The arctic air that has frozen the northeastern U.S. over the first weeks of 2018 has prompted New Englanders to crank up the heat and New England’s utility companies to scramble for fuel.
This season’s above-average heating and electricity demand has tested grid reliability at a time when the topic has had particular political salience. Most reporting on the matter has lauded the resilience the grid has shown, but a fuel-security analysis performed by the group that oversees New England’s power system delivers a pessimistic chill. ISO New England’s analysis reveals that in winters to come fuel insecurity will plague the region.
Insecurity despite abundance
What makes ISO New England’s report so tragic is that the United States is now a veritable world energy superpower.
{mosads}Ten years ago, concerns about energy prices and fuel security were a standard element of the national zeitgeist. But a decade removed from the oil price peak of $147 per barrel in July 2008, our national concern over resource depletion has been rendered moot. Spurred by the high prices of the mid-2000s, American companies embarked upon nothing less than a domestic energy renaissance. Since 2005, oil production in the United States has increased by 50 percent, oil exports have seen a tenfold increase, and oil imports have fallen by a quarter.
More critically for electricity, however, have been the gains made on the concomitant natural gas front. Natural gas production has soared over the past decade by 50 percent and in late 2017 the United States became a net-natural gas exporter — meaning that America now sells more to foreign countries than it buys from them.
Given the positive developments that have left markets awash with energy resources, one would expect American utility companies would be well-positioned to meet the needs of their customers. Instead we are now being warned by ISO New England that in future winters utilities will be unable to meet demand during bouts of frigid weather. The group’s projections in almost every future scenario forecast the implementation of rolling blackouts — the sequential disconnection of blocks of customers from power — to protect the grid from outright disaster.
Though the resources are close at hand, a combination of laws and regulations has made New England dependent upon natural gas, yet unable to access all that it needs. While the presence of natural gas in New England’s electricity fuel mix has grown from 18 percent in 2000 to 45 percent in 2017 to an anticipated 56 percent in 2025, New England’s ability to receive natural gas has not kept pace.
Pipeline paucity
On Jan. 23, ISO New England CEO Gordon van Welie testified before the Senate Energy and Natural Resources Committee that, “when it gets cold the region does not have sufficient gas infrastructure to meet demand for both home heating and power generation.” It is a theme van Welie has conveyed since at least 2013. The pipeline constraints to which he points have at times caused New England to have the most expensive spot natural gas prices in the world — including this January.
At the barricade preventing the transport of gas from the abundant reservoirs of Pennsylvania and West Virginia to New England is the state government of New York. Cursed by geographic happenstance, New England needs New York’s consent to receive gas from the Marcellus Shale. But New York politicians and regulators headed by Gov. Andrew Cuomo refuse to grant it whenever possible. In addition to a hydraulic fracturing ban, New York politicians have put the brakes on pipeline projects through their permitting power, blocking the Constitution and Northern Access pipelines outright.
New England, for its part, is not much better. In the summer of 2017 the Massachusetts Supreme Judicial Court nixed a pipeline cost-sharing proposal that would have helped to reduce stress on the grid during a harsh winter like New England is experiencing now. The hostility to pipelines is so pervasive in the northeast that ISO New England takes that bleak view that “no new incremental gas infrastructure will be built to serve power generation.”
The Jones Act
With state governments blocking new pipeline construction to bring in affordable shale gas, New England buys liquefied natural gas (LNG) transported by sea.
Since the United States is now an LNG exporter, New England would seem to have a reliable option. But domestic shipping of LNG is made impossible by the obtuse Merchant Marine Act of 1920 — commonly called the Jones Act. The Jones Act mandates that only American-built, -owned, -crewed and -flagged vessels can participate in maritime shipping between domestic ports.
The alleged purpose of the Jones Act is to improve national defense. While that may have made sense to lawmakers with the specter of German U-boats fresh in their memories, the Jones Act’s only effect today is that it drives up prices for consumers and protects a special interest group.
The Congressional Research Service has found that the Jones Act results in American vessels operating at twice the cost of comparable foreign ships. There are no Jones Act-compliant LNG ships at this time and New England therefore contracts with importers from around the Atlantic. While Trinidad and Tobago is the largest supplier, this month the Everett LNG import terminal is due to receive Russian gas produced by Yamal LNG, a facility subject to U.S. financial sanctions.
The cold truth
In 2013, van Welie sounded the alarm, informing the Senate that New England was becoming more reliant on natural gas for power generation without investing in natural gas supply infrastructure. Sadly, ISO New England’s message has gone unheeded and insidious laws and regulations continue to harm the region. The result is that despite unprecedented domestic energy production, New Englanders will soon find themselves out in the cold.
Jordan McGillis is a policy analyst at the Institute for Energy Research, a nonprofit focused on free-market energy and environmental research and policy.