New England's electrical grid faces a series of challenges in coming years, including potential problems that could result from an increased reliance on natural gas, according to independent grid operator ISO New England (ISO-NE).

Over the past decade New England has added more than 13,000 MW of generation and 400 transmission projects, but "the region is facing a transition, and the energy landscape is poised for a transformation over the next few years," ISO-NE CEO Gordon van Welie said Thursday.

In the 1990s New England was largely dependent on oil and nuclear generation, but by 2010 natural gas had become the region's dominant fuel, producing 46% of New England's electricity, compared with 29% from nuclear, 11% from coal and just 0.5% from oil, according to ISO-NE COO Vamsi Chadalavada.

"Several factors have contributed to the shift to natural gas, including both environmental policy and global economics," Chadalavada said. "Over the years we've seen the price of natural gas increase and decrease, with its price tracking closely to the price of oil. This is no longer the case. With natural gas prices now much lower, there is a growing separation between the price of oil and natural gas, making generators that use oil less competitive. And when it comes to meeting New England states' environmental standards, natural gas, with its relatively low emissions, has become the fuel of choice for most new generation development."

And increased investment in transmission projects over the past decade has eased the flow of power across New England, reducing the region's need to run older, more expensive units, Chadalavada said.

But the growing dominance of natural gas brings its own set of challenges. Weather-related equipment issues at some gas-fired power plants -- like those that occurred during a bitter cold wave last January (see Daily GPI, Jan. 26) -- expose the vulnerability of a system so reliant on a single fuel source, according to Chadalavada. Between 10 a.m. EST Jan. 23 and 10 a.m. EST Jan. 24, National Grid delivered 4.55 Bcf of natural gas to its 3.4 million customers in New England and New York. The total fell just short of the record of 4.57 Bcf that the company delivered to customers on Jan. 15, 2004. But "nearly 2,000 MW of generation that was scheduled to run could not," Chadalavada said. "While some oil and coal power plants would have been the likely replacement, their long start-up times prevented them from providing power when it was needed."

New England's reliance on natural gas " means that the region is quickly affected when problems on the system arise. The risk becomes more pronounced in the winter, when a substantial amount of the fuel is needed simultaneously for home heating and electricity generation. In general, the home heating market takes priority for natural gas deliveries over power producers because power plants typically do not have firm fuel contracts for natural gas delivery. They instead rely on supplies delivered just-in-time or, in some cases, are purchased a day in advance." That system exposes ISO-NE to pipeline capacity issues, according to Chadalavada, who said the grid operator is able to manage through contingencies on the power system but does not incorporate potential pipeline contingencies into its long-term system planning.

And while the recent run of low prices for natural gas has been an obvious positive for ISO-NE and its customers, the flip side of that coin is that natural gas price increases would impact electricity prices across the region.

The "strong possibility" of the retirement of aging generation units, increased environmental regulations and more integration of wind generation -- which is variable and, therefore, must have reliable backup generation -- means New England will likely become even more reliant on natural gas in the future, Chadalavada said.

"Depending on the pace of retirements over the next decade, New England could be facing a large loss of capacity. Replacing that capacity would likely mean the construction and interconnection of more natural gas plants, which would further the region's dependence on natural gas as a source of electricity production."

Other challenges identified by ISO-NE were resource performance and flexibility, the integration of variable resources and the alignment of planning with markets.

ISO-NE oversees a six-state region interconnected by more than 350 generators and 8,000 miles of high-voltage transmission lines. New England has more than 32,000 MW of capacity and is tied to neighboring grids in New York and Canada through 13 different interconnections.

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