THE REGION’S POWER GRID had a close call during the February blizzard. Six power plants running on natural gas ran out of fuel and couldn’t obtain any more. Several oil-fired plants said their fuel stocks were depleted so they couldn’t supply any more electricity. Along with other plants shut down because of storm-related outages, more than 6,000 megawatts of power were unavailable at a time when the grid was struggling to meet demand.
The operators of the regional power grid managed to keep the lights on, but they avoided drastic measures only because the cold snap eased quickly and no other plants encountered problems. Now the operators are saying the region’s growing dependence on natural gas—a fuel that has brought enormous economic and environmental benefits to New England—is “a rapidly-escalating strategic risk.”
Gordon van Welie, president of ISO-New England, the power grid operator, says the natural gas pipelines coming into the region don’t have enough capacity when demand for power peaks. “What New England has to do is build up its pipeline capacity and build up its storage,” he says.
Natural gas has taken over in New England because of its lower carbon emissions and, more recently, because it is relatively cheap. In 1990, gas accounted for just under 6 percent of the region’s electricity generation, far less than nuclear (35.5 percent), oil (34 percent), and coal (16 percent.) Last year, natural gas produced 52 percent of the region’s electricity, followed by nuclear at 31 percent. Coal now accounts for just 3 percent of power generation and oil less than 1 percent.
The shift to natural gas yielded enormous economic and environmental benefits. The falloff in coal and oil electricity production has dramatically cut carbon emissions, allowing Massachusetts to easily reach its targets for greenhouse gas reduction.
The growing supply of domestically produced natural gas from hydrologic fracturing, or fracking, has also driven down the price of the fuel. Natural gas prices and electricity prices hit their lowest level last year since 2003. The region’s wholesale electricity bill last year fell to $5.2 billion, down more than a billion dollars from the previous year and down $7 billion from 2008.
The popularity of natural gas shows few signs of abating. Many analysts expect natural gas prices to remain low for much of the decade, which could lead the fuel to increase its share of the electricity market even further. Oil and coal plants already find themselves sitting idle much of the time. The owner of the Brayton Point Power Station in Somerset sold the facility at a fire sale in March and previously shut down the coal-fired Salem Power Station. The Mount Tom coal plant in Holyoke is preparing to shut down for an entire year.
But the popularity of natural gas is creating some bottlenecks. Pipelines coming into the region from the south and west are operating at near capacity during periods of high demand, while declining production in Canada has limited supplies from the north. Shipments of liquefied natural gas are down because prices are much more attractive in Europe.
The tightness in supply is already having an impact on prices. The US Energy Information Administration says the average price of natural gas coming into New England has been the highest in the nation over the winter months, nearly a third higher on average than deliveries to the New York area and at times nearly nine times as much as the national average.
The cause of the jump in prices is pipeline capacity, but poor planning also plays a role. Oil-fired power plants rarely run anymore, so they keep very low stocks of fuel on hand. When demand for power peaks, the plants fire up but can only operate for a couple days before they run out of fuel. Many natural gas plants are accustomed to buying their supplies as they are needed; when demand spikes, deliveries for heating homes and businesses take priority, leaving the power plant operators without fuel.
Van Welie says the solution to the region’s problem is not to prop up older oil and coal plants, which are dirtier and tend to break down when they do run. He says the solution is to build additional natural gas pipeline capacity into the region, but he can’t just wave a wand and make it happen.
His organization is developing financial incentives that will reward those power suppliers who meet or exceed pledges to deliver electricity when needed, and penalize those who fail to deliver on time. Van Welie believes the financial incentives will spur natural-gas fired plants to structure deals with pipelines that will lead to expansion of existing lines or the construction of new ones.
“We have a transition on our hands,” says van Welie, who concedes that his incentive proposal will probably yield more reliable supplies of natural gas at higher prices, a tradeoff he is willing to accept.
Jim Gordon, who is trying to build Cape Wind, says his proposed wind farm in Nantucket Sound could be another answer to New England’s gas crunch. Gordon, who built and later sold five of the region’s gas plants, says the power from Cape Wind could diversify New England’s fuel mix, reduce carbon emissions, and ease pressure on natural gas.
Cape Wind, as designed, is capable of generating 468 megawatts of electricity, or about a third of Brayton Point’s output at full capacity. The expectation is that Cape Wind will operate at about 37 percent of capacity on a year-round basis—29 percent in the summer and 45 percent in the winter. “It’s analogous to having a gas well in Nantucket Sound,” Gordon says.
