Frigid spell diverts natural gas from New England’s power grid

For the second time since Friday, frigid temperatures in New England are forcing a realignment of how natural gas is used to power the region -– a renewed reminder that increasing reliance on natural gas, coupled with limited pipeline capacity to deliver it, has ramifications for the reliability of the electric grid and, potentially, the cost to consumers.

This morning, as last week, that has meant the Independent System Operator that runs the New England power grid, ISO New England, has had to buy a lot more expensive and dirtier coal- and even oil-fired power and a lot less cleaner and normally cheaper power from natural gas.

At 7:30 this morning, that sent the price ISO was paying for power to over $400 a megawatt hour for a short time, 10 times its usual price. By mid-morning, it had settled back down, but was still extremely high -– at times more than $260 a megawatt hour, which is roughly where it hovered during last Friday and Saturday’s cold snap.

This is the New England winter energy dance. It happened last winter, and it’s pretty much guaranteed to happen until something is done about the natural gas pipeline problem.

When natural gas prices began plummeting several years ago because of the sharp increase in domestic shale gas being recovered (through fracking), a lot of power plants that could burn more than one fuel, especially in New England, switched to natural gas.

Down went the cost of electricity.

In the summer on hot days, New England’s peak electricity season, the need for additional power is largely a matter of getting more generation. Natural gas can usually handle that.

But in the winter, some of that natural gas goes to heat homes. Homes get first dibs on the gas. What’s left can go to run power plants. But when it’s really cold, like now, there’s less gas left.

You can’t just pump more gas through the pipelines because the pipelines are as full as they can get. Today an alert from the Energy Information Administration arm of the U.S Department of Energy warned of just such congestion.

And while new pipelines have been built from the noted Marcellus shale gas supply in Pennsylvania, those pipelines are only going to New York and New Jersey — not New England. Another report from EIA said it doesn’t expect those pipelines to reach here until 2016.

So that means we are stuck with the law of supply and demand, said Tyson Brown, a statistician with the EIA. “The reason why the price is going up is because we can’t get any more gas into the market.”

Today and last week the price of gas got so high that oil and coal were actually cheaper. And when ISO buys its power, it goes for what costs the least, even if it pollutes more.

It’s not unusual for this time of year,” said Ellen Foley, a spokeswoman for ISO New England. “It’s a combination of time of year, the weather and the price of the different fuels.”

Brown said the tipping point is about $186 or $187 a megawatt hour.

ISO is well past that point today, as it was Friday and Saturday. Following the lowest cost fuels, ISO this morning is buying power that is about 25 percent natural gas with around 15 percent each oil and coal. The data is updated continuously and is available here.

Averaged over the year, ISO’s fuel mix in 2012 (2013 data is not available yet) was 52 percent natural gas, 3 percent coal, less than 1 percent oil. Nuclear is always about 30 percent and hydro and renewables tend to be around 15 percent.

“Unless they can build out more natural gas infrastructure to bring more gas into the region, it’s very difficult to see something that doesn’t involve natural gas prices going up,” Brown said also predicting that a general natural gas price increase tat has been going on for the last year or so would continue. “But it’s important not to lose track of most of the year natural gas is much cheaper, not like during winter when the pipes get full.”

Capacity an issue

ISO has been very vocal about its concern over the pipeline capacity issue. In announcing a Winter Reliability Program Dec. 4, 2013, it noted last winter’s lack of gas availability that resulted in a prolonged price spike and a situation that it said “threatened the reliability of the regional power system. In some instances, natural-gas-fired generators were not able to run because they could not get the fuel they needed; in addition, many oil-fired units had limited oil inventories and, in some instances, ran out of fuel.”

For this winter, ISO said it has put systems in place to make sure it can get power from other sources as well as ask customers to conserve power. It called the reliability program an “interim solution.”

This afternoon, ISO posted the same alert it posted last week to make sure all power plants would be available as gas supplies shifted to heating tasks. Routine maintenance, construction and testing are called off.

The region did not hit any records over last week’s cold days. The hourly average peak power demand across New England came on Friday at 21,093 megawatts. Today’s peak demand is predicted to be 20,860 megawatts. This morning demand ran slightly higher than what ISO was predicting.

The wintertime record was set on Jan. 15, 2004, when a cold snap caused demand to reach 22,818 megawatts. The all time highest demand in New England was 28,130 megawatts Aug. 2, 2006.

As for the direct impact on consumers of the cold-induced price spikes -– there is none. Based on the ongoing generation cost increases from rising natural gas prices overall, Connecticut standard offer electric rates increased  Jan. 1. CL&P estimates it as $15 a month.