Monday, February 25, 2013

New England: Cold weather, environmental rules, and a shortage of natural gas pipeline capacity lead to an electricity crunch, with prices four times higher than normal for sustained periods

How to Solve New England's Electricity Crunch? -
The electricity crunch in New England that I wrote about on Feb. 15 persists, and it is clearly related to a shortage of natural gas pipeline capacity relative to growing demand. But experts say the root cause is something more complicated: a structural flaw in the regional electric market.
The details are important because the phenomenon could spread around the country.

The problem in New England, which has resulted in electricity prices that are four times higher than normal
for sustained periods, is that all of the pipeline transmission
capacity has been purchased by the local gas distribution companies that
sell gas for home heating and retail uses. When those companies need
all that capacity to meet customer demand during a cold snap, there is
nothing left over for them to sell to the gas-fired electricity

The pipeline owners agree that demand for gas has grown far faster than their ability to transport it, and that they should either lay new pipe or add compressor stations to squeeze more gas through existing pipe. The trend in New England is not very different from the trend in the Midwest. New York is in a slightly different situation; local rules require that gas generators be able to run on fuel oil as well in a pinch.

New England generators used to avoid this problem by stocking up on diesel oil, but environmental rules discourage this.

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