NEW ENGLAND’S GOVERNORS, who for years called for increasing the delivery capacity of natural gas into the region, have largely gone silent. Today, the region is seeing the consequences with Bloomberg reporting December 27 that “spot prices more than tripled … and turned the region into the world’s priciest market.”
Natural gas prices last week reached $50 per million BTU, a level unseen since the “polar vortex” of 2013-2014, and electricity prices spiked to $200 per megawatt-hour. Cold temperatures and inadequate pipeline capacity were culprits, just as they were several years ago that led to more than $7 billion in higher energy costs. No other region of the country is paying such penalties.
After encouraging natural gas pipeline development – and even proposing possible funding mechanisms involving utilities – the region’s governors, for the most part, have turned their attention to renewable energy.
Expanding renewable energy resources is a good thing. But wind and solar are intermittent resources that require natural gas generation to fill the gap. To ignore the severe consequences of inadequate gas supplies impacting the economic health of the region is simply shortsighted.
Someday, the electric grid may be cost-effectively powered by renewable energy backed up by battery storage. For now, the needs of consumers expecting electricity around the clock, including major employers, must still be met by natural gas-fired power plants working in concert with intermittent power from wind and solar.
While energy prices have risen dramatically, there are other consequences. On January 2, oil, used primarily as a back-up fuel, generated one-third of the region’s electricity while cleaner-burning natural gas, normally accounting for about half the region’s generation, was cut in half because of inadequate fuel supply. Solar and wind were providing just two percent.
Also on Tuesday, electric grid operator ISO New England, citing gas pipeline constraints, reported that oil-fired plants already face operating limits because of air emission restrictions. For perspective, during the polar vortex of 2013-14, greenhouse gas emissions increased nearly 3 million tons as oil and coal plants were called upon to meet electric needs.
When prices spike as they have recently – and did a few winters ago as a polar vortex swept through the region – utilities become easy targets for critics. Recently, two major New England utilities, Eversource and Avangrid, were accused of contributing to constraints by withholding gas pipeline capacity, which they procured to meet customer needs, from the wholesale market. The accusations demonstrated a gross misunderstanding of the role of utilities in today’s electricity and gas markets.
Today’s utilities bear little resemblance to the utilities of 30 years ago. Electric utilities, for the most part, no longer generate electricity but are still responsible for its reliable delivery. In addition, the range of services and programs they provide are extensive and responsive to public policy and environmental concerns.
New England utilities are among the nation’s leaders in promoting energy efficiency, adopting renewable resources, including solar and wind generation, and implementing customer service programs. Eversource, for example, is the top-rated utility in the nation for energy efficiency by the sustainability investor group Ceres.
Eversource promotes renewable energy on a large scale as it builds large-scale solar installations and invests in a major wind development with a goal of producing 2,000 megawatts of offshore wind energy in the next decade. It also deploys the infrastructure to enable electric vehicle charging stations to make EV adoption easier and is developing electric transmission projects to deliver hydroelectric and wind generated power from Canada and northern New England. Not to ignore basic reliability, it invests some $1 billion annually to improve and maintain infrastructure.
Unfortunately, during high winter energy demand periods, New England utilities have no control over the price of electricity or natural gas but often get the blame.
When New England’s governors made natural gas pipeline expansion a priority in 2013, natural gas companies and utilities responded with investment proposals. Those proposals were blocked or stalled by conflicting public policies and aggressive litigation.
It is time to adopt policies and a regulatory framework that recognize the need for both intermittent renewables and natural gas generation – and that define a workable role for utilities – if the region is to avoid future headlines labeling New England the “world’s priciest market” for natural gas.
Carl Gustin is a senior advisor with SalientPoint LLC and former utility executive, co-founder of an energy efficiency company and founder of a regional energy association.
The reason that the fossil fuel industry wants state and regional subsidies to increase pipeline capacity from Pennsylvania is because business economics make it a loser. According to this article the extra gas is only needed on rare occasions, and only until renewables backed up with batteries can take over, at which point it turns into a white elephant.
It’s a sucker’s bet!
So, how come “Today’s utilities bear little resemblance to the utilities of 30 years ago?” Back in 1997, Massachusetts passed an “emergency law” restructuring the electric utility industry that needs to be revisited. The most recent well publicized “emergency law” enacted in this state was the big pay raise heist by the state legislature. Looks like “emergency” laws don’t work out for the public.
Of course “little resemblance” depends upon how semblance is measured. Technologically and in terms of business models, utilities are identical to the 20th century models. Why? They have not embraced how the fundamentals of their business models have changed, from they-distribute-all to a prosumer model, where the relationship between utility and consumer is now bidirectional, and the utility needs to be just like a retail business, an Amazon, or a Walmart, and actively seek out the needs of prosumers and compete for their dollars.
Mr Gustin misrepresents, as it seems all the apologists for utilities do, the study which he claims “…demonstrated a gross misunderstanding of the role of utilities in today’s electricity and gas markets” and containing that accusation that “two major New England utilities, Eversource and Avangrid, were accused of contributing to constraints by withholding gas pipeline capacity, which they procured to meet customer needs, from the wholesale market.” Each of these apologists either have not read the study or themselves are defensively parrying it. For the study itself demonstrated how the cited behavior was highly implausible and inconsistent as a means of meeting “customer needs”, because of the limited extent of the pipeline reservations, the existence of these despite having “no notice” contracts for capacity, and how atypical these are for natural gas providers. If these actions are proper, why were Avangrid and Eversource unlike everyone else? And while the study could not address motives, speculating on it, it also made clear the simple things Eversource and Avangrid could do to dispel doubt, by revealing publicly the time-stamped train of communications and orders between themselves and their pipeline suppliers.
Mr Gustin continues relating the PR tale of how “Someday, the electric grid may be cost-effectively powered by renewable energy backed up by battery storage. For now, the needs of consumers expecting electricity around the clock, including major employers, must still be met by natural gas-fired power plants working in concert with intermittent power from wind and solar”, arguing that renewables are fundamentally incompatible with electricity needs. Belgium does not need battery storage. Denmark does not need battery storage. Texas does not need battery storage. They have smart, agile grid management, including day-ahead forecasts of renewable generation and consumption, and much smarter grids, including self-diagnosing and self-healing electrical grids. New England electrical grids are inefficient and fragile. This is why the cost per kWh of electricity is so high here despite monthly charges per home and business for electricity being so low compared to other states. And Eversource/NSTAR having the highest dividend (almost by a factor of two) of any investor-owned utility in the United States doesn’t help.