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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Summer officially begins June 21, which means a guessing game has begun: If temperatures soar, will the lights stay on in New England? The Power Industry has been closing generating plants in the six-state region, mainly for environmental reasons, but new generation (mainly gas-fired) has been slow to come online.
And some of the proposed gas pipelines that are scheduled to service those planned generators are running into local resistance, potentially pushing back the in-service dates. Electric transmission projects remain especially difficult to site in areas like New England, which has a high population density and a low amount of available real estate. Electricity prices, already high in New England, seem poised to move upward, perhaps in a volatile fashion if there's a summer heat wave.
"The integration of gas and electric markets is particularly acute in New England, which sits at the end of a lot of pipelines," Greg Hopper, a vice president at ICF International Incorporated (NASDAQ:ICFI) (Fairfax, Virginia), said in a recent webcast. "Demand for electricity and natural gas is growing in New England, but that region also has seen the retirement of coal, oil and nuclear generation. Gas pipeline development in that region has lagged other regions. Recent price behaviors suggest new (electric and gas) infrastructure is sorely needed." He added regulatory issues needed to be addressed "if gas is to play its planned role in a lower-carbon future."
One of the major challenges to keeping the lights on in New England is the way those states restructured their electric markets, Hopper said on a webcast May 26. The rules of those markets don't allow generators to receive payments for power plant capacity.
The companies that now own electric generation facilities in the region only get paid for the electricity they generate, as is the case in Texas and other restructured markets. Pipeline developers can't move forward with projects unless they have binding financial commitments from companies to take the gas. But companies that own the region's generators don't want to make the large financial commitments needed for pipeline developers to build new projects, Hopper said.
In the New England region, Industrial Info is tracking 86 capital construction projects for the Power Industry valued at $18.31 billion. The biggest project is the 1,000-megawatt (MW), $4.2 billion Deepwater Offshore Wind Energy Center, which is scheduled to be built off the Rhode Island coast. The project is scheduled to kick off during the summer of 2016, and to be operating by June 2018.
ICF's Hopper pointed to a recent decision by the Massachusetts Department of Public Utilities (MDPU) (Boston, Massachusetts) as a possible step forward in resolving the chicken-and-egg electricity problem bedeviling New Englanders. The ICF consultant said Bay State regulators posed 25 questions to market participants in an effort to break the decision logjam and "socialize the cost of new (gas) pipeline construction." According to Order 15-37, Massachusetts regulators are looking for ways, under existing law, to allow the state's electric distribution companies to charge customers for capacity on gas pipelines.
"Innovative means are needed to reduce these (gas-delivery capacity constraints) and make sufficient natural gas delivery capacity available," Massachusetts regulators stated in Order 15-37, released April 27.
Something needs to change, because New England's electric options are dwindling. Earlier this year, Entergy Corporation (NYSE:ETR) (New Orleans, Louisiana) closed its Vermont Yankee nuclear plant, which removed 640 megawatts of carbon-free, base load electric generation from the New England market. For more on that plant's closure, see January 8, 2015, article - Entergy Permanently Shutters Yankee Nuclear Station in Vermont.
Another source of planned electricity in the region--the Cape Wind offshore windfarm--appears to be dead in the water after utilities that had signed power purchase agreements with that project backed away from it earlier this year when the developer failed to meet some project milestones. For more on that issue, see January 15, 2015, article - Cape Wind Project's Future in Doubt after Utilities Cancel PPAs.
In a move that also took place in early 2015, a planned $800 million facility to import liquefied natural gas (LNG) was cancelled after being on hold for more than four years. The Pleasant Point LNG terminal was scheduled to be built in Maine. The loss of that project also will take some electric generation options off the table.
Importing more electricity via transmission lines is one part of the solution, observers agree. One major proposed electric transmission project, Northern Pass, wants to bring low-cost hydropower from Canada to New England, but that project is years away from operating. The 1,200-MW project is being developed by Hydro-Quebec TransEnergie, a subsidiary of provincial utility Hydro-Quebec (Montreal, Quebec), and Eversource Energy (NYSE:ES) (Hartford, Connecticut). The state of New Hampshire is expected to begin its environmental impact statement this summer. The proposed route for the transmission line would go through a national forest, which could complicate permitting, and New Hampshire's legislature has asked the developers for additional time to gather public comment.
Because it crosses national borders, the Northern Pass project also is required a presidential import permit. The Federal Energy Regulatory Commission (FERC) (Washington, D.C.) has approved the contract between Eversource and Hydro-Quebec, but New Hampshire's governor opposes the project as it currently stands. If all goes well, the $2.5 billion, 399-mile project is scheduled to be operating in 2019.
Several large gas pipeline projects to and in the region also are under development. One project is Northeast Energy Direct, being developed by Tennessee Gas Pipeline Company (Houston, Texas), a subsidiary of Kinder Morgan Incorporated (NYSE:KMI) (Houston). It is scheduled to run between Wright, New York, and Dracut, Massachusetts. According to a recent Associated Press report, the route proposed for the Massachusetts portion of this project so angered local residents that Kinder Morgan then proposed routing that portion through New Hampshire, which irritated residents of the Granite State. People living in the nine towns in New Hampshire that would be affected by the revised pipeline route voted to oppose it. That proposed pipeline has an in-service date of early 2017.
Another proposed project that is some time away from operating is the Access Northeast gas pipeline, which is being developed by units of Spectra Energy (NYSE:SE) (Houston, Texas), Eversource Energy and National Grid (NYSE:NGG) (Waltham, Massachusetts). Earlier this year, developers held an open season for a proposed interstate gas pipeline that would transport fuel to generators throughout New England.
Access Northeast's open season ended May 1, and its developers expect to have legally binding agreements in place by the end of this month. If there is sufficient demand, the developers estimate the pipeline could be in place by late 2018.
While the regulatory and market gears turn on proposed pipeline and transmission projects, the region's governors held an energy summit in late April to begin crafting a regional energy policy. The event was attended by the governors of Connecticut, Maine, Massachusetts, Rhode Island and Vermont. The governor of New Hampshire was unable to attend, and sent two high-level representatives in her place.
"The cost of energy in our region is a major issue that our states need to address in a collaborative way," said Connecticut Governor Dannel Malloy in calling the summit. "At this meeting, the governors will renew and strengthen our commitment to working together to put solutions to this challenge in place."
New England relies heavily on natural gas for its electricity, and at those meetings the governors reportedly sought ways to diversify their states' electricity mix with more renewables, imports and energy-efficiency programs. Greater cross-state collaboration was endorsed. More than a little anxiety was expressed about the perennially high electricity prices across the region.
But environmentalists claims the fears of a regional energy crisis are overblown. The New Hampshire Union Leader quoted Chris Courchesne, senior attorney for the Conservation Law Foundation in New Hampshire, as saying: "Despite dire predictions and some of the worst winter weather on record, there wasn't a crisis (during the winter of 2014-15). Modest market shifts made a huge difference, driving down prices, assuring the lights stayed on, and calling into question the wisdom of the region making big new bets on gas pipelines and transmission infrastructure. This winter's most important lesson was that we can significantly reduce winter volatility and prices by more wisely using and upgrading the existing infrastructure.
"Gas pipeline bottlenecks are an important factor in keeping New England's electric prices high," said Brock Ramey, Industrial Info's North American power specialist. "If that region experiences a particularly hot summer, generating capacity could be stretched beyond the breaking point. Electricity emergencies such as we saw in California a few years back are not out of the questions for New Englanders. If you hitch your wagon to one fuel, in this case natural gas, and then make it virtually impossible for pipeline developers to bring projects online, you're going to have a problem. The retirement of Vermont Yankee, and coal- and oil-fired generation in the region, makes a bad situation worse."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
And some of the proposed gas pipelines that are scheduled to service those planned generators are running into local resistance, potentially pushing back the in-service dates. Electric transmission projects remain especially difficult to site in areas like New England, which has a high population density and a low amount of available real estate. Electricity prices, already high in New England, seem poised to move upward, perhaps in a volatile fashion if there's a summer heat wave.
"The integration of gas and electric markets is particularly acute in New England, which sits at the end of a lot of pipelines," Greg Hopper, a vice president at ICF International Incorporated (NASDAQ:ICFI) (Fairfax, Virginia), said in a recent webcast. "Demand for electricity and natural gas is growing in New England, but that region also has seen the retirement of coal, oil and nuclear generation. Gas pipeline development in that region has lagged other regions. Recent price behaviors suggest new (electric and gas) infrastructure is sorely needed." He added regulatory issues needed to be addressed "if gas is to play its planned role in a lower-carbon future."
One of the major challenges to keeping the lights on in New England is the way those states restructured their electric markets, Hopper said on a webcast May 26. The rules of those markets don't allow generators to receive payments for power plant capacity.
The companies that now own electric generation facilities in the region only get paid for the electricity they generate, as is the case in Texas and other restructured markets. Pipeline developers can't move forward with projects unless they have binding financial commitments from companies to take the gas. But companies that own the region's generators don't want to make the large financial commitments needed for pipeline developers to build new projects, Hopper said.
In the New England region, Industrial Info is tracking 86 capital construction projects for the Power Industry valued at $18.31 billion. The biggest project is the 1,000-megawatt (MW), $4.2 billion Deepwater Offshore Wind Energy Center, which is scheduled to be built off the Rhode Island coast. The project is scheduled to kick off during the summer of 2016, and to be operating by June 2018.
ICF's Hopper pointed to a recent decision by the Massachusetts Department of Public Utilities (MDPU) (Boston, Massachusetts) as a possible step forward in resolving the chicken-and-egg electricity problem bedeviling New Englanders. The ICF consultant said Bay State regulators posed 25 questions to market participants in an effort to break the decision logjam and "socialize the cost of new (gas) pipeline construction." According to Order 15-37, Massachusetts regulators are looking for ways, under existing law, to allow the state's electric distribution companies to charge customers for capacity on gas pipelines.
"Innovative means are needed to reduce these (gas-delivery capacity constraints) and make sufficient natural gas delivery capacity available," Massachusetts regulators stated in Order 15-37, released April 27.
Something needs to change, because New England's electric options are dwindling. Earlier this year, Entergy Corporation (NYSE:ETR) (New Orleans, Louisiana) closed its Vermont Yankee nuclear plant, which removed 640 megawatts of carbon-free, base load electric generation from the New England market. For more on that plant's closure, see January 8, 2015, article - Entergy Permanently Shutters Yankee Nuclear Station in Vermont.
Another source of planned electricity in the region--the Cape Wind offshore windfarm--appears to be dead in the water after utilities that had signed power purchase agreements with that project backed away from it earlier this year when the developer failed to meet some project milestones. For more on that issue, see January 15, 2015, article - Cape Wind Project's Future in Doubt after Utilities Cancel PPAs.
In a move that also took place in early 2015, a planned $800 million facility to import liquefied natural gas (LNG) was cancelled after being on hold for more than four years. The Pleasant Point LNG terminal was scheduled to be built in Maine. The loss of that project also will take some electric generation options off the table.
Importing more electricity via transmission lines is one part of the solution, observers agree. One major proposed electric transmission project, Northern Pass, wants to bring low-cost hydropower from Canada to New England, but that project is years away from operating. The 1,200-MW project is being developed by Hydro-Quebec TransEnergie, a subsidiary of provincial utility Hydro-Quebec (Montreal, Quebec), and Eversource Energy (NYSE:ES) (Hartford, Connecticut). The state of New Hampshire is expected to begin its environmental impact statement this summer. The proposed route for the transmission line would go through a national forest, which could complicate permitting, and New Hampshire's legislature has asked the developers for additional time to gather public comment.
Because it crosses national borders, the Northern Pass project also is required a presidential import permit. The Federal Energy Regulatory Commission (FERC) (Washington, D.C.) has approved the contract between Eversource and Hydro-Quebec, but New Hampshire's governor opposes the project as it currently stands. If all goes well, the $2.5 billion, 399-mile project is scheduled to be operating in 2019.
Several large gas pipeline projects to and in the region also are under development. One project is Northeast Energy Direct, being developed by Tennessee Gas Pipeline Company (Houston, Texas), a subsidiary of Kinder Morgan Incorporated (NYSE:KMI) (Houston). It is scheduled to run between Wright, New York, and Dracut, Massachusetts. According to a recent Associated Press report, the route proposed for the Massachusetts portion of this project so angered local residents that Kinder Morgan then proposed routing that portion through New Hampshire, which irritated residents of the Granite State. People living in the nine towns in New Hampshire that would be affected by the revised pipeline route voted to oppose it. That proposed pipeline has an in-service date of early 2017.
Another proposed project that is some time away from operating is the Access Northeast gas pipeline, which is being developed by units of Spectra Energy (NYSE:SE) (Houston, Texas), Eversource Energy and National Grid (NYSE:NGG) (Waltham, Massachusetts). Earlier this year, developers held an open season for a proposed interstate gas pipeline that would transport fuel to generators throughout New England.
Access Northeast's open season ended May 1, and its developers expect to have legally binding agreements in place by the end of this month. If there is sufficient demand, the developers estimate the pipeline could be in place by late 2018.
While the regulatory and market gears turn on proposed pipeline and transmission projects, the region's governors held an energy summit in late April to begin crafting a regional energy policy. The event was attended by the governors of Connecticut, Maine, Massachusetts, Rhode Island and Vermont. The governor of New Hampshire was unable to attend, and sent two high-level representatives in her place.
"The cost of energy in our region is a major issue that our states need to address in a collaborative way," said Connecticut Governor Dannel Malloy in calling the summit. "At this meeting, the governors will renew and strengthen our commitment to working together to put solutions to this challenge in place."
New England relies heavily on natural gas for its electricity, and at those meetings the governors reportedly sought ways to diversify their states' electricity mix with more renewables, imports and energy-efficiency programs. Greater cross-state collaboration was endorsed. More than a little anxiety was expressed about the perennially high electricity prices across the region.
But environmentalists claims the fears of a regional energy crisis are overblown. The New Hampshire Union Leader quoted Chris Courchesne, senior attorney for the Conservation Law Foundation in New Hampshire, as saying: "Despite dire predictions and some of the worst winter weather on record, there wasn't a crisis (during the winter of 2014-15). Modest market shifts made a huge difference, driving down prices, assuring the lights stayed on, and calling into question the wisdom of the region making big new bets on gas pipelines and transmission infrastructure. This winter's most important lesson was that we can significantly reduce winter volatility and prices by more wisely using and upgrading the existing infrastructure.
"Gas pipeline bottlenecks are an important factor in keeping New England's electric prices high," said Brock Ramey, Industrial Info's North American power specialist. "If that region experiences a particularly hot summer, generating capacity could be stretched beyond the breaking point. Electricity emergencies such as we saw in California a few years back are not out of the questions for New Englanders. If you hitch your wagon to one fuel, in this case natural gas, and then make it virtually impossible for pipeline developers to bring projects online, you're going to have a problem. The retirement of Vermont Yankee, and coal- and oil-fired generation in the region, makes a bad situation worse."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
