It doesn’t take a polar vortex to drive throughput on Spectra Energy’s Northeast/New England pipelines to peak levels. Comparatively modest weather combined with power generation demand is enough to do the trick, said a pipeline executive with the company, which now is engaged in a demand-pull system expansion targeting the region.
“Of course, we hit peak throughput last winter with the polar vortex and all, but interestingly, we’ve continued to hit peak throughput levels this year,” Spectra’s Bill Yardley, president of U.S. transmission and storage, said during an analysts meeting Thursday. “On our Algonquin system serving New England, we’ve seen nine out of the top-10 delivery days in history this January. On Texas Eastern [Transmission], the market area serving the Northeast, we’ve hit all 10 of our top-10 peak days in history. And East Tennessee, serving the Southeast, has seen peaks throughout the month of January.”
Record throughputs on Algonquin during each of the last three winters is the backdrop to a multi-billion-dollar buildout of the system that includes three major expansions taking place over the next three years, Yardley told analysts during a meeting called to lay out Spectra’s plans for the coming years. “We’re full out of the Marcellus and Utica, so we’re going to build a new pipeline to Michigan and on to Ontario markets. And we’ll keep marrying pockets of capacity with newbuilds to help producers access liquid points,” he said.
But in the “congested Northeast,” laying new pipeline is easier said than done, thanks to a regional history of environmental sensitivity and political opposition to such infrastructure projects (see Daily GPI, Jan. 23a). “It’s not capacity constrained by accident here,” Yardley said. “The Northeast is a challenging environment to build in from the environmental, political, power market structure and stakeholder perspective. Still, over the past several years we’ve successfully completed many projects here.”
Spectra’s success at laying pipe in New England has come because the company has striven to use as much existing right-of-way as possible, Yardley said. “That’s how we’re solving the current lack of gas infrastructure in New England.” But projects can’t follow existing right-of-way for their entirety. The most challenging portion of the company’s Algonquin Incremental Market (AIM) Expansion (see Daily GPI, Jan. 23b) is the approximately five miles of greenfield build, he said.
The Atlantic Bridge project is slated to enter service a year after AIM in 2017 (see Daily GPI, Feb. 5, 2014). It will optimize Algonquin with increased pipe diameter and compression. These projects, however, don’t address what has been the most nettlesome challenge facing New England energy markets: power generators and their relationship with pipeline capacity (see Daily GPI, Jan. 12). For that, Spectra is proposing a third project: Access Northeast (see Daily GPI, Sept. 16, 2014).
Environmental pressures to use cleaner fuels, along with coal and nuclear power plant retirements and increased reliance on intermittent power sources all have built a case for comparatively inexpensive and clean gas-fueled power generation. New England is leaning on gas-fueled plants year-round for much of its energy.
“When coupled with the mechanics of the deregulated electric generation market and no incentive for these generators to contract for pipeline capacity, a very bad outcome for electric consumers has resulted,” Yardley said. “Scarcity of pipeline capacity on peak days has lead to inelastic regional pricing and an increasing number of days each year when New England daily gas prices skyrocket.”
Power consumers end up picking up the tab for that high-priced gas. Last year alone, New England utilities passed through to consumers about $2.8 billion of excess power costs, according to Yardley. AIM and Atlantic Bridge are essentially local distribution company-driven, he said, but Access Northeast is for the power generators.
“The generators simply use gas differently than our other customers,” he said. “They need quick-start services, an hourly service, peaking service. Generators and gas utilities will have coincident peaks during many days of the winter. We have to solve for that. But the summer’s fine. In fact, all summer long, generators in New England were buying gas below Henry Hub pricing, 50 cents below on average, all summer long.
“Through a combination of incremental pipeline and storage facilities, our solution cost-effectively offers supply when generators need it, with new tariff services to handle the peak hours, the quick start and those seasonal needs. Access Northeast will deliver from the least expensive Northeast supply areas with multiple supply options, directly to the majority of power plants in new England.”
During the presentation to analysts, Yardley and other Spectra executives took pains to emphasize that they believe Spectra is insulated from the low oil and natural gas price environment through fee-based contracts. While the earlier days of the Marcellus/Utica pipeline buildout fell on the wallets of producers, projects Spectra and others are touting in the region today increasingly are demand-pull enterprises.
“…[W]e’re seeing that through additional requests for new pipeline capacity from distributors, power developers and industrial markets,” Yardley said. “These customers are far less hampered by the current commodity markets as the need for new natural gas infrastructure continues to exist. Confidence in price stability will only serve to encourage these demand-based customers…
“Beyond our projects in execution, we have additional market-pull opportunities to serve power plants, industrials and local gas distribution companies, including Philadelphia, which is a market that we currently serve with a lateral that is consistently constrained.” Yardley said to expect “more news on that as the year progresses.”
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 1532-1266 |