Saturday, February 16, 2013

Electricity Costs Rise in New England likely indicative of a growing problem

The New York Times has an important report that includes the growth of natural gas generation in the electricity sector, the removal of other capacity, and cold winter temperatures putting a high demand on natural gas for space heating.

Electricity Costs Rise in New England, Which Relies on Natural Gas -
Electricity prices in New England have been four to eight times higher than normal in the last few weeks, as the region’s extreme reliance on natural gas for power supplies has collided with a surge in demand for heating.
Chart from IESO January 2013 Monthy Report
Frigid temperatures and the snowstorm that hammered parts of the Northeast last week have revived concerns about the lack of alternatives to natural gas. Many plants that ran on coal or oil have been shuttered, and the few that remain cannot be put into service quickly enough to meet spikes in demand. The price of electricity is determined by the price of gas.
Last year, natural gas provided 52 percent of New England’s electricity, and that share is expected to grow. Gas is generally cheaper than other energy sources, and the lower costs have spurred the retirement of aging coal generators and nuclear reactors. The six-state New England region and parts of Long Island are the most vulnerable now to overreliance on gas, a vulnerability heightened by a shortage of natural gas pipeline capacity, but officials worry that similar problems could spread to the Midwest.
“We are sticking a lot of straws into this soft drink,” said William P. Short III, an energy consultant whose clients include companies that move and burn gas. “This is a harbinger of things to come in New England, as well as New York.”
Continue reading at the


The spike in the NEPOOL price, discussed in the article, was evident in the IESO's monthly comparison of "control area" pricing, for January, shown in the chart above; Ontario's IESO was not the lowest priced jurisdiction for the first time since the summer of 2010 - edging the US Midwest ISO (MISO) area where coal is the most common price setter.

Ontario is an exporter during the winter months this year, as it has been for a number of winters.  Many of those exports feed into the US directly, and the export into Quebec allows for coincidental exports from Quebec into the US.  
The 2500+ MW of coal capacity Ontario will shut at the end of 2012 is one more reason to expect tighter gas supplies and higher electricity prices in New England next winter - and another reason the MISO area may expect to start to see the same difficulties New England is already experiencing.

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