A lack of pipelines into New England is making natural gas costlier, pushing up wholesale electricity prices in the region by 55 percent last year. The news comes as no surprise as New England's six states are literally at the end of the nation's energy pipeline. What to do about it is another matter.
Some stakeholders are pinning their hopes on a proposal offered by the region's governors to fast-track construction of hundreds of miles of new natural gas pipelines and the construction of hundreds of miles of new transmission lines.
The average price of wholesale electric energy rose to $56.06 per megawatt hour, up from a historic low of $36.09 in 2012.
Higher fuel prices result in higher power prices. New England sits on the doorstep of the Marcellus Shale, which has increased supply and lowered natural gas prices significantly, at least in areas of the country that can access that gas. However, the limited pipeline capacity coming into New England means that sometimes natural-gas-fired generators have difficulty getting fuel, and that not only pushes up prices, it also creates a risk to reliable operation of the power system.
Natural gas is the predominant fuel used to generate the region's electricity, amounting to about 46 percent of generation in 2013. Wholesale power prices tend to track the price of natural gas.
The rising price undermines the attractiveness of natural gas, which is in high demand as an alternative to costlier heating oil.
But limited pipeline capacity into New England has made it difficult for some natural-gas-fired generators to get fuel, pushing up prices and risking reliable operation of the power system.
Pipeline constraints, particularly in winter when demand for home heating rises, have pushed up the average spot price for natural gas in New England to the highest in the country. Until new pipelines and equipment and new electric transmission lines are built, prices for natural gas and wholesale electricity are likely to remain volatile.
The higher electricity prices due to the cost of gas should prod officials to switch from fossil fuels, particularly using wind power that can capitalize on gusty New England winters.
rep-am.com
