New Hampshire, the Granite State, has been impenetrable to Algonquin Gas Transmission LLC’s Access Northeast Project, and the rest of New England hasn’t been too hospitable to new pipe in the ground either. Liquefied natural gas (LNG) storage might not be the answer to Maine’s energy woes, according to a recent Navigant Consulting Inc. report. But more natural gas would serve the Northeast well, wrote analysts at S&P Global Ratings.
Access Northeast is sponsored, along with Spectra Energy, by New England’s two largest utilities: Eversource Energy and National Grid USA. The project right now needs offtaker commitments from electric distribution companies, but regulators in New Hampshire and Massachusetts have so far balked. State lawmakers might need to step in to change that, wrote analysts at S&P in a note last week.
“Furthermore, New England states seem to be increasingly interested in filling the energy shortfall with renewable projects,” S&P said. “While we believe these challenges could be overcome and the Access Northeast Pipeline will ultimately be completed, the project will face serious delays.”
Rhode Island and Connecticut are sitting it out until regulatory issues are resolved in neighboring states, S&P noted. For now, Eversource is appealing to the State Supreme Court in New Hampshire a New Hampshire Public Utility Commission (PUC) denial of its contract with Access Northeast. For its part, Spectra has talked of seeking a legislative fix in Massachusetts on the contract issue while it works to line up natural gas local distribution companies as customers to bolster Access Northeast.
S&P said there are opportunities for natural gas and its infrastructure in the Northeast, but they will be hard fought. “We view natural gas as the likely fuel to meet growing energy demand in the Northeast,” S&P said, “leading to continued opportunities for new natural gas pipelines. Intervenors and regulatory obstacles have caused a recent wave of setbacks, suggesting that the midstream sector is evolving and pipeline developers will be forced to adapt.”
Natural gas storage is part of the midstream sector, too. Regulators in Maine solicited proposals for LNG storage projects that could alleviate natural gas constraints.* They also hired Navigant to analyze the potential benefits of projects proposed.
In its final report, Navigant found little economic benefit from the proposals it examined. The consultant looked at 11 projects and considered them within scenarios with and without the Access Northeast pipeline project.
Under the Access Northeast scenario, only one proposal provided a positive net present value (NPV), and it was only 3.2%. “Thus, Navigant’s findings in this instance are that if the PUC decides to go forward with any one of the PESCs [physical energy storage contracts] as proposed, it would be for objectives other than pure economic return,” Navigant said.
Under the scenario in which Access Northeast is not constructed, the storage proposals fared better, with seven of the 11 having a positive NPV. That doesn’t mean that storage could shut out Access Northeast or a similar pipeline project, Navigant said in its report.
“While Access Northeast has experienced some delays, there is no specific indication that the project is not intended to be pursued,” Navigant said. “Further, the continued need for pipeline capacity to meet existing and growing New England demand, as well as the new political environment in Washington and announced appointments in the new administration, tend to support the ‘with Access Northeast’ scenario.
“In addition, even if Access Northeast is not built, the market will likely respond accordingly with some other pipeline project being built, as has historically been the case when the need for additional capacity is indicated by the market.”
In a Friday letter to the PUC, one storage project sponsor, ENGIE Gas & LNG LLC, wrote that it expects the regulators to consider qualitative issues related to the storage proposals as well as the economic analysis provided by Navigant. An all-day technical conference on the Navigant study and non-bidder testimony/comments has been scheduled for Jan. 17 at the PUC.
And for the time being, Algonquin told FERC last month that it “expects limited activity” in the Access Northeast docket at the Commission while it evaluates the “commercial foundation” of the project.
*Correction: The original version of this story said New Hampshire is reviewing LNG storage options when in fact it is Maine where a regulatory proceeding on LNG storage is ongoing. NGI, regrets the error.
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