New Englanders would have paid about $3.7 billion less for wholesale electricity during the 2013-2014 "polar vortex" winter if the proposed Northeast Energy Direct (NED) project of Tennessee Gas Pipeline Co. LLC (TGP) had been in service, an analysis by ICF International and commissioned by TGP found.
ICF looked at the potential impact of the NED project on New England's gas and power markets. It also assessed the cost savings from the increased natural gas capacity NED would make available to the region, which pays some of the highest electricity costs in the United States, in part due to inadequate gas supplies and infrastructure, TGP, a Kinder Morgan Inc. (KMI) pipeline, said.
The study also found that the additional gas capacity NED would provide could generate $2.1 billion to $2.8 billion in future annual savings for New England electric consumers under normal weather conditions.
KMI said estimated energy cost savings for 2013-2014 would equate to $578 if spread across each of New England's 6.4 million households, and average $437 per household over the next 10 years, assuming normal weather conditions.
"The ICF study supports NED's potential contribution to reducing and stabilizing prices, and improving reliability through increased gas availability," said Kimberly S. Watson, president of KMI's east region gas pipelines. "New England needs more natural gas capacity, and NED would provide the region with direct access to abundant, reasonably priced supplies of gas."
As coal and nuclear capacity are retired and replaced by natural gas-fired power generation, New England power sector gas demand will grow, according to the study. Local distribution companies in New England project that residential and commercial gas demand will also grow, increasing by 8% over the next three years, and continue rising at a steady rate thereafter, it said. The growing natural gas consumption for heating and electric generation are expected to contribute to increases in the frequency and magnitude of daily natural gas pipeline capacity deficits over the course of a winter season.
ICF projects that the deficit between supply and demand in both New England's gas-fired electric generation and residential/commercial heating loads during normal winter weather conditions on a peak day in 2020 could approach 1.5 Bcf/d and be as high as 1.7 Bcf/d on a "design day," even with the several gas pipeline expansion projects expected to be in-service by the end of 2017. ICF estimates that the duration of such deficits for electric generation during the winter could extend to 63 days, which is more than 41% of winter days.
During 2012-2014, TGP transported 52% of the gas consumed by New England's natural gas-fired power generators. With the addition of NED's capacity, TGP would be able to transport gas supplies for the vast majority of New England’s gas-fired generators, the pipeline said.
NED would include 412 miles of new natural gas transmission pipeline and associated facilities in Pennsylvania, New York, Massachusetts, New Hampshire and Connecticut and be capable of moving 2.2 Bcf/d. The project has attracted scores of negative comments to the Federal Energy Regulatory Commission from New England landowners (see Daily GPI, Sept. 3; Aug. 27; July 21). In July, KMI gave the go-ahead for the pipeline's market path segment, which was downsized from previous plans (see Daily GPI, July 16; June 4).
The ICF study on behalf of TGP's NED is not the first recent examination of New England natural gas and power markets; nor is it likely to be the last. NED and competitor Access Northeast [backed by Spectra Energy, Eversource Energy and National Grid (see Daily GPI, Sept. 16, 2014)] are battling for the right to serve New England with abundant Appalachian gas.
ICF was also hired by Access Northeast backers to examine the impact their project would have on New England markets. That study was released in February (see Daily GPI, Feb. 19).
Meanwhile, liquefied natural gas provider Distrigas of Massachusetts LLC and affiliate GDF SUEZ Gas NA LLC have been pushing LNG as the solution to New England's gas supply woes (see Daily GPI, May 11). A GDF-funded study released last month said LNG is the way to go and that a pipeline is unnecessary (see Daily GPI, Aug. 18).
Whether it's a pipeline or more LNG, something must be done, otherwise New Englanders will be on the hook for billions of dollars of economic consequences, according to another study funded by energy trade associations and released last month (see Daily GPI, Aug. 31).