MANCHESTER – One week ago, circuits tripped in Quebec, plunging 188,000 Canadians into darkness for hours and cutting off thousands of kilowatts of electricity imported by New England, putting the region’s power grid on alert during the first real cold snap of the season.
At about the same time, a series of complex pricing rules went into effect, designed to prod New England power generators into better dealing with the region’s soaring electricity prices caused by a bottleneck in natural gas supplies.
Although unrelated, the two events reflect the reality that the business of providing electricity in New England is facing more concerns than just a spike in the cost of electricity that’s likely to cost us several billion dollars extra this winter: They also reflect the reality that whatever solutions are found will be messy, controversial and take years to arrive.
“I don’t have a rosy picture to give you, moving forward,” Bob Scott, a member of the Public Utilities Commission, told a packed house of industry and utility executives at the New England Energy Seminar, hosted Wednesday by the state Business and Industry Association.
Natural gas demand
New England’s delicate electricity situation has been created by what seems to be good news: the huge and relatively inexpensive supplies of natural gas that can be tapped nearby, from the Marcellus shale beds underneath New York, Pennsylvania and many mid-Atlantic states.
This has dropped the price of natural gas to near-record lows, which in turn has led power companies to abandon more expensive fuels like coal, oil and nuclear power. In New England, three very large coal-fired plants and the Vermont Yankee nuclear plant are shutting down because they lose money.
Instead, firms want to generate electricity more profitably via gas turbines, which can be built fairly quickly. Slightly over half of New England’s electricity is now generated by gas-fired plants, compared to 6 percent a decade ago, and that won’t change. More than half of proposed new-generation energy in the region (about 5 gigawatts’ worth) is gas-fired, with most of the rest involving wind farms.
That would be fine, except for the issue of getting enough natural gas to feed all those power plants.
Only two major gas pipelines, known as Tennessee and Algonquin, enter New England from the west. These pipelines have long-term contracts with distributors like Liberty Utility that sell natural gas for heating, but not with power plants, which traditionally sign only short-term contracts.
In a cold winter like last year, heating contracts use up much of the gas that flows into New England, leaving gas-fired power plants bidding against each other for the leftovers, including liquefied natural gas brought in by ocean tanker.
The result is that during cold snaps, many power plants have to buy gas at spot prices that are more than twice as high as usual – a cost that they are passing along to customers this winter – or else they shut down and wait for more gas to be available, which forces high-cost alternatives to be turned on.
Either way, ratepayers get hit; many electricity rates are going to rise by 30 percent to 50 percent this winter.
One positive result is that there is more financial incentive to cut energy waste through efficiency programs, and a greater push for innovative ideas like demand-response, in which companies sign up in advance to cut energy use during peak times, or microgrids and distributed generation.
But the big picture is to increase supply.
Several giant energy companies are scrambling to build more gas pipelines, but those are billion-dollar projects that take at least four years to complete, assuming they can even overcome the sort of objections that arose in Hollis when a pipeline was proposed there. They will provide no relief before 2018 at the earliest.
Several other major companies are also proposing large electricity transmission projects that would bring down hydropower from Quebec, which has a huge network of 61 dams than can generate more electricity than used by all of New England. But those transmission lines – including Northern Pass in New Hampshire – face as many regulatory and public-opinion obstacles as a gas pipeline, and would take at least two and probably four years to complete.
The Quebec blackout
Further, Quebec hydropower isn’t foolproof. On Dec. 4, breakers were tripped on two huge transmission lines across James Bay for reasons that are still unexplained, leaving 188,000 people around Montreal without power for as much as a day, when temperatures fell to single digits.
The loss of thousands of kilowatts of electricity imported from Quebec caused ISO-New England, the organization that oversees our regional power grid, to go into a preparatory stance called Operating Procedure 4. While New England was not in danger of blackouts, the loss of imported electricity cut deeply into the excess capacity kept on hand in case an emergency happens to a local power plant or transmission line, and reflected a vulnerability in electricity production that will only get worse as power plants shut down.
“We used to have a surplus, but we’re starting to be somewhat constrained in terms of resources,” Andrew Gillespie, principal analyst for ISO-New England, told the forum.
Last year, a series of changes were made by ISO-New England in the way power plants are compensated. These rules, for such relatively obscure things as capacity and energy markets and real-time pricing, often were developed in older, more regulated, times and may not be suited to the current situation.
“These offer more flexibility,” Gillespie said of the rules, including what is called a pay-for-performance model. “This will allow us to make the best use of what we have.”
More drastic action is sometimes required. Last winter, ISO-New England bought about $75 million worth of oil and stored it so that shuttered oil-fired power plants could operate in case gas-fired plants fell short. This year, it is trying to accomplish the same thing through new pricing rules.
Former Public Utilities Commissioner Mike Harrington said at Wednesday’s meeting that the most likely short-term fix will involve gas-fired plants making the relatively simple change to being “dual-fuel,” so that they can burn either gas or oil depending on circumstances and prices. Since oil is far more polluting than natural gas, especially in terms of greenhouses gases, that change would in some ways be considered a step backward.
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