Worries about region's use of natural gas surface

Aug 30 - Paula Tracy The New Hampshire Union Leader, Manchester


The operator of the New England electric grid is expressing concern about the region's increasing reliance on relatively inexpensive natural gas as a source for electricity.

In a July report, the Independent System Operator of New England issued a warning call for the region's stakeholders to plan a strategy to ensure the region does not run out of power on a cold winter day sometime in the future. New Hampshire power providers and generators said this week they have seen the report and know the answer is diversification.

While they said they are taking advantage of the lower price of natural gas for consumers, they are also working on a strategy of multiple fuel sources being at the ready.

Gary Long is president and chief operating officer of Public Service of New Hampshire, the state's largest utility. He said he has seen a tremendous shift in 36 years in New Hampshire. It went from "all about oil," with about 40 percent of electricity made from that fuel, to natural gas, which now represents more than 50 percent of the region's fuel for electricity.

In the past three years, he said, he has watched the increasing reliance on natural gas. It is good from the consumer's perspective of being inexpensive, but problematic when the power source shifts to a focus on heat during cold weather, he said. Then natural gas is focused on making heat, not for making electricity.

"I've been predicting this for three to four years," he said of the ISO-NE concerns.

PSNH, which is both a generator and transmitter of power, has been working on diversification as back-up and what Long calls having "dispatchable" sources to make electricity.

PSNH's Newington power station can now switch from natural gas to oil to generate electricity. On Tuesday, Long visited the Burgess biomass project under construction in Berlin. It is expected to produce up to 70 megawatts of power from wood chips.

Long said that "storable hydro-power is the top of the heap," in terms of accessing quickly dispatchable sources for electricity.

The proposed Northern Pass hydro-transmission project would establish "a clear tie to a large hydro system" and help alleviate that concern, Long said. Also, he said natural gas pipelines could be expanded -- but no one wants to take on the expense, and it would be four to five years out.

Northern Pass a plus?

Mike Skelton, spokesman for PSNH, said never has the region been so reliant on one source of power for electricity. He said if anything were to happen to three gas pipelines feeding the region -- or if new regulations on gas production affected the flow -- "nothing is ready to fill that void."

The report indicates that in the 1990s, less than 5 percent of the region's electricity came from gas. But now it represents 51 percent of the market, as availability of domestic sources of gas has become more abundant. The cost of gas has become more attractive compared to coal, oil, nuclear or renewable energy.

Skelton said 21 percent of PSNH's transmission now is in renewable energy.

The Northern Pass is a proposal to import 1,200 megawatts of Hydro-Quebec power using 180 miles of transmission lines through the state.

Opponents are concerned the project would destroy the landscape and private property values. Proponents said it will help the region's energy needs, though ISO-NE calls it not necessary for system reliability.

The New England Power Generators Association has also said the lower cost of natural gas and its availability make Northern Pass not as attractive to investors, though Long notes price volatility in that market is huge.

PSNH officials also said NEPGA says that because association members do not want to compete with Northern Pass.

Skelton said Northern Pass would be "another arrow in the quiver," to deal with any spike in natural gas prices or lack of availability.

At New Hampshire Electric Cooperative, about 37 percent of electricity its 80,000 members use comes from natural gas.

Seth Wheeler, spokesman for the Co-op, said its members are enjoying the lowest price in seven years and it is largely due to the relatively lower cost of electricity made by natural gas. He said he agrees diversity is key and notes that, by 2025, the Co-op has a plan of increasing its renewable energy percentage from 10 to 25.

The solution is up to the generators, he noted, adding: "We're only a customer."

The Co-op does not produce its own power.

Looking ahead

Gordon van Welie is president and CEO of ISO New England Inc., the region's coordinator of electricity.

In an opinion-editorial piece he wrote in July, van Welie said that while reliability can be maintained in the near term with existing tools and better utilization of existing power system infrastructure, "these are not long-term solutions to the challenges. The Strategic Planning Initiative has begun to outline potential solutions, many of which are ambitious, complex, and will take years to implement; others may be more easily instituted in the short term to begin mitigating these risks."

According to van Welie, potential solutions include:

-- Alignment of the wholesale electric market and gas market time lines, so power plants will know if they've been scheduled to run before the deadline to buy natural gas;

-- Allowing generators to update their offers in the energy market to reflect real-time changes in fuel prices;

-- Increasing the performance incentives for generators to deliver electricity and the consequences for failure to deliver energy.

"Other interim solutions, such as ensuring power plants have sufficient fuel levels, may be necessary as we work to implement long-term solutions to the region's fuel security needs," van Welie said.

He recalled a prolonged deep cold in the region, and how ISO-NE scrambled to respond to the region's needs, in large part because of a reliance on natural gas.

"Looking ahead, the one certainty is that days like Jan. 24, 2011, will come around again until the region has fully addressed its reliance on natural gas for electricity generation," he concluded.

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Paula Tracy may be reached at ptracy@unionleader.com.

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