Market Overview

Northeast Struggles Due To Insufficient Gas Pipeline Infrastructure

Share:
Northeast Struggles Due To Insufficient Gas Pipeline Infrastructure

Residents of Northeastern states are struggling with increased electricity costs and an unreliable energy supply as elected officials contemplate expanding natural gas pipelines in the region.

Consolidated Edison, Inc. (NYSE: ED), a New York utility provider, announced on January 18 a moratorium on new natural gas customers in Westchester County, beginning on March 15. The reason given by the utility was "new demand for gas is reaching the limits of the current supplies to our service area." Politico reported that New York State's reluctance to construct new natural gas pipelines is preventing adequate supplies from reaching growing economic centers in New York City, Long Island and Yonkers.

Con Edison added that existing customers would not lose their supplies of natural gas.

"We have learned of Con Edison's temporary moratorium on gas service to new developments, and we are concerned about this occurrence," George Latimer, Westchester County's Executive, announced on Thursday. "We have requested a meeting with Con Edison officials and hope to bring to the table local, state and federal officials to discuss this matter."

In neighboring New England, the shortage of natural gas infrastructure is more widespread.

"The New England states used to be dependent on coal, oil, nuclear and hydroelectricity," said Dan Kish, senior fellow at the Institute for Energy Research. "And they've shifted quickly to natural gas for generation, and they've shifted so fast that it's caused huge draws of natural gas into the system [pipelines] without increasing infrastructure."

Kish said that the United States is the world's largest producer of natural gas and has among the lowest natural gas prices, especially in regions where natural gas is produced. He blamed the lack of supply in New England on political opposition to the use of fossil fuels.  

Kish said there are additional supply lines for New England's natural gas demand. He referenced the Everett liquified natural gas terminal in Boston, which currently supplies 20 percent of New England's natural gas.  

Still, industry analysts agree that the current pipeline infrastructure is insufficient to meet natural gas demand in New England.

Don't miss it.  Register today .

Don't miss it. Register today.

"We do have congested pipelines and obstructed pipelines," said Stephen Leahy, vice president for policy and analysis at the Northeast Gas Association. "We have added incremental projects at different points for gas utility demand. But larger proposed projects have not progressed. There's a lot of opposition to any additional energy infrastructure in the region."

Leahy stated that the main opposition to larger pipeline projects originates from environmental concerns. He also said that 15 years previously these same voices were largely in favor of natural gas to replace coal and fuel oil in the region's energy market.

A leading environmental voice in opposition to natural gas pipelines in the Northeast is the National Resource Defense Council (NRDC). The environmental advocacy group has criticized ISO New England, a regional electric power transmission system operator, for proposing new pipeline infrastructure.

"ISO has presented the region's choice in a biased way, with clean energy discounted as speculative or far off and paths relying on pipelines or bailouts or polluting energy as more reliable or certain." said an NRDC press release last March.

Leahy concluded that an "overnight" transition to 100 percent renewable energy is not feasible and that natural gas will be relevant for "decades" in New England's energy market.

ISO New England reported that natural gas increased as a proportion of New England's source of electricity from 15 percent in 2000 to 48 percent in 2017. Natural gas consumption has reduced the amount of coal and fuel oil used to generate electricity in the region.

The Energy Information Administration (EIA), a federal statistics agency with a focus on energy topics, reported that the average price for electricity in the New England region (which includes the six states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) was more than 17 cents per kilowatt hour of electricity. New England's average price for electricity was higher than the 10 cents per kilowatt hour that is the average price of electricity in the United States. Additionally, New England's average price for electricity increased by 0.71 cents per kilowatt hour – from 16.67 cents in October 2017 to 17.38 cents in October 2018.

Kish also stated that energy prices among regions of the United States are strongly tied to the regulatory climate for the natural gas industry.

The EIA found that in New York (one of three states – as well as Maryland and Vermont – to have statewide fracking bans) the average price of electricity was over 15 cents per kilowatt hour in October 2018, while in Pennsylvania (the nation's second-largest natural gas producer) the average price of electricity was under 10 cents per kilowatt hour.

Want more content like this? Click here to Subscribe

Permalink

Posted-In: Freight Freightwaves Natural Gas Oil & Gas Pipelines pipelineNews Markets General

 

Related Articles (ED)

View Comments and Join the Discussion!

What's Next For Square's Stock?

The Street Mostly Agrees: Starbucks Print Shows 'Positive, Less Controversial' Quarter