to continue
higher as new data centers are built. Utilities like Duke Energy have long hoped
to replace coal-fired plants with gas-fired plants. Sure, they are building out
solar as well and even some offshore wind. However, they still need the gas. Now,
there is a way to bring that gas, the Mountain Valley Pipeline (MVP). This 303-mile
42-inch high-pressure natural gas line has 2BCF/day of capacity. Along with it
the adjacent Transco system and other small lines can distribute that gas to
different local markets.
MVP started
operations in mid-June. However, due to constraints on the systems into which
it can transport gas, it is currently operating at less than half-capacity, or well
under 1BCF/day. These restrictions are considered to be temporary as we enter the
‘shoulder season’ where natural gas consumption is lower due to air
conditioning drawing less power and the heating season not yet begun. That is
expected to change. Indeed, the new owner of Equitrans Midstream and the
biggest player feeding into MVP, gas producer EQT, fully expects to use
compression to expand MVP’s capacity by 500MMCF/day to 2.5 BCF/day as soon as
possible. RBN Energy’s Housely Carr explains:
“The combination of all that’s already in place (MVP
and the Carolina Market Project) and all that’s planned (the Transco
expansions, the MVP expansion and the Southgate project) has two primary
purposes. The first is to keep pace with soaring demand for gas in Virginia,
the Carolinas and beyond from electric utilities, gas distribution utilities,
industrial customers and current and future data centers. The second is to
provide Marcellus/Utica gas producers (including EQT, the largest producer in
the play) with greater access to premium-priced end markets in the Southeast.”
Prices in Appalachia are suppressed as usual due to constrained
pipeline capacity, but they can sell that gas at a significant premium to Appalachian
prices in those Southeastern markets. Expected premiums were at about $0.20 per
MCF but current premiums are as much as $0.50-0.70 per MCF, and occasionally up
to over $1.00 per MCF. As the graph below shows. MVP entered service at a fair
natural gas price, but it has since dropped as summer demand has waned a bit.
According to
Carr. EQT estimates that “incremental gas demand from data centers/AI and
coal-plant retirements alone is likely to total at least 10 Bcf/d by 2030, and
an aggressive data-center buildout could increase that to 18 Bcf/d.” That
is 4-9 times what MVP can provide.
In addition to
MVP, the upgrades to Transco’s system will keep volumes of gas flowing to the
region. These additions include the Carolina Market Link (78MMCF/day) which came
online in Q1 2024, the Southside Reliability Enhancement Project (423MMCF/day),
now under construction and expected to be online in Q4 2024, the Commonwealth
Energy Connector (105MMCF/day) expected to be online in Q4 2025, and the Southeast
Supply Enhancement (SSE) project which involves looping and other enhancements
and can add a total takeaway capacity up to 1.6 BCF/day. It is expected to come
online in Q4 2027. In addition to the Transco enhancements, there are two upgrades
on the Williams pipeline systems. The first is the Alabama Georgia Connector
which will add 64MMCF/day by Q4 2025 and the Southeast Energy Connector, now
under construction and expected to be online in Q2 2025, adding another
150MMCF/day. That equals a lot of gas to be delivered to the region in the next
three years.
References:
Give
More Power to the People - Soaring Power Needs Drive Gas Demand in Virginia and
Carolinas. Housley Carr. RBN Energy Blog. August 20, 2024. Give
More Power to the People - Soaring Power Needs Drive Gas Demand in Virginia and
Carolinas | RBN Energy
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