Why we’re still using gas, oil to produce electricity
New England grid relies on vulnerable energy supply
IN DECEMBER, ISO New England issued its annual winter outlook and warned of the precarious state the region’s power system would be in if a prolonged, severe cold snap developed and our energy supply chain was disrupted.
New England has well-documented natural gas pipeline constraints, while transported fuels used by generators, such as liquefied natural gas and oil, depend on a fragile supply chain vulnerable to weather and global price volatility. When New England is facing adverse weather, our neighbors in New York and Canada typically are as well, limiting our ability to count on electricity imports.
We announced our concerns not to cause undue alarm, but to inform the public of the risks the power system faces—and to let New Englanders know that, under extreme circumstances, emergency measures, including public conservation and controlled power outages, may be necessary to maintain system reliability.
Fortunately, so far this winter, the region has not needed to resort to emergency actions. During a two-week period in January, though, we managed through several contingencies we warned about, including the loss of a large nuclear unit, limited imports from New York and Canada, and an outage of a major transmission line.
Our job is to speak out when we see reliability concerns and it requires us to stay grounded in reality. From an energy perspective, there are two realities New England must grapple with: the societal impacts of climate change caused by fossil fuel use, and the need for a reliable power system throughout the clean energy transition.
Climate change poses an existential threat to our future, so the region must work together to limit the impact of emissions. The transition to clean and renewable power must happen as quickly as possible, but it must also be managed carefully, keeping both grid reliability and consumer costs in mind.
The good news is that almost all of the new energy resources currently proposed are renewable resources; however, the timelines for these projects are, at best, uncertain. Permitting delays and legal challenges have slowed the development for even those resources that secured financing through long-term, state-sponsored contracts. In the interim, we cannot escape the reality that until more clean energy resources are built, and until we have a robust, long duration source of clean balancing energy, the region will remain reliant on natural gas and, to a lesser extent, oil-fired generation to both produce the power it needs and to balance supply and demand during periods when renewables cannot produce electricity.
These resources rely on globally-traded fuels procured in real time. This increases both reliability risks and price volatility, and runs counter to the region’s long-term decarbonization goals.
In January, natural gas prices quadrupled over the year before, leading to higher market bids from natural gas-fired resources. Because oil was cheaper than natural gas, the region ran oil generators in greater quantities than usual. Oil generation accounted for more than 11 percent of the fuel mix, a 500-fold increase over the previous January when temperatures were milder and natural gas was less expensive. Grid-scale renewables also accounted for 11 percent of generation (4.4 percent from wind, 2.7 percent from refuse, 2.4 percent from wood, 1.5 percent from grid-connected solar, and 0.4 percent from landfill gas).
Aside from being contrary to the region’s emissions goals, the month showed the price volatility that exists under our current energy supply chain. Wholesale electricity prices averaged $148.66/megawatt-hour in January, the second-highest January price on record and a 240 percent increase over the previous year.
In the meantime, ISO New England must manage the regional system with a vulnerable energy supply—and that is the reason we are speaking out more publicly about the risks and costs of the regional situation.
Our concerns are not hypothetical. Four out of seven independent service operators and regional transmission organizations in the US have resorted to controlled outages in the past 18 months because extreme weather limited energy supplies. Therefore, it is incumbent upon all of us—ISO New England, state and federal officials, the utilities, and the energy industry—to analyze our regional vulnerabilities. We must work together to either mitigate the risks, or accept them and prepare the electric distribution utilities and their customers to operate through periods when demand has to be curtailed to match the available energy supply.The clean energy transition is a journey of many steps, and we cannot escape the fact that the region will rely on much of the existing fleet, and the fuels they utilize, for some years to come. Only by acknowledging the fragility of our existing energy supply chain can we have the honest conversations needed to fix it, so we can move the region to a clean, reliable future.
This is the third installment in a multi-part series from ISO New England CEO Gordon van Welie on the evolution of the region’s power system.