LAST WINTER’S NATURAL gas price spikes, and resultant electric rate hikes, continue to be used to justify the push for massive expansion of gas infrastructure. Yet a successful program to incentivize New England’s power generators to contract for back-up fuel for this winter undermines the argument for more pipelines. This winter’s lower wholesale gas and electric prices indicate that the rate hikes themselves could have been avoided had such measures been more fully implemented for the 2013-2014 winter.
Last winter, many gas-fired plants sat idle at peak demand times because the generators simply didn’t buy gas when wholesale natural gas prices spiked. Instead, oil and coal plants were brought online to meet demand. Electric generators don’t normally contract for gas in advance; price spikes occur when generators are backed against the wall at times of peak demand and re-sellers can charge outrageous prices.
This winter, our region’s grid operator, ISO New England, is helping to deal with the price spike problem. The ISO-NE Winter Reliability Program (WRP) now includes incentives for gas-fired generators to contract for liquefied natural gas (LNG) so that there are reserves available to run their plants. Last year, incentives were only offered for stockpiling oil.
In fact, ISO-NE intentionally excluded LNG storage incentives from last winter’s winter reliability program, telling the Federal Energy Regulatory Commission that gas-market-related solutions “would lower gas prices and send the wrong signal about the relative scarcity of natural gas. These lower prices would also be reflected in the electricity market.” In other words, allowing prices to rise would help convince the public that we need more natural gas pipelines.
The winter reliability program is currently scheduled to sunset in January 2018, the winter before two enormous gas pipeline projects are proposed to be completed – Kinder Morgan’s Northeast Energy Direct and Spectra Energy’s Access Northeast, both of which would allow shale gas to be exported to Canada and shipped overseas. The consensus among energy economists, recently affirmed by the U.S. Energy Information Agency, is that domestic natural gas prices will rise, not fall, as exports increase.
Extension and expansion of the winter reliability program are among the many ways that demand for gas infrastructure could be reduced, eliminating the pipeline companies’ justification for eminent domain takings across the Commonwealth for projects that are in large part motivated by the access to foreign markets they would provide.
As the winter reliability program demonstrates, strategic use of existing fossil fuel infrastructure can keep electricity costs down as we continue to transition to cleaner energy solutions, while avoiding further investments in fossil fuel infrastructure that will soon become obsolete. In contrast, expanding the natural gas pipeline system would encourage expanded use of natural gas for heating and electricity, ultimately perpetuating the cycle of price spikes for gas-powered generators on days of winter peak demand. Furthermore, buying shale gas sends our energy dollars out of state, while investing in energy efficiency, renewables, and storage technologies strengthens our local economy.
Today, Massachusetts is already preventing annual demand for electricity from increasing by investing in energy efficiency. New England winter demand for electricity, even at its highest level last year, was still lower than the record high set 10 years ago. Many cost-effective solutions remain unimplemented, such as time-varying rates to encourage consumers to shift energy use away from peak demand times.
As things stand, consumers are facing electric bills with exorbitant rates that utilities have established based on last year’s realities – even though this winter has not been projected to be as cold, and even though the winter reliability program now better shields us from the vagaries of the commodities market.
Perhaps the Baker administration will take a more forward-thinking approach in its energy policy decisions than its predecessor, recognizing that increasing our dependence on natural gas is not sustainable from a climate perspective or an economic perspective.
Kathryn R. Eiseman is the director of the Massachusetts PipeLine Awareness Network, a statewide coalition of groups and organizations opposed to Kinder Morgan’s Northeast Energy Direct pipeline proposal.
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Thank you for this clear and concise summary of the current situation, and for pointing out the market manipulations that have contributed to the false belief that we need more gas pipeline infrastructure in Massachusetts. We don’t!
In the last 10 years policymakers have incentivized wind and solar in the false belief that it can replace fossil fuel. Variable energy resources (VERs), like wind and solar, need the firming of energy storage before they can be an effective replacement for any conventional power resource. In the absence of grid scale energy storage, only natural gas can be combined with VERs to provide firm power on which the grid depends. As a result, the policy is forcing coal and nuclear off the grid and is replacing it with natural gas. Forcing the premature closure of coal and nuclear will leave the state and the region overly dependent on natural gas.
To avoid skyrocketing rates, policymakers need to wait for the development of grid scale energy storage which, combined with VERs, can outcompete coal and nuclear in the wholesale market for electricity.
We need to recognize that the effort to diversify the fuel supply with wind and solar is, in reality, achieving just the opposite.
Undoubtedly, another lobbyist