New England should have sufficient resources in place this winter to meet consumer demand for electricity, but “insufficient pipeline capacity to meet power generators’ demand for natural gas continues to be a particular concern during the winter months,” according to the region’s grid operator.
“New England’s dependence on natural gas puts the region in a vulnerable position, especially during cold weather, because the current pipeline infrastructure cannot deliver all the gas required to serve both heating customers and power generators,” the Independent System Operator of New England (ISO-NE) said in its 2014-2015 Winter Outlook. “Most gas-fired generators do not have firm contracts for natural gas delivery and instead rely on the release of spare pipeline capacity from gas utilities.
“With increased residential and business conversions to natural gas for heating, spare pipeline capacity is often not available for power plants.”
The call for more natural gas infrastructure has become a common plea from the region in recent years (see Daily GPI, Oct. 31; Sept. 30; Jan. 23). New England’s governors last year vowed cooperation to improve the region’s energy infrastructure (see Daily GPI, Dec. 6, 2013).
Last winter, demand for electricity in ISO-NE’s footprint peaked at 21,453 MW on Dec. 17, and “periods of sustained cold weather boosted demand for natural gas, causing severe pipeline constraints that led to record-high natural gas prices,” ISO-NE said. “As a result, for much of winter 2013/2014, natural gas was often more expensive than oil, which is relatively uncommon.”
Due to fuel price differences, the region’s oil-fired and coal-fired generators ran at higher-than-normal capacity much of the winter. “Most significantly, on certain cold days, the natural gas pipelines in New England were running at maximum capacity, but very few gas-fired generators were producing power, signaling the gas was being used for other purposes, most likely to heat homes and businesses.”
And with the retirement of coal, oil and nuclear power plants, New England’s reliance on natural gas for power generation is expected to increase, ISO-NE said.
In response to the filing of a 2014-2015 Winter Reliability Program by ISO-NE and the New England Power Pool [ER14-2407], FERC in September ordered the grid operator to “initiate a stakeholder process to develop a proposal to address reliability concerns for the 2015-2016 winter and future winters” (see Daily GPI,Sept. 11). That plan creates incentives for dual-fuel resource capability and participation, offsets carrying costs of unused firm fuel purchased by generators and provides compensation for demand response services, effective Sept. 9. Associated tariff revisions regarding market monitoring are scheduled to take effect Dec. 3.
ISO-NE’s recent draft Regional System Plan (RSP) concluded that while plenty of pipelines are being built to carry natural gas away from the Marcellus and Utica shale producing areas, not enough of them are designed to serve New England (see Daily GPI, Sept. 9).
In January, ISO-NE submitted a proposal to implement a “pay for performance” (PFP) system to the Federal Energy Regulatory Commission (see Daily GPI, Feb. 14). PFP would compensate the region’s generators when they exceed their obligations during periods of system stress. FERC subsequently approved the proposal, which takes effect in 2018.
The electric power system is the largest consumer of natural gas in New England, and “this dependence on the natural gas fuel-delivery system that has limited local storage, combined with the economic pressures experienced by gas- and oil-fired generating facilities to participate in the wholesale electricity markets while attempting to minimize operating costs, are causing persistent reliability concerns. These concerns, while possible year-round, are most acute during extended cold-weather periods when natural gas demand by LDCs [local distribution companies] is high,” according to the RSP.
New England turned to natural gas to fuel 42.8% of its capacity and 45.1% of its electric energy production in 2013.
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