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New England power reliability outlook uncertain

26 May 2017 18:18 (+01:00 GMT)
New England power reliability outlook uncertain

Houston, 26 May (Argus) — The New England electric grid operator said accessing adequate natural gas for the region's generators is its "most pressing challenge" for 2017.

Natural gas-fired generation comprised 49pc of ISO-New England's fuel mix in 2016, up from only 15pc in 2000. Half of all proposed new generation is gas-fired, and the fuel sets the real-time price of electricity three quarters of the time in the region.

But there are few interstate pipelines and LNG delivery points in New England to serve those plants. Regional pipelines were built to serve heating demand, not power generation, and these lines already run at or near maximum capacity during cold weather.

Demand is capped by pipeline capacity at around 4 Bcf/d (113mn m³/d) in the winter, driven primarily by heating needs, while power demand peaks in the summer at about 1.7 Bcf/d, BTU Analytics chief executive Andrew Bradford said.

Algonquin Gas Transmission's Incremental Markets expansion added 330mn cf/d to the New England region in January, relieving some capacity constraints. But rising public opposition to pipelines and a slow regulatory process could discourage further pipeline expansions. The New York Department of Environmental Conservation's (NYDEC) recent denials of critical water certificates for the Constitution Pipeline and National Fuel Gas' Northern Access project could set a precedent preventing more northbound transportation.

"The prospect of getting additional capacity into the Boston market area remains a challenge with only a few remaining projects trying to push forward" on Algonquin Gas Transmission and Portland Natural Gas Transmission, Bradford said. "The ‘Wall of Cuomo' stands strong," he noted, referring to New York governor Andrew Cuomo.

Governors in New England have been relatively open to expanding natural gas infrastructure, but ultimately failed to revamp the region's system in 2014. Their proposed solution was to fund new natural gas pipelines and power transmission through a fee on power sales collected by the regional electric grid operator. All six New England governors backed that plan, but the idea stalled. The initiative would have needed approval from federal regulators and was guaranteed to face legal challenges. The region has increasingly relied on LNG as a stopgap, but that source has its drawbacks. LNG must be contracted for in advance and is in global demand, and severe weather can delay shipments.

Other sources of power generation are dwindling in the region, with 4,200MW of coal, oil and nuclear capacity shutting down between 2012 and 2020, equal to about 15pc of current capacity. Another 5,500MW of oil and coal capacity are at risk of retirement. Coal-fired generation has fallen to only 2pc of the region's fuel mix from 18pc in 2000.

Entergy's 620MW Vermont Yankee nuclear plant closed in 2014, dealing a huge blow to power reliability in ISO-New England, and Entergy's 685MW Pilgrim station is scheduled close by May 2019.

The grid operator is also bracing for the retirement of Dynegy's 1,464MW Brayton Point coal-fired power station in Somerset, Massachusetts, at the end of this month, said Stefan Baden, an analyst with research firm Energy GPS.

The plant "gets a pretty decent run," during extremely cold weather and during the summer, Baden said, describing it as New England's "go-to" for non-gas generation before moving to refined oil products.

Gas transmission constraints occurred earlier this month when unseasonably high temperatures occurred at the same time that Algonquin's Burrillville, Rhode Island, compressor station was shut for maintenance. ISO-New England had to rely on Brayton Point to handle a rise in demand, even though total demand did not even exceed a typical summer peak level.

"They have taken away a big part of the generation stack" by shutting the plant, Baden said.

The region may need to rely on power imports from nearby regions in order to maintain reliability this summer, according to a report this month from the Northeast Power Coordinating Council. The council forecasts the region's operable capacity margin at negative 521MW for its peak week in summer 2017, driven primarily by the Brayton Point retirement.

In the past, New England has relied on oil-fired generation when gas prices spike. But these plants are up against increasingly stringent air-emission regulations. Oil-fired generation has dropped to 1pc of the fuel mix compared with 22pc in 2000.

The grid operator said it may have to pursue costly, higher-polluting options in order to improve reliability, such as higher incentives for generators to contract for natural gas, or retaining some non-gas generators that would otherwise retire. But a key challenge going forward will be balancing the markets with public policy.

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