Region told pipeline squeeze may push up power prices

BOSTON — The New England region needs more natural gas pipelines and power transmission lines, speakers at a conference on regional energy policies said last week.

The region has grown increasingly reliant upon natural gas for electricity generation, but pipeline development hasn’t kept pace, some said.

High-tension power lines in New England. File photo by John Herrick/VTDigger
Unavailability of sufficient natural gas could lead to high power prices as producers are forced to fire up outmoded or backup plants when gas demand exceeds pipeline capacity.

Others at the Boston conference, however, said better use of currently available technology could meet much of the demand with existing infrastructure.

Meanwhile, the use of renewable energy could increase if the New England states enable the building of large-capacity transmission lines to carry electricity from Canada, according to executives with Quebec companies.

As things stand, New England’s reliance on coal or oil for power generation when natural gas isn’t available could mean high prices both financially and environmentally, executives said.

“In the winter days it’s tough — there’s just simply not enough gas,” said Marcy Reed, president of National Grid in Massachusetts, a gas and electricity company. The slated retirements of generators such as the Pilgrim Nuclear Power Station in Plymouth, Massachusetts, will only exacerbate the problem, she said.

“Meanwhile renewables … large and small are starting to fill that gap, but not at any kind of a rate that we currently need to be, and of course intermittency remains an issue for us as we try to keep the reliability of the grid stable,” Reed said. “So, without new gas supply to gas generation, we’ll have to, unfortunately, I’m guessing, do what we’ve done in some of the last few winters, which is switch to some of the dual-fuel plants, with oil or coal as the backup.”

“And the result, for our winter constraints, as long as they remain, our electric prices will remain high,” she said.

Shortages, or constraints, could arise as a result of several contributing factors, speakers said.

For a variety of reasons — including cost and the growing reluctance Americans feel toward power sources they consider environmentally harmful — current power plants are being mothballed across the Northeast.

Politicians have promised they’ll be replaced with renewable energy. But in the meantime, natural gas is cheap, and the fuel source is in some circles considered cleaner than other fossil fuels, so natural gas power plants have become a common source of electricity throughout the Northeast.

This means that while Northeast states are attempting to ramp up the ratio of renewable sources in their power mix, natural gas isn’t going away anytime soon, speakers said.

Non-gas generators around the Northeast are disappearing, said several speakers, including James Daly, vice president of energy supply at Eversource Energy. As many as 3,000 megawatts’ worth of non-gas generators in the Northeast have recently been taken offline or are slated to be in the near future, Daly said.

As a result, what’s coming for the foreseeable future, Daly said, “is increased reliance on natural gas.”

His fellows agreed.

“We need enhanced natural gas infrastructure,” said Richard Paglia, president of Maritimes & Northeast Pipeline.

“I’m not suggesting gas is the only source” of energy needed in the Northeast, “but it will remain vital … for decades to come,” Paglia said.

Natural gas as a percentage of the Northeast’s power mix grew from 21 percent in the year 2000 to 43.8 percent in 2014 and is expected to grow to 49 percent by 2020, said Christopher Huskilson, president and CEO of Emera, a Canadian energy company. Renewables are expected to have expanded from 15.5 percent in 2000 to 26 percent by 2020, he said.

That’s a problem because the Northeast has far too many regulations hampering fossil fuel pipeline development, said Alex Pourbaix, chief operating officer of TransCanada Corp., the company behind the controversial Keystone XL oil pipeline.

Because of this aversion to fossil fuel pipelines, Pourbaix said, Northeasterners experienced 90 natural gas shortages last year alone. These shortages leave Northeastern markets on some winter days with the most costly natural gas in the country, he said.

Eric Martel
Eric Martel is president and CEO of Hydro-Quebec. Courtesy photo
But alternatives exist already, some speakers said. One of those is hydropower, said Éric Martel, president and CEO of Hydro-Québec.

Martel’s company has massive amounts of power from dams on the St. Lawrence River, and the company is eager to send it into Northeast states, he said.

All that’s required is a regulatory framework that will ease installation of new power lines, he said. Massachusetts appears willing to adopt such a framework, and other states should follow suit, Martel said. The states will need to act as leaders on this issue, however, since the federal government appears unlikely to pursue expansion of renewable energy imports in the next several years, he said.

“We are really willing and able to support your state in achieving its vision” for renewable energy use, Martel told a crowd of more than 100 energy executives. “We have the supplies right now … but we need the proper framework.”

He said new energy storage technologies are also crucial to meeting state energy targets. Hydro-Québec is working with Sony to develop batteries that use new chemical formulas to greatly increase the number of charges they can take, Martel said — from around 3,000 cycles to as many as 20,000. Testing begins next year, he said.

Gaz Métro, the parent company of Vermont Gas Systems and Green Mountain Power, is hoping to export renewable energy from Canada as well, said the company’s vice president of development and renewable energy, Martin Imbleau.

A map on the wall in Green Mountain Power's control room can spot power outages at intersections in their service territory. Photo by John Herrick/VTDigger
A map on the wall in Green Mountain Power’s control room in 2014. GMP is owned by Gaz Metro. File photo by John Herrick/VTDigger
The company has underway a 650-square-kilometer wind farm in Quebec, Imbleau said, and that power will be available for export.

But beyond additional power — from either wind turbines or natural gas produced by fracking — still further options are available, Imbleau said.

Power companies are increasingly trying to use existing infrastructure more efficiently, he said, and sufficiently developed information technology can create a “virtual pipeline” with what’s currently on the ground, by better coordinating supply with demand.

The situation’s comparable to that seen with auto infrastructure, said Sayun Sukduang, president and CEO of electricity provider ENGIE Resources.

Governments have long sought to fix excessive traffic with additional roads or added lanes, Sukduang said, but that approach eventually runs up against physical, environmental, regulatory or aesthetic constraints — for instance, nobody wants 20-lane highways, he said.

The same applies to energy, Sukduang said. America has already built an exceptional network of energy transmission infrastructure, he said, and there’s no good reason to keep expanding it when modern technology allows it to be used far more efficiently.

Americans have built a vast transportation network at great cost but wouldn’t tolerate these kinds of projects if they left enormous highways deserted most hours of the day, Sukduang said.

“I think that was the right thing to do for the economy,” Sukduang said, “but now we’re at a point in time where distributed energy is available to us, digitization of information, and a spirit of de-carbonization, and when you take those elements and combine them into the grid, I think our responsibility is: How do we coordinate our supply and demand better, unlocking the value of the system we’ve already invested in?”

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  • Matt Davis

    “How do we coordinate our supply and demand better, unlocking the value of the system we’ve already invested in?” By becoming more efficient and by building more generation capacity close to where the power is needed. Which in Vermont’s case, given we import more that 50% of our own power, means we need to get to work building more generation capacity. Biomass, wind, solar.

    • “Which in Vermont’s case, given we import more that 50% of our own power, means we need to get to work building more generation capacity. Biomass, wind, solar.”

      Re: Biofuel,

      Why would we go the burning Biofuel route? Doesn’t that method generate CO2 emissions and a lot of it? One of the last things we should be considering is building numerous wood burning electricity generating plants.

      Re: Wind, Solar,

      It has been shown numerous times by following the ISO-NE fuel mix, during periods of high electricity demand, it has been noted the combo of wind and solar actually produces less power than desired, and certainly doesn’t come close to producing rated power….. thus the need to fire up back-up coal and oil electricity generating plants to meet demand. There have been times, that % of the fuel mix can increase to 30-35% of total power produced.

      The answer is more power from Quebec and Nuclear power. There are no other short range solutions.

      • No matter what power alternative is considered……we’re looking a huge costs for fuel, infrastructure and regulatory obstacles.

        All of this points to the folly of allowing Vermont Yankee to go dark. Back around 2012, VY initially asked for about 5 cents per kWH for its power. This was rejected because of uncertainty related to relicensing and cost. Ultimately, Entergy threw in the towel, saying the plant could not operate in current market conditions.

        Now hypothetically, if Vermont agreed doubled the initial proposed price from 5 to 10 cents per kWh would VY have been able to continue operating? Did anyone even consider examining this option? If such an option was analyzed, nothing that I know of has been said about such a course.

        Instead VY closed and Vermont has gone on to buy industrial wind and solar a prices as high as 30 cents per kWH.

        A chance to provide a 20 years of transition power from VY was lost because of anti-nuclear pressures. The people now pay the price.

        • Randy Jorgensen

          Down in the land of abundant hydro and nuclear power I pay 4.7c/kwh for off peak which is 21 hours of the day.

        • John Greenberg

          Peter Yankowski:

          “Back around 2012, VY initially asked for about 5 cents per kWH for its power.” Actually, the time was 2009 and Entergy was asking 6.3 cents for large blocks of power. Instead, VT utilities negotiated long-term power contracts with HQ and Seabrook for far lower prices. As a consequence, GMP actually lowered its rates.

          For 2 years, VY sold power into the New England markets, but there too it was uncompetitive. Pilgrim can’t compete either. Entergy has decided to close both plants.

          Yankowski writes: “Vermont has gone on to buy industrial wind and solar a[t] prices as high as 30 cents per kWH.” Tiny amounts of power were purchased at high prices under early SPEED contracts. Recently, the Deerfield wind project agreed to sell power to GMP for 4-5 cents (after the sale of RECs).

          It’s hard to fathom why Mr. Yankowski would want Vermonters to see substantial rate increases merely in order to keep VY open.

      • Matt Davis

        There is opportunity with anaerobic digesters, especially given legislation requiring food waste be removed from the waste stream, and there is a plentiful wood supply here in VT. Wood biomass plants produce less CO2 emissions than fossil fuel and wood is renewable but CHP is key. Biomass has potential to produce baseload here in VT and coupled with continuing HQ contracts at existing levels, wind and solar can be balanced. Burlington Electric provides a model to be replicated here in VT at different scales. As it says in the article building more transmission lines are an option, but is it cost effective? Every kw we buy from out of state is a lost economic development opportunity here. Wind and solar produce power and your suggestion otherwise, or that more coal and oil are needed is false. Please support that suggestion… I do agree that a modern nuke plant could be a good option but where to build it and who is going to invest in it?

  • Andrew Simon

    It should not be a surprise that fracked gas suppliers think we need to ease regulations on gas pipelines. “Natural” gas is not less polluting, does not contribute less to global warming. It is also no surprise that people still believe in gas a “bridge fuel”, given the level of analysis in this article. An article on energy that does not contain the word “conservation” is not worth its salt.

    • Moshe Braner

      Right. To avoid firing up those expensive and polluting generation sources at peak demand times, they need to discourage the demand. The obvious way to do that is to do what they promised to do when they spent our money to purchase and install the “smart meters”: variable rate billing. At peak demand times the retail prices SHOULD be much higher, because the wholesale prices are much higher, and the existing infrastructure is insufficient. With the current flat rates, the frugal are subsidizing the profligate.

  • R.J. Adler

    You can protect yourself from rising prices by harvesting power on your own- Go solar!

  • Suzanne Fay

    I would love to get Annette Smith’s take on this. Annette, we need your intelligent, fair, fact-based commentary. Please re-join the conversation!

  • Jane Palmer

    Ah. The push has started again. How well timed it is! Wait for the first real cold snap, or snowfall, and then start the fear mongering about higher energy prices in order to get compliance from the public. There is really something wrong when our government is listening to all these gas and oil execs when they say they need more expensive pipelines and the public will have to pay for it. They indicate gas is cheaper but it isn’t when you figure in the externalized costs that aren’t included in the price the gas holes quote. Pipelines aren’t cheap and the continued practice of environmentally unsound extraction practices are running up a bill none of us will ever be able to pay.

    • Melanie Peyser

      Thank you, Ms. Palmer! VT’s electricity prices are not at all dependent on natural gas pipelines in Southern New England (and would not be affected by new pipelines in VT either. This article shows how much Gaz Metro and Vermont Gas are grasping at straws to find a public benefit for their obsolete, unnecessary, and costly infrastructure expansion. VT Gas customers should call on Phil Scott now to make sure he doesn’t follow in Gov. Shumlin’s footsteps and try to stick them with even more rate hikes to build out pipeline infrastructure that won’t bring them any benefit and will only be a new source of easy dividends to Canadian shareholders at ratepayers’ expense.

      Consumers have an easy way to get off the fossil fuel-driven energy price roller coaster! As storage improves, distributed energy will allow us to produce, store, and use your own energy without depending on corporate captured DPS and PSB to (not) protect you. Use your savings from low oil to invest in home renewables.

      • John Greenberg

        Melanie Peyser:

        “VT’s electricity prices are not at all dependent on natural gas pipelines in Southern New England (and would not be affected by new pipelines in VT either.”

        I agree with you that new pipelines in VT would have no impact on electricity prices, since the gas would be used for heating rather than power production.

        But what is the basis for the first part of your statement? The folks at this conference are pointing out that there is currently not enough gas during the winter months to supply both heating needs and power production needs during the coldest times in New England. Demand rises, supply is constrained by lack of pipelines (and/or storage), so prices go up (at times precipitously) during cold spells. This jibes well with everything I think I know about New England electric markets from other sources.

        If you think that is false, please provide an explanation and some documentation.

    • Moshe Braner

      Yeah, “in the meantime, natural gas is cheap”, but it won’t stay that way. Fracking costs a lot more than the price they currently sell the gas at. That’s why they pretty much stopped drilling a couple of years ago, and dozens of companies have gone bankrupt. This is a financial bubble, and after it finishes popping, natural gas price will double, at least.

  • Steven Farnham

    Attention Thumbs-downers! Here’s another one you can trash!

    1) Gas can’t compete with sustainables, if it isn’t built.

    2) Gotta hurry up and build gas infrastructure before the sustainables make it unnecessary.

    3) Also gotta hurry and get it done while Coal, Oil, and Gas are in power in Washington, because a progressive administration would not support this.

    4) Step number one is to terrify people into believing that we’re about to bust, and Gas is the only option.

    The usual B.S. from the petroleum industry.

  • Melanie Peyser

    Why doesn’t this article the name or sponsor of this conference. Is it the Energy Trade & Technology Conference, sponsored by the New England Canada Business Council

    This article ought to objectively describe how Vermont fits into the picture described. While part of the larger New England regional energy picture, Vermont doesn’t need more gas pipelines to keep electricity costs down and would only be a conduit for piped gas to get from Canada to other New England states. Also, Vermont is not currently dependent on the U.S. pipeline system for its natural gas or NG-fired electricity – to fuel power plants or otherwise. the TDI project, already approved to transmit electricity from Canada South under Lake Champlain (no comment) would carry energy that far exceeds Vermont’s needs, and their bid was not selected to deliver energy to Southern NE.

    Somehow, it feels like this feels like a classic fluff piece to grease the wheels for Gaz Metro.

  • rosemarie jackowski

    The greatest threat to the environment is the US Military and the Pentagon.
    Changing all the light bulbs in Vermont won’t help as much as NOT building one F-35.

    We need to focus on conservation. Discourage building homes larger than 1000 sq ft.

    • Randy Jorgensen

      My 1200 Sq/ft home in VT cost me over $5,000/year in property taxes. Thats $4.17/ sqft in property taxes. Now my 2200 sqft home costs me $1200 yearly in property taxes for better schools (which include school choice) So now I pay $0.55/sqft in yearly property taxes.

  • jim mccarthy