New England is “importing European prices” in a looming gas supply crisis

A European-style winter energy crisis looms over New England in the US Northeast, even as US natural gas producers export record amounts and a wave of the fuel heads across the Atlantic.

Utility chiefs in the region have called for emergency help from Washington to preempt a crisis, while criticizing a century-old law that cut off New England from some of the most prolific in America. rocky leaving it even more dependent on expensive imports.

On Friday, a ship loaded with LNG will land in Massachusetts — but a federal law barring foreign ships sailing between US ports means the gas will come from Trinidad, not from US export plants along the Gulf of Mexico that ship record amounts of the fuel overseas.

“You’d think philanthropy would start at home . . . that American fuel would go to American ports,” Joe Nolan, CEO of Eversource Energy, one of the largest utilities in New England, said in an interview. – in the global market.

New England’s regional grid operator said it will be able to handle normal weather conditions this winter, but warned that a prolonged period of particularly cold temperatures could force it to ration electricity supplies, possibly through blackouts.

Prices for gas to be delivered in Boston this winter have risen to nearly $30 per million British thermal units on the Intercontinental Exchange, compared to current prices in Europe, as utilities scramble to find international supplies to replace Russian energy.

A $/MMBtu bar graph showing the rise in energy prices in the US Northeast this year

Gas elsewhere in the US for the same months trades at about a quarter of that level. Spot prices dropped below zero in West Texas in recent weeks, as production rose to new records.

Plans to pump more gas to New England from huge shale deposits in neighboring Appalachia have been scrapped in recent years, while the Jones Act of 1920 bars foreign vessels — such as LNG carriers — from delivering bottled gas in the Gulf to customers in the Gulf. the Northeast.

While Gulf ports export record amounts of gas, Elizabeth Warren, a Democratic senator from Massachusetts, this year urge The Joe Biden administration to limit LNG exports to “keep prices low for American consumers”.

The ship from Trinidad at the Everett LNG terminal near Boston will be the eleventh to land in the region this year, up from nine last year, according to Kpler, a tanker tracker. Analysts said that the price is likely to be close to European levels. Constellation Energy, the station’s owner, said the US Coast Guard prevented it from publicly disclosing information about the arrival of cargoes at the station.

Despite the imports, utilities responsible for the region’s electricity transmission, including Avangrid and National Grid, have warned of New England’s “weak reliability position” as temperatures drop.

“On the brink of the 2022-2023 winter period, New England faces retail energy supply prices nearly double what they were last winter and, perhaps more worryingly, a serious fuel security situation should the region experience prolonged or unplanned cold weather.” Memorandum to the Federal Energy Regulatory Commission last week.

The region has been at the forefront of efforts to decarbonize America’s energy supply and build new renewable generation capacity, and an emerging offshore wind industry is beginning to take root.

But those developments will take time, and analysts say the retirement of nuclear power, the closure of new power transmission lines from Canada, and gas pipelines from shale gas fields in western Pennsylvania, as well as overly rosy assumptions about cheap foreign supplies, have left New England exposed.

“You sleep on the bed you make,” said Gene Snyder, senior advisor at energy consulting firm Valider. “There have been decisions along the way that have been a bit optimistic about oil and LNG prices and how quickly . . . wind and solar can serve a larger, more consistent share of the energy market.”

“We’re importing LNG – but we’re also importing European prices,” Snyder added.

The bleak outlook for natural gas supplies is reflected in the market for liquid fuels known as distillatesincluding diesel and heating oil used as fuel in many New England homes.

The Energy Information Administration warned Thursday that households that use heating oil — about a third of homes in the Northeast, versus 4 percent nationwide — will pay 45 percent more for fuel this winter than last because the market is tight. Fuel stocks in the Northeast have fallen by nearly half over the past year.

that evaluation By the nonprofit North American Electric Reliability Corporation this week, it found that without a “significant effort” to replenish oil and LNG stocks, there were concerns about “whether there was enough power available to meet electricity demand during the extended cold period”.

A DOE spokesperson said the department is engaging with companies on ways to build inventories and will continue to “monitor the situation closely, work with state and industry partners, and stand ready to provide support as appropriate.”

Eversource Energy’s Nolan recently wrote to Biden calling for an emergency federal response to pre-empt a crisis, including releasing supplies from the federal fuel stockpile and waiving the Jones Act, saying the Northeast’s dependence on foreign supplies could get worse. A global supply crisis, too.

“In addition, the increasing reliance on natural gas from foreign sources poses a particular threat to national security at this time given the war in Ukraine,” he said.

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