Reliance on natural gas worries grid operators

The shale-gas bonanza on New England’s western doorstep has dramatically reduced the price of energy, but hasn’t ended fuel-supply constraints for the region’s electricity generators.
When a blizzard struck New England last month, residents faced widespread power outages and ISO New England Inc., the company that operates the regional power grid, faced a challenging period keeping electricity flowing smoothly.
As transmission lines went out of service and some power plants, including a nuclear station, dropped off the grid, ISO New England operators scrambled to find additional power from other plants.
Because of its declining price, natural gas has become the fuel of choice for power producers. ISO New England contacted gas plants with untapped generation capacity to see if they could pick up the slack.
But even though natural gas continues to pour out of the Marcellus Shale formations in New York and Pennsylvania, finding some for New England power plants proved difficult.
“The middle of the night on a Friday and they were having trouble contacting traders to get gas,” said ISO New England spokeswoman Marcia Blomberg. “It was a delicate situation. I can’t quantify how close we came to a disruption – we were able to manage. We didn’t have to enact any emergency procedures, but we did need some natural gas generators to come online.”
When needed, those emergency measures can include buying emergency power from Canada, asking large, commercial energy users to reduce consumption, and asking general customers to reduce consumption. All of those things are meant to avoid the unpalatable possibility of rolling blackouts.
The region’s increasing reliance on natural gas, which now accounts for 52 percent of the region’s electrical generation, has been ISO New England’s top concern for at least two years.
Providing a steady supply of electricity for the nation is a complex process involving cooperation between electricity generators, power grids, utilities, fuel distributors and global energy markets. Right now two pipelines – the Algonquin Pipeline and Tennessee Gas Pipeline – connect New England to the inexpensive domestic gas responsible for driving down energy prices and increasing gas market share.
But in addition to electrical generation, natural gas has also grown as a heat source for homes and businesses.
The gas utilities’ distribution to heat buildings is purchased on long-term contracts, but power-plant owners buy their gas the day before they need it in an effort to get the best price and avoid making more power than necessary.
That means that during periods of high demand – generally cold spells when home heaters kick in – demand for gas can exceed what the two pipelines carry.
Each day, ISO tries to predict what the next day’s demand for electricity will be and then solicits bids from power producers to fulfill it, starting with the least expensive and moving up.
In Boston and on the Massachusetts coast, liquefied natural gas terminals provide an alternative supply of Middle Eastern gas, but since the shale-gas boom, it has become comparatively expensive.
That makes it unlikely another company will propose a southern New England LNG terminal such as the Weaver’s Cove plan for Fall River killed by regional opposition.
The wholesale price of natural gas in 2012 was the lowest since 2003, but during periods of constrained supply, the price for emergency gas purchases can triple, according to ISO.
“As older coal and oil-fired plants retire and new gas-fired plants are built to replace them, it is likely the region will come to rely even more on this fuel,” ISO New England wrote in its 2013 energy outlook.
Outside of building new power plants, options for avoiding future shortages include increasing pipeline capacity and tweaking the day-ahead fuel purchase system to encourage power plants to produce additional reserves.
ISO New England has filed a series of proposals with federal regulators on the fuel purchase and power generation side in the past year and expects responses over the coming months. In Rhode Island, the R.I. Public Utilities Commission works with other state regulatory bodies and ISO New England to maximize the price benefits from domestic gas production while minimizing the supply risk.
“The important thing is we are part of a regional grid and face the same challenges the rest of New England faces, the long-term pressure on pipeline resources,” said Thomas Kogut, spokesman for the R.I. Division of Public Utilities. “Expanded reliance on natural gas has provided price benefits and infrastructure challenges.”
Attempts to reach Dominion Power, which owns the Manchester Street power station in Providence and Brayton Point power station in Somerset; TransCanada, which owns the Ocean State Power Plant in Burrillville; and Capital Power, which owns a Tiverton plant were unsuccessful last week.
As for the pipelines, Houston-based Spectra Energy Corp. is planning to expand the Algonquin Pipeline and is now in negotiations with natural gas utilities on long-term contracts for increased supply.
Spectra spokeswoman Marylee Hanley said the company expects to ask federal regulators this spring for permission to expand the Algonquin. Even though the new contracts are being made with utilities, Hanley said the added pipeline capacity would also add to what is available to power plants on the daily market.
Houston-based Kinder Morgan has expansion plans for the Tennessee Gas Pipeline, but a company spokesman would not say how it would impact New England.
According to a map from Kinder Morgan, the Tennessee pipeline has two branches entering New England from New York, one running into southwestern Connecticut and the other western Massachusetts.
The pipelines join near the Massachusetts Turnpike and then split again with one branch heading to Boston and the other toward Providence.
The Algonquin Pipeline cuts across the middle of Connecticut, crosses the northwest corner of Rhode Island at Burrillville and then splits into three branches: Boston, Cape Cod and Aquidneck Island. •

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