How does Natural gas in storage affect the price of electricity in Texas?
Natural Gas is stored in the ground to be used later when the demand is there for its use. The natural gas travels through pipes throughout the country to different gate locations. Once reaching it’s destination it is often times not needed at that time. Because the natural gas is not used it can be injected into natural storage locations in the earth. These underground storage facilities are usually located close to market locations that usually have a big demand for natural gas from time to time. These times usually are during cold winters and very hot summers.
When excess natural gas is stored in the ground from transmission during the summer months it is used when there is a shortage during the winter months. Because natural gas is not only used to generate electricity but also heat homes and businesses in the winter it has a greater demand during this time. Because power generation in Texas is increasingly from natural gas generation we are beginning to see the same demand for natural gas in the summer as we do in the winter. Natural gas in storage also serves as an insurance policy against any unforeseen natural gas disasters such as hurricane Katrina.
Natural gas is usually stored in a location where it can be stored and replenished quickly during high demand times. Interestingly enough salt caverns are the primary storage location for peak loads. Right now these storage facilities are used as insurance in this high volatile natural gas market. As coal power plants continue to be built in Texas and natural gas is used less there will be a drop in electricity prices as the demand is eased on natural gas in storage.
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