THE MOST CONTROVERSIAL ENERGY POLICY issue pending before the Commonwealth – rivaled perhaps only by the solar debates – has been the proposal to expand natural gas pipelines into New England to serve electric generators. Resolving this policy question is not clear-cut. It is a complex issue about comparative risk assessment and risk tolerance. The recent cancellation of the Kinder Morgan project reduces the choices but makes it no less complicated. There have been numerous “studies” or “white papers” on the subject, the most notable of which was the comprehensive study completed by Analysis Group, Inc., sponsored by the office of the Attorney General. As for many of the others, it should come as no surprise that in many cases one can predict the conclusion by simply identifying the sponsor of the study. Sides have been taken, and the advocacy battle is well underway. But if we do not evaluate the risks associated with the choices at hand in a balanced manner, we may lose our vision in the haze of smoke from the cannon-fire.
There is much that needs to be sorted out to get a clear view of what is at stake. First, the question of “need” suffers from some confusion. This is a result of the blending of different need issues. It starts with confusion between (1) the need for capacity to serve traditional thermal uses of natural gas capacity and (2) the need for capacity to serve electric generation. Whether additional pipeline capacity is needed to serve traditional thermal uses of natural gas such as heating is important. But that is a different question than the one relating to contracting for additional capacity to assure that we will not suffer power outages during the coldest days of the year. In fact, nearly half of the capacity that had been proposed for the abandoned Kinder Morgan project was supposed to address the thermal requirements of gas distribution companies. It was the balance of the project that had largely remained uncommitted.
The Analysis Group study is often cited by some opponents of pipelines for the proposition that we do not need additional pipeline capacity for any purpose. Yet the study did not address the “thermal” question at all and the office of the Attorney General has never suggested it did. Rather, it was limited to the question whether we need additional capacity for electric generators to assure electric system reliability. In addressing the electric generation reliability need, the study concluded that, under expected conditions, the system would operate reliably without additional capacity. The study also reviewed scenarios of “stressed conditions” on the system and compared various solution options that could address those unusual circumstances. Two of the favored solutions assumed the ability of all the New England states to radically ramp up energy efficiency beyond today’s nation-leading levels. Among them was a combination of bringing 1,100 megawatts of firm large-scale clean resources into the region with an expansive, sustained ramp-up of energy efficiency throughout New England. But the study did not assess the probabilities of the states being able to implement the aggressive energy efficiency solution and sustain it over a long period.
There also is another question of “need.” This is whether additional pipeline capacity is needed to lower and stabilize high winter electricity costs. The Analysis Group study forecasted that the addition of natural gas capacity would result in net savings in wholesale energy costs regionally, among other initiatives that could produce savings. But that was not the issue the study was really addressing. In contrast, the proponents of adding larger amounts of pipeline capacity for electric generation base their case on forecasts of substantial savings that can be achieved every winter by adding additional pipeline capacity.
Finally, there is another key question that relates to the environment. That is the question of how additional pipeline capacity for electric generation might impact greenhouse gas emissions over time. Of course, there also is the environmental concern of some advocates regarding the impact of construction and operation of the proposed facilities on the surrounding land and communities. But preemptive federal law places the responsibility to address those issues in the hands of federal authorities. The emissions question, however, is an important one that can be addressed locally, in the context of the requirements of the Global Warming Solutions Act. For example, the Analysis Group study included a forecast of the regional emissions impact of its identified solutions. According to the study, some proposed solutions that combined energy efficiency with other initiatives would reduce emissions if they could be implemented in New England. The data also showed that adding capacity alone, without including other initiatives, would cause a relatively small increase in regional emissions when compared to an assumed base case. All of these issues – relating to emissions, reliability, and cost risk – do need to be considered together, as the Analysis Group study endeavored to do last year.
One of the most important issues, of course, relates to the weight that should be given to the reliability risks. Many assume that ISO-New England, the operator of the regional power grid, will always find a way to assure that power outages are avoided through market responses. But the ISO has been publishing warnings about the impact of pipeline constraints for several years now. In any case, ISO-New England may be the entity responsible for maintaining reliable service in the region, but the ISO has no authority to address environmental objectives. And if emergency action is needed to avoid power outages, cost will be no obstacle.
The other prominent risk relates to winter electricity costs. This is a central issue in the pending DPU proceedings. But, unfortunately, nothing on this topic is simple. At the outset, Massachusetts needs other states picking up an equitable share of the costs of the capacity that produce a region-wide benefit. In addition, the municipal electric companies in Massachusetts (who serve 40 communities) and one investor-owned utility (Unitil) are not proposing to share in those costs at all. Only National Grid and Eversource have executed capacity contracts. As currently proposed in the regulatory proceedings, the costs would be borne only by the customers of those entities who sign contracts. There will be “free riders.” For that reason, if Massachusetts commits to a disproportionate share of the capacity costs needed to create the regional savings, its share of those regional savings may not be large enough, thereby rendering it uneconomic to Massachusetts. Another complication is that there are many who simply do not trust the utilities. National Grid and Eversource have contracted with Access Northeast, in which their corporate affiliates have substantial equity interests. As a result, a suspicion of self-interest casts an unfortunate shadow on the decision process employed by the utilities, even if the proposals have been made in good faith.
If the DPU navigates a path through these complexities and decides to approve the contracts, many stakeholders stand ready to litigate in the courts over the DPU’s authority to approve the contracts, among other issues that lawyering can muster. So we may be reading CommonWealth articles about this topic for years to come!
Importantly, we now know that some form of Omnibus Energy legislation is likely to be enacted in Massachusetts. Thus, there will be new combinations of options concretely before us that could be evaluated. For example, it could be instructive to evaluate a combination of firm large-scale hydro with different-sized pipeline capacity additions. Similarly, it could be helpful to evaluate solutions that include a less radical regional ramp-up of energy efficiency that has a good chance of being implemented among states with different political challenges. Finally, it might be important to understand whether the loss of half of the capacity that was intended for thermal needs from the Kinder Morgan project will have other impacts on winter gas capacity constraints, as gas distribution companies look elsewhere for capacity. But unfortunately, the posture in which we find ourselves in regulatory and litigated proceedings may not be conducive to performing this type of updated evaluation in a comprehensive and satisfactory way. Instead, a fight appears to be looming among some stakeholders who do not trust each other and hold strong opinions – an all-too common feature of energy policy deliberation these days.
At its core, the issue should be about comparing risks, prioritizing them, assessing probabilities, and determining our level of risk tolerance. There are several risks of different types in that equation. First, there are those that are assessed through energy forecasts and debatable assumptions that can have a pivotal effect on the conclusions drawn:
- The risk that power could be lost during stressed winter conditions, as the region grows more dependent upon base-load natural gas generation to integrate with intermittent renewable resources,
- The risk that we could have very high and sustained winter electricity costs that have a significant economic impact, caused by growing gas constraints after numerous large base-load plants retire, and
- The risk of uncertain long-term greenhouse gas emission effects.
Then there are those risks that relate less to forecasts and more to one’s perspective regarding regulatory, environmental, and market principles:
- The risk to electric ratepayers of making long-term financial commitments for infrastructure that could become stranded or uneconomic,
- The risk of uncertain market impacts when employing out-of-market initiatives that shift generation-related financial risks from the market to ratepayers, and
- The risk that more capacity might encourage longer-term reliance on natural gas.
Whether one concludes that capacity is “needed” is undoubtedly affected by how much weight is given to each of these, among others not listed. And one’s confidence level in the energy forecasts can shift the weighting considerably. That may explain, in part, why there have been numerous opinions offered by well-respected commentators reaching different conclusions. When any stakeholder declares that additional pipeline capacity is “needed” or “not needed,” there is an implicit acceptance of certain risks that apply to either point of view. But whatever one’s perspective, we should be highlighting the trade-off of risks.
Which risks should we be willing to accept and why? And while we’re at it – is there a less ambitious capacity addition that should be considered along with new carbon-reduction initiatives to hedge some of the risks? Unfortunately, the issues may be too polarizing and the sides too entrenched for compromise.
Ron Gerwatowski is a freelance energy advisor with 29 years of experience in the energy industry. He recently served as assistant secretary for energy during the first year of the Baker-Polito Administration. After completing a year of public service, he returned to the private sector as an energy and regulatory policy consultant. He was formerly senior vice president for regulation and pricing at National Grid before retiring from the company in early 2014.
CommonWealth Voices is sponsored by The Boston Foundation.
The Boston Foundation is deeply committed to civic leadership, and essential to our work is the exchange of informed opinions. We are proud to partner on a platform that engages such a broad range of demographic and ideological viewpoints.
All that needs to be read in the above to see where Mr Gerwatowski is coming from is the phrase “The risk of uncertain long-term greenhouse gas emission effects.” There is NOTHING uncertain about those long term effects. In fact, some of them may not be that long term. In fact, some of them are HAPPENING NOW. Witness the “nuisance flooding” on the wharf in Boston. Witness the meeting that will be held Tuesday morning, May 3rd, on Atlantic Wharf, addressing the interests of the Boston Harbor Association about what the City of Boston is going to do to anticipate and adapt to the serious probability that Atlantic Avenue will be awash at high tide by 2050.
No, what Mr Gerwatowski shows himself to be is a FUD-generator (“Fear, Uncertainty, and Doubt”), and an apologist for an industry, fossil fuels, that will see its assets go to zero in value because no one is going to want to burn them.
Nowhere does Mr Gerwatowski address the leakage of methane (“Natural gas is not granola”) and its carcinogenic impurities (e.g., Benzene) from the old Boston distribution system. (See http://graphics8.nytimes.com/images/2012/11/19/blogs/dotmethanebostonaerial/dotmethanebostonaerial-blog480.jpg and http://www.heetma.org/squeaky-leak/natural-gas-leaks-maps/) Notably, one of the reasons for the West Roxbuy Lateral, that highly inappropriate pipeline rammed through towns with federal authority, is to pressurize a leaky distribution pipeline system which currently has some delivery at 2 PSI which should be at 60 PSI. Guess what happens when such pressurization is done: It leaks faster and more.
The scientific facts are that fugitive methane from fracked gas wells, and the distribution network have recently been found to be many times greater than what the industry (and EPA, because all the EPA uses is industry numbers) reports. Effectively, without these leaks being stemmed, it’s BETTER to keep burning coal, because methane has a radiative forcing effect (strength of causing climate disruption) which is, over the short term (since it gets replenished constantly) of 100x that of mere carbon dioxide. (See http://www.nrel.gov/docs/fy16osti/62820.pdf and http://pubs.acs.org/doi/abs/10.1021/acs.est.5b05503 and others, including reports relying upon overflights funded by independent organizations and satellite data.)
The answer to the heating problem Mr Gerwatowski bases his concern upon is not throwing good money after bad, but LEAVING FOSSIL FUELS. If the Commonwealth seeks to address its self-perceived energy shortfall, EFFICIENCY ought to be paramount. This means efficiency in generation and delivery. Every time fossil fuels are converted to another form, there is a loss of energy, and there are emissions. If energy is generated as electricity in the first place, relatively little energy is lost. The most efficient form of residential heating (and cooling!) today are free air heat pumps, which are electric. The most efficient form of water heating is also a heat pump system. The Commonwealth could provide funds, more significant loan programs, and greater incentives for the installation of these units, and abandoning dirty methane and its intrusive pipelines, controlled not by Massachusetts representatives or town officials, but by obscure federal officials far away, out of touch with local needs and concerns.
And who, Mr Gerwatowski, is going to answer for the heartache of asthma and cancer from the leaks of these pipelines in towns like West Roxbury, Dedham, and the proposed pipelines and compressor stations on the South Shore?
Sorry for the confusion. I did not mean uncertainty about the effects on the environment of emissions generally. They are real and present. What I meant was the incremental emissions effects of adding pipeline capacity as compared to doing nothing, where dual-fuel generation units burning oil in the winter replace gas burning. Climate change is real! Renewable energy is needed! My point was only whether adding capacity would be worse than not adding capacity. You are absolutely right to point out other risks associated with the effects of methane and other fossil fuel burning emissions. That is exactly the dialogue that I intended to encourage. It is about measuring risks.
Fears like that of Atlantic Ave. will be underwater by 2050, are responsible for a policy of state mandates to abandon fossil fuel, and replace it with wind, solar, and hydro. So far, the policy is replacing coal and nuclear (no carbon avoidance there) with more dirty natural gas peaking power plants. After years of telling us that the dirty canal power plant in Sandwich will be forced to close, they just announced that it will double in size burning natural gas and diesel, This, while being surrounded with four giant wind turbines in Bourne, four more inside Otis Air Force base, and countless solar panels on roofs and clear-cut forested fields.
In the meantime, CO2 emissions have gone up. Clearly the policy isn’t working, rates are rising in the Winter, and if this keeps up, rates will skyrocket long before 2050.
The solution is simple. Reverse the bad policy. Cancel the mandates, and give incentives back to coal and nuclear to continue in service.
As for Atlantic Avenue, if it really does go underwater by 2050, the lower rates between now and then will help everyone move to higher ground!
This is the most well reasoned and best informed opinion piece on this topic that I have seen. I strongly urge my environmental activist friends to read and consider it.
What’s up with ending your commentary with “Unfortunately, the issues may be too polarizing and the sides too entrenched for compromise?” The state needs to start with aggressively pursuing energy efficiency and that includes fixing the leaks. The gas lost to leaks is still paid for by ratepayers even though there was no benefit to them. How fair is that? Recent findings by Boston University researchers using “precise measurements” of gas leaks in the metropolitan Boston area show almost one-sixth of leaks “qualified as potentially explosive” and “a handful of leaks emitted half of the total gas lost.” There are two bills in the state legislature going nowhere that should be prioritized and passed. H.2870 would prohibit utilities from charging gas and electricity customers for leaked and unaccounted for gas. Why should gas utilities be able to charge customers for gas lost to leaks? How did that become an accepted business practice? The second bill, H.2871, would require utilities to repair all gas leaks during significant road repairs or paving. Why aren’t gas utilities actively working with municipalities on road projects? “Doing nothing” shouldn’t even be considered an option. And I really wish you acknowledged the gas leak map Jan Galkowski included with her comment. But in general your commentary tackled a complex issue making it understandable to readers…not an easy task to do.
The proposal to fix leaks has been made and rejected. It’s the only reason the West Roxbury Lateral exists.
@NortheasternEE,
Electricity rates decreased in the winter of 2015-2016. Accordingly, it does not just depend upon explosive methane supply, it depends upon weather. And, in fact, it also depends, as ISO-NE has noted, upon the price of LNG overseas. Proposals to export explosive methane as LNG from the U.S. and Canada can only have the effect of firming prices here, meaning that prices for energy by these means will be higher than they otherwise would be.
Nuclear plants are a red herring because (a) the American nuclear industry has never figured out how to run them properly as a business (their unit costs and time-to-build go up with each additional unit produced) and (b) the carbon dioxide emissions from making the concrete and steel that goes into building these plants, according to the Bulletin of the Atomic Scientists, wipes out any benefits they offer in saving carbon dioxide emissions.
Now, just 3 flood events in the downtown Atlantic Avenue area are estimated to cost $7 billion in property damages in present day dollars. A recurring flood, such as repeated flooding at high tide, means a total loss of these properties which are estimated to be at least ten times that, or, say, $70 billion.
The total expenditure by residences on electricity in ALL OF MASSACHUSETTS in one year is about $4 billion. So, suppose through some as-yet-unspecified-means, pipelines or whatever save Massachusetts residents year after year 5% of that expenditure. That’s $185 million for all of Massachusetts. In order to compensate for $70 billion of losses would require about 380 years of having these savings. Sounds like a REAL BARGAIN to me.
After all, free markets and capitalism will solve all problems, no? Why not propose Spectra Energy and Eversource and National Grid build huge pumps powered by explosive methane in order to pump the Atlantic out and send it to the Pacific in order to combat this flooding. Think of how great THAT would be for the economy and the jobs it would create? Why not propose that? It’s just as sensible.
Electricity rates decreased in the winter of 2015-2016 after a huge increase of 37% in the winter of 2014-2015. ISO-NE has repeatedly warned that the mandates for renewable energy will increase the overall cost of electricity.
Your arguments on nuclear to not address the stupidity of forcing the early retirement of serviceable power plants like Pilgrim who have a license to continue operating for at least another 20 years.
Hi Mhmjjj2012 :
Thank you for recognizing the difficulty of trying to sort these issues out in an objective way. It was a challenge.
I agree that methane leaks are a big problem because of the severe effect they have, compared to carbon emissions alone. They exist all through the distribution system. But I need to take one issue at a time. How we might be more effective in fixing those leaks is a complex problem in itself that could use an article all by itself.
One of the things I was trying to do with my article was to try to make sure that we not mix issues up that appear to relate to each other, but are really separate and equally important problems needing separate resolution. Expanding interstate gas capacity for electric generators was the central issue.
The gas that is delivered to the large generators, however, stays on the high pressure system, going from the main pipelines, to high pressure laterals, and directly to the generating source. The large generators do not typically use the distribution system.
Having said this, I think the way the two issues could theoretically relate is framed by two questions: (1) If we fixed most of the leaks in the distribution system, would it be a solution that adequately addresses the gas capacity constraint issue in the winter? And (2) is it possible to fix all the leaks on a time schedule that addresses this issue in a timely way?
I have reviewed more than a dozen studies on the capacity question, and I have not seen any that have concluded that if we fixed all the leaks, the gas constraint issue would be solved. I also understand that fixing the leaks is a process that will take more than a decade to resolve, even with rapid ramp ups. My understanding is that the replacement program requires resources, both physical and financial that cannot turn this around in very quickly. But I am open-minded enough to hear if you think I am misunderstanding.
The bottom line is that if we have two distinct problems, it will be important to address them both distinctly. Otherwise, we may not solve either one very effectively.
As for the pending legislation, I don’t want to venture into that debate just yet as to whether financially penalizing the utilities will actually cause the leaks to be fixed faster. Perhaps that is an opinion piece for another day. But I will leave it here for now.
Aside from the substance of the issues, it is always easier to have face-to-face conversations about these issues, rather than using blogs. I find that it is too easy to increase misunderstanding trying to engage in this manner. If you would like to meet for coffee some time, let me know. I would be happy to listen and offer my own views to you and anyone else you may wish to bring along, as long as everyone promises to be genuine and civil in the discussion.
I’m a firm believer in getting the undisputed facts out in the open for an informed public debate on the issues… especially energy. You could be a serious contributor to the conversation with columns like this thanks to your background and writing ability. There’s so much going on and so many players that’s it’s difficult to follow. CommonWealth’s editor Bruce Mohl recently wrote an exceptional article on this region’s electricity generators that dropped a bombshell with a quote from Moody’s: “ISO-New England remains the most lucrative among US merchant markets.” That’s even after an ISO-NE auction with prices coming in at $1 billion or 25% less than the previous auction. We’ve got sky high electricity rates and Mohl’s piece was the only one I came across referencing the role power generators have in our electricity cost structure and their incredible profitability. We’ve accepted exceptionally high electricity rates only because no one has taken the time to explain how they come about. I know that will probably take 3-5 columns but would be worth the effort. Regarding the two House Bills addressing gas leaks, I don’t recall any financial penalties to utilities. H.2870 would simply prohibit utilities from charging gas and electricity consumers for leaked and unaccounted gas while H.2871 requires gas companies to survey for the presence of gas leaks when there is a major repair or paving of a public way. The second bill has potential cost savings for utilities in their pipe replacement efforts… they’d be able to piggyback on an already scheduled project. Rather than coffee, how about spending the time coming up with your next commentary for CommonWealth?
Mr Gerwatowski is right that we will be arguing about this issue for some time because are many of us reject the idea that we can embrace a future involving more fossil fuel consumption that we have today. He alluded to the Global Warming Solutions Act but failed to give it respect. Access Northeast would push us further away from our GWSA requirement than the baseline. Period. He also says that ramped up efficiency would be “radical” even though it is by far the cheapest resource available, is zero-emission, and is implemented on a year-by-year basis. What is really radical is the notion that we must meet our energy needs by sticking electricity ratepayers with a long-term tax in order to finance a fossil fuel delivery system. He also points to the self-interest of National Grid and Eversource in Access Northeast. He can call it good faith. I call it self-dealing by monopoly utilities who need to find a new business model. Finally, he’s right on one thing. If Governor Baker’s appointees allow Grid and Eversource to charge electricity consumers for Access Northeast, there will be litigation.