Jun 142014

There is a lot of information being dispersed of late on the topic of the proposed Kinder Morgan gas pipeline (Northeast Energy Direct) that would run, in part, through Groton, on its way from the New York state line to a distribution terminus in Dracut. So, let me try, if I might, to clarify a couple of things, and present some options not yet addressed in the local discourse. (By way of disclosure, I am the director of public policy for Northeast Energy Efficiency Partnerships, a nonprofit energy efficiency strategic programming and advocacy organization based in Lexington that works throughout the Northeast region, so we have had some pretty direct interest in the decisions being made regarding gas supply to New England. However, the opinions expressed here are mine, and not of my organization.)

Jim O’Reilly is one of the panelists in the Monday, June 16 Board of Selectmen’s Information Session on the pipeline, beginning at 7 p.m. in the Groton-Dunstable Regional Middle School Performing Arts Center. See Groton Conservation Trust Takes Pipeline Stand Before Second BoS “Information Session”.

Clean Energy Alternatives

First, the NESCOE report referenced in his letter by Kevin Kelly of GELD does, indeed, promote the concept that the Kinder Morgan pipeline is needed. But what he doesn’t say is that very same report also contained the following note:
“In the absence of infrastructure and demand reduction/energy efficiency/non-natural gas-powered distributed generation solutions, New England will experience capacity constraints that will result in high natural gas and electric prices …” and that “[I]n a Low Demand Scenario, no long-term infrastructure solutions are necessary.” (Emphasis added.)
Further, NESCOE’s own New England Gas-Electric Focus Group, which used the study as the basis of its final report, noted: “Successfully implementing natural gas and electricity energy efficiency programs, renewable thermal heating applications, and distributed electric generation that cause the demand for natural gas and the net electric load to decline in the long-term could eliminate any need for additional infrastructure.” (Emphasis added.)

The report’s authors, Black & Veatch, however, did not model such a scenario. This was due to directions from NESCOE not to do so. When my organization approached NESCOE about performing such an analysis, we were told that they were not interested. It’s also interesting to note that the cross-regional gas pipeline scenario that NESCOE had modeled mirrors almost exactly the proposed pipeline that was modeled by … Kinder Morgan.

However, Environment Northeast (ENE), a nonprofit that promotes clean energy throughout the region, has done a series of calculations that do show that through a variety of clean, distributed demand-side and renewable strategies, we can more than offset the need for new gas infrastructure in New England. These resources include:

  • Combined Heat and Power (CHP) — If we achieve just one-quarter (25%) of the technical and economically achievable potential the region has, we can install 1.6 GW of clean CHP across the region.
  • Electric and Gas Energy Efficiency — Right now, Massachusetts and Rhode Island are the leading states in New England in capturing cost-effective energy efficiency. If the other four states achieved the same levels of savings, we could achieve 1.2 percent annually gas savings and 2.5 percent annual electric savings, relative to current load. And that’s not even including the fact that even greater levels of savings are quite achievable. (Also, these savings are compounded by the fact that as our grid is about half reliant on gas for electric generation, thus savings at the end-use level — i.e., homes and businesses — are multiplied as that gas is then not needed at the electricity generation level. It’s this kind of analysis we had asked NESCOE to perform to a deeper level of detail, but they declined.)
  • Expanding the Renewable Portfolio Standard (RPS) -Expanding the cumulative regional RPS target to 25% by 2025 would require an increase of just 3.7 % from the current effective target of 21.3 % by 2025. (This is in reference to the earlier discussion points on this list about renewables replacing gas generation.)
    Energy Storage — 743 MW of energy storage deployed across the six-state ISO New England territory by 2020 is proportional to the mandate recently established in California. In other words, the markets are already responding with advanced energy storage technologies (i.e., batteries and fuel cells).
  • New Electric Transmission- 1.2 GW of new electric transmission is at the low end of what the New England Governors’ regional cooperative compact (signed in Dec. 2013) has planned for in terms of the procurement of “clean energy” imports (i.e., hydro) into the region.

In all, alternatives like this could account for more than 780 million cubic feet per day of natural gas, more than offsetting the proposed 600 million cubic feet that Kevin refers to.

Market Rules Improvements

The reason we’re in this situation is because we rely on natural gas for about 47 percent of our electric generation in the region, and, because all of that gas is imported, and because a great many people in this region rely on gas for heating, there are shortages in the winter. But the severity is not exactly as it’s been generally portrayed by ISO-New England — whose principal job is to keep the lights on. The claim is that the gas pipelines coming in this region are full. The truth is that the gas in those lines is “subscribed,” but they’re not fully “utilized”. Prices spikes occur when we reach about 75 percent pipeline capacity. And that’s because gas users are on firm contracts with their customers, but the electric generators are on interruptible contracts with the gas suppliers. Thus, the generators bid against each other when pipeline capacity hits 75 percent, driving up the prices for electricity. However, not all the gas included in the firm contracts is needed; in fact, the gas distribution companies often sell this excess “capacity” back to the generators, but, again, do so at a premium.

How our energy markets operate could have an impact. For example, gas and electricity markets operate on different schedules of days, meaning that if they were more closely aligned, we could realize pricing effects to the benefit of customers. Also, we could require the buyers of pipeline capacity, i.e. the gas distribution companies, to put out notice when they have availability. That currently does not occur.

And to the point Kevin made about the Ludlow plant burning oil this winter because of gas supply concerns, it should be noted that when a number of groups petitioned ISO New England to allow for other alternative fuels (e.g., LNG) to be burned in such dual-fuel plants, ISO refused. Apparently, the need to show the volatility of natural gas prices is of paramount concern.

Other Pipelines and the FERC

As part of the modeling in the Black and Veatch study, the pricing impact of the AIM pipeline expansion was included, and showed that, beginning in 2017 and lasting for at least six years, the expansion of the AIM pipeline would drive down and keep down natural gas prices to levels seen before last winter’s price spikes. (It should also be noted that AIM, as opposed to Kinder Morgan), is not a “greenfields” pipeline proposal, but one that would expand an existing pipeline, with only about a mile of new pipe needed.)

Because the capacity expansion of AIM could be easily justified, they had no problem signing up buyers for contracts, which is why this project has moved forward with little debate and is likely to be granted its “certificate of public need” by FERC, which is often described as the “golden ticket” of energy projects since FERC supremacy law was established by the federal Energy Policy Act of 2005.

By contrast, Kinder Morgan has had an open bidding process underway for its proposed pipeline for two years, and they have yet to announce that anyone has signed on to contract for its gas. This is precisely the reason why NESCOE — representing the collective governors — have asked for an unprecedented measure. They’re requesting that ISO-New England file with FERC for a tariff on electric ratepayers in order to pay for a gas pipeline expansion. It’s never before in history been done. This would require that all of us — municipal and IOU electric customers alike — be asked to finance what could be up to a $7 billion project (no one can say for sure, since Kinder Morgan won’t state how much its proposed pipeline would cost) via the regional network service charge we currently pay. No ISO or regional transmission organization (RTO) in the country has ever subsidized the cost of gas infrastructure. However, without this move, replacing the “contracts” that Kinder Morgan is unable to get on its own is the only way this pipeline could be paid for.

The Environment

If the economics of it aren’t enough, consider that what we’re talking about is burning more fossil fuels. Yes, natural gas may be cleaner than coal and oil, but that doesn’t make it clean. In fact, some analysis has shown the methane produced via natural gas production and burning is much more harmful as a greenhouse gas than the resulting carbon. And, yes, the gas we’re talking about bringing into this region would be the result of hydraulic fracturing, or fracking. (By the way, the B & V analysis only modeled natural gas at today’s prices; most economists generally acknowledge that given the historic volatility of natural gas prices, they will go up precipitously in the future. And that also doesn’t account for any new cost of environmental compliance that may result from new fracking regulations.) Finally, any plans to burn more natural gas are inconsistent with both the state’s Green Communities Act, which requires that all cost-effective demand solutions be procured before burning new fossil fuels, and the Global Warming Solutions Act, which requires us to reduce our CO2 emissions by 25 percent by 2020, and 80 percent by 2050. We’ll never reach those targets if gas supply is increased in the state to the degree proposed by the Kinder Morgan pipeline.

Jim O’Reilly