New Study Says Region Doesn’t Need New Gas Pipelines

by John MacKenna

It looks like New England doesn’t need new natural gas pipelines after all.

After a multi-year pro-pipeline propaganda blitz by the natural gas industry and its allies in the government and regulatory sectors, a new study commissioned by Massachusetts Attorney General Maura Healey reveals that the proposed pipelines are not the best solution to the region’s energy needs.

“As we make long-term decisions about our energy future, it’s imperative we have the facts,” said AG Healey. “This study demonstrates that we do not need increased gas capacity to meet electric reliability needs, and that electric ratepayers shouldn’t foot the bill for additional pipelines.”

Leaders of the heating oil industry are vindicated by the new report, which was prepared for Healey by The Analysis Group. Oilheat was shunned under the administration of former Massachusetts Gov. Deval Patrick despite the great strides the industry made to deliver cleaner-burning heating oil. The industry has led a push to reduce the fuel’s sulfur content by 99 percent by replacing traditional heating oil with Ultra Low Sulfur Heating Oil.

Cleaner Fuels But No Respect

At the same time, oil heat associations throughout the region are displacing petroleum heating oil with renewable biodiesel, which the California Air Resources Board has called the most environmentally friendly replacement for petroleum. The board studied alternative fuels and found that biodiesel reduces greenhouse gas emissions by at least 50 percent and often by as much as 81 percent versus petroleum, according to the National Biodiesel Board.

The assault on heating oil has been even more egregious in Connecticut, where Gov. Dannel P. Malloy has aggressively pushed natural gas expansion with the express goal of converting customers from oil heating to natural gas heating, despite studies showing that blends of Ultra Low Sulfur Heating Oil and biodiesel are cleaner burning than natural gas.

Vermont too has a government-sponsored natural gas expansion underway. Vermont Gas is looking to extend service into Addison County in western Vermont via a new pipeline and convert oil heat customers to natural gas.

Utilities in all three states have attained the government’s blessing to pass the costs of pipeline construction on to electric ratepayers, despite warnings from the Conservation Law Foundation and others that the projects could leave ratepayers with a heavy cost burden for gas capacity that the region doesn’t need.

Meanwhile, the commodity cost benefits of natural gas have eroded. Natural gas prices had fallen to a level well below oil prices for several years as recently as 2014, but oil prices have now come down too, so that heating oil and natural gas prices are once again highly competitive at the consumer level.

Applause From MEMA

The new report, entitled Power System Reliability in New England: Meeting Electric Resource Needs in an Era of Growing Dependence on Natural Gas, immediately drew favorable response from the beleaguered Oilheat industry. “Following an extensive study of the New England region’s energy needs, Massachusetts Attorney General Maura Healey announced today that the region does not need new natural gas pipelines to meet New England’s electricity demands,” the Massachusetts Energy Marketers Association President Michael Ferrante stated in a press release. “Her study ‘found that through 2030 the region’s power system reliability will be maintained during our coldest winter months.’ The results of the AG Healey’s study are certainly welcome and important news for our industry, given that MEMA and the New England Fuel Institute (NEFI) have been strong advocates for sensible energy policy in our region that recognizes the important role of clean burning heating oil and Bioheat fuels; and the predatory, expand-at-any-cost practices of the natural gas utilities.”

“I want to extend my thanks to all those who helped MEMA in advocating for our industry with our Attorney General’s office including Michael Trunzo with NEFI; MEMA Board Chairman Ted Noonan; Howard Peterson with Peterson Oil; and my counterpart in Connecticut, Chris Herb, who helped establish an important working relationship with GDF Suez-Distrigas in our joint efforts to battle regional natural gas pipeline expansion,” Ferrante added.

Healey’s office said, “the study was designed to, first, determine whether the region is facing electric reliability challenges through 2030 and, second, identify the most cost-effective and clean solutions for addressing any of those challenges.”

Guidance for Policymakers

The executive summary states that the report is intended to provide New England’s policymakers and stakeholders with an independent and transparent assessment of the potential benefits and drawbacks associated with the various approaches to addressing the region’s dependence on natural gas for electricity generation. “We recognize that this is but one of many studies related to the region’s dependence on natural gas, and that all studies require forecasting and judgment on highly variable and uncertain future market conditions,” the report states. “It is incumbent on policy makers and stakeholders to consider carefully the purpose, analytic method, and outcomes of all such analyses.”

The Analysis Group conducted the study over three months with guidance from a Study Advisory Group with representation from government, utilities, environmental groups, industry associations and more. The study report states that through 2030 the region’s power system reliability will be maintained during our coldest winter months. “The study used extremely conservative assumptions, including applying winter conditions from 2004 (one of the coldest years in two decades). Analysts also modeled a worst case scenario under which New England becomes even more reliant on natural gas power than expected, and experiences a short-term disruption in other fuels, causing the electric system to be more stressed than expected on very cold days. Under those conditions, the study determined that the region could need roughly 2,400 MW for a few hours across nine very cold days by 2029/2030. That is the energy-equivalent of an additional 0.42 billion cubic feet per day of new gas capacity.

“To solve that deficiency, the study evaluated several options including 1) reliance on incremental dual fuel-power plants (the status quo), 2) a higher reliance on firm liquefied natural gas (LNG), 3) incremental natural gas capacity, 4) energy efficiency and demand response, 5) energy efficiency and low-carbon imports on existing transmission, and 6) energy efficiency and low-carbon imports with new transmission. Solutions were compared to the status quo and evaluated for both their costs/savings for ratepayers and their impacts on New England’s greenhouse gas (GHG) emissions.

What’s Best for the Ratepayers?

“The study concluded that all of the solutions would ensure the reliability of the electric system in a worst-case scenario. However, investment in energy efficiency and demand response would result in the greatest customer savings and would reduce GHG emissions. New gas pipelines infrastructure would result in less customer savings and would actually drive up GHG emissions. Energy efficiency combined with firm low carbon imports on existing transmission lines would also save customers money and would produce the greatest reduction in GHG emissions.

“The study also reviewed two “infrastructure scenarios” – first, an oversized pipeline (new 0.5 Bcf/day natural gas pipeline in service in 2020), which would bring customer savings but significantly increase GHG emissions; second, low carbon imports (2400 MW in-service in 2020 over existing and new transmission lines), which was the only alternative studied that would meet the region’s climate goals by 2030, but was the most expensive studied alternative.

The study which was made possible by grants from the Barr Foundation and the John Merck Fund, accounted for recent news that Pilgrim Nuclear Power Plant is scheduled to shut down no later than June 2019, resulting in the loss of 680 MW of non-GHG emitting power.

The Attorney General provided a copy of the study to the Federal Energy Regulatory Commission for its consideration as part of the federal review of the Kinder Morgan Northeast Energy Direct pipeline project.

The report cites duel-fuel usage as one solution in times of excess demand. “New England has significant potential new dual-fuel capability at existing gas-only resources, and underutilized LNG storage and vaporization capacity that could be relied on by gas-fired generators,” the report states. “Absent any action by states to promote alternative solutions, reliability will most likely be maintained through a combination of these resources. This pathway may continue to experience periods of elevated winter prices, but will also require the least cost investment from ratepayers. Specifically, these two ‘market outcome’ solution sets reviewed – involving the conversion of gas-only generation to dual-fuel capability, or the specific contracting on a multi-year basis of storage and delivery as needed of LNG by or for electricity generators – involve minimal up-front investment by consumers.

“Instead, these solutions would increase costs to the owners of generating assets to meet capacity and energy market obligations, and associated implementation costs would partly or fully flow through to ratepayers over time through existing wholesale market mechanisms.”

The report also looks at the use of oil and other fuels in times of peak winter demand. “The remaining resources – generating capacity fueled by oil, natural gas, or both (dual-fuel) –require fuel imported from outside New England, and are subject to limitations on the ability to store such fuel for long-run operations. Continuous oil-fired operation at many units is constrained by both limited on-site tank capacity (with the need for potentially frequent replenishment of fuel) and in some cases annual operating limits based on applicable air regulations. Similarly, natural gas-fired capacity is dependent on contemporaneous fuel delivery on an as-needed basis through the region’s interstate pipeline system.”

The complete report is available at the Massachusetts Attorney General’s website, www.mass.gov/ago.

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