Energy strategy focus on gas still needs a way to get it here
Less than five months after it was unveiled in draft form, Connecticut’s first Comprehensive Energy Strategy is final. An ambitious and broad-ranging blueprint of 500 pages including hundreds of public comments, it covers natural gas, energy efficiency, electricity supply and renewable energy, industrial needs and transportation — establishing goals for all far into the future.
While efficiency is emphasized to reduce demand for energy resources, a cornerstone remains the conversion of more than 300,000 homes and businesses to gas heat from oil and other fuels. And that provision stokes concern, if not controversy.
“We’re very, very concerned about the governor and the commissioner (of Energy and Environmental Protection) not picking winners and losers by promoting the hell out of natural gas,” said Martin Mador, legislative and political chairman for the Connecticut chapter of the Sierra Club. “It keeps us on fossil fuel for decades.
“How willing are we to endure natural gas as an interim fuel? And how long does interim last?”
But perhaps the most gnarly concern surrounding the greater use of natural gas is something the document itself revealed: Right now, the region lacks the gas pipeline capacity to do that.
“The interstate pipeline system that supplies Connecticut’s natural gas is already constrained, and there is limited liquified natural gas (LNG) capacity in Connecticut. At current use rates, there will not be enough interstate pipeline, storage, or peaking capacity to serve a large-scale addition of new customers,” the document states.
It continues: “Underestimating and purchasing too little capacity could lead to reliability issues (i.e., a shortfall in supply during peak winter season), or might require the gas companies to turn away customers who want to convert to natural gas.”
Effects from these pipeline problems have been felt recently. As first reported by the New York Times, cold weather since Thanksgiving coupled with the recent blizzard has stressed the regional gas supply, which goes to both heating customers and the area’s natural gas-fueled power plants.
In such a situation, residential and commercial gas customers would not see service interrupted, but it has forced the Independent System Operator that runs the New England electricity grid to buy more expensive power when there was not enough gas to run the gas power plants. That could mean higher electricity prices down the road as well as higher gas prices for all users.
“More or less New England is at the end of the majority of pipelines that serve it,” said Christopher McGill, vice president for policy analysis at the American Gas Association, which represents local natural gas companies.
“It’s hard to build stuff,” he said. “It’s difficult to get [a liquified natural gas] tank located. It’s difficult to get pipeline extensions. It’s difficult to get new pipelines,” he said. “And there’s no way of knowing who comes out of the woodwork either supporting or opposing a project.”
Both the gas association and the Interstate Natural Gas Association of America, a trade association for pipeline companies, pointed out that neither new pipelines nor extensions to old ones would be built without a guarantee they would be used.
“This is not a field of dreams, build it and they will come, for the industry,” said Don Santa, president of the interstate natural gas group, whose grandfather founded Connecticut-based Santa Energy. “We need somebody to sign a long-term contract to effectively underwrite the development of pipeline capacity.”
Santa also said, and others agreed, that the pipeline industry has a good track record for getting projects done quickly. Of the 16,000 miles of new pipeline approved by the Federal Energy Regulatory Commission between 2000 and 2010, 15,000 miles has been built.
Santa and McGill said the four-year estimate in the Connecticut strategy for getting new pipelines is a reasonable one. DEEP Commissioner Dan Esty said he expected that time frame could be even shorter, with local gas companies and pipeline owners already looking at the potential.
“I am absolutely confident that we will see announcements within the next few months of expanded pipeline capacity,” he said.
One reason for that confidence is the way the incentive for the gas conversion strategy is designed. It offers a $500 one-time tax credit for those making the conversion, but it will only be available during the second half of 2013.
“So it sharply focuses both business and residential on the gas choice,” Esty said. “With those signups in hand, we will be able to ramp up a cost-effective, consistent construction program for new gas lines.”
The credit will require legislative approval. Another provision — to allow a longer payback on gas conversion loans from 15 or 20 years to 25 years — requires approval from the Public Utilities Regulatory Authority.
Environmental advocates’ reactions
While many environmental organizations are pleased with the overall energy strategy, they point out that its many moving parts need to be synchronized, especially as they relate to gas conversion. Energy efficiency, all say, needs to be the first consideration because it can reduce the need for gas, making the pipeline capacity concern less critical.
“There’s a ripple effect from energy efficiency, said ENE (formerly Environment Northeast) Connecticut director Bill Dornbos, who pointed out that even ISO New England’s forecast shows electricity demand flat as a result of energy efficiency.
Janet Gail Besser, of the New England Clean Energy Council, said renewable energy also needs to be part of that synchronization, especially on the electricity-generation side.
“Use gas for its best use: home heating, commercial, industrial, combined heat and power, gas-fueled fuel cells,” she said.
But some, including Michael Jacobs, senior energy analyst with the Union of Concerned Scientists, saw a bigger concern in relying too much on a single fuel. “We go into boom-and-bust cycles when we pick a new fuel to jump on,” he said. “That’s happening now with natural gas.”
He and others worried about whether the availability of shale gas, especially from the Marcellus shale in New York and Pennsylvania, will be reliable enough to keep natural gas prices steady.
“I share concerns about the uncertainties of the Marcellus shale and other shale gases being as plentiful and as long-term as people would like,” he said.
Esty, DEEP commissioner, said the gas plan was predicated on far more than just availability of Marcellus gas, and he said it assumes a natural gas price increase from $3 to $4 per million BTU range to about $4 to $6.
“It still makes sense for a large number of people to take advantage of the option,” he said. “It is a choice.”
And for state Rep. Lonnie Reed, D-Branford, and Sen. Bob Duff, D-Norwalk, choice is important. As heads of the Energy Committee, it will be their job to shepherd the legislative components of the energy strategy through the General Assembly.
“Energy is never easy,” Reed said. “Today’s discovery is tomorrow’s headache.
“These are very complicated issues involving big investments and when you have big investments, you have big investors who like to make money.”
But both she and Duff think the natural gas strategy is warranted — both said they constantly get calls from constituents asking when and how they can switch — and well-planned.
“I think we have our challenges for sure,” Duff said. “But you can’t have a comprehensive energy strategy without putting natural gas on table.
“It’s a resource to tap into if done correctly. To do nothing would be a huge mistake. We’re not picking winners or losers, we’re just saying people should have a choice.”
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