The shale gas revolution of the past decade has made electricity from cleaner-burning natural gas available at low, stable prices across our nation. Utilities in charge of supplying electric power are finding long-term value and significant emissions reductions with the fuel.
The natural gas now being produced in record quantities is driving everything from renewed U.S. manufacturing, to the U.S. leading the world in carbon reductions, to the potential for our nation to become a net natural gas exporter by 2020.
And the Northeast’s Marcellus Shale offers game-changing potential for a region where affordable, clean and reliable electricity and heating is crucial. But as a cold January made clear, for the densely populated Northeast to reap the full benefits of the natural gas abundance right in its own backyard, it is essential that the region break through its current natural gas pipeline bottleneck.
As one analyst put it, it’s the “ultimate irony” that a region so rich in natural gas abundance was unable to put these vast resources to their full use. All stakeholders—from the natural gas industry, to regional policymakers, to our customers—have a strong stake in turning this around. With another cold front expected this weekend, here are a few important things to know:
1. Record Cold Means Soaring Demand and Utilities Work Hard to Prepare:
During the Polar Vortex, temperatures were 20 to 40 degrees below normal for this time of year. Snowfall from Ohio through New England has been two to three times its typical rate. For many areas, weather this extreme had not been seen since the mid-1990s. Additionally, this past January was the 10th coldest on record since 1897. From securing long-term contracts at stable prices to stocking up in the off season to coordinating with nearby markets, electric utilities use a growing array of tools to buffer the impact on their customers and maintain reliable service.
2. The Northeast Has Plenty of Gas, But It Needs More Pipelines:
The U.S. Northeast is home to the second largest natural gas field in the world. There is no shortage of this resource to meet the region’s growing needs. However, pipeline infrastructure has not kept pace. he Federal Regulatory Energy Commission recently concluded that the recent spike in wholesale natural gas prices in the Northeast was due to pipeline constraints, not natural gas supply. When extreme weather prompts extreme demand, as ICF’s Frank Brock explains, “there’s a transportation constraint, not a lack of supply.”
3. Double-Digit Wholesale Prices Hit Just 1.1% of Regional Market:
With the Polar Vortex gripping the Northeast, January 7th set a new record for regional natural gas demand. Of the total 18 bcf in regional demand that day, just 1.1% was purchased with double-digit prices—just 0.2 bcf. More infrastructure will go a long ways to alleviating those swings, but it is important to put them in context.
4. Regional Leaders Are Focused on Expanding Infrastructure:
Regional leaders fully understand the importance of expanding infrastructure. As Teri Viswanath, an analyst at BNP Paribas, explains: There is a “known problem with insufficient pipeline capacity to meet the growing demand for gas in the Northeast.” New England governors are pressing plans to expand pipeline infrastructure, many echoing the recent call from Sen. Ed Markey (D-MA) “to bolster our capacity to bring natural gas into New England.”
5. Projects Are Underway to Ease the Northeast Pipeline Bottleneck:
Spectra Energy’s New Jersey-New York pipeline expansion brought an additional 800,000 mcf/d of delivery capacity online late last year. When operating at capacity, that’s enough gas to heat 8 million homes. And, progress continues, Spectra's Algonquin pipeline will expand their existing system as far north as Boston. And Kinder Morgan’s proposed “Northeast Expansion Project,” if completed, could increase capacity by an additional 15 percent.
6. BOTTOM LINE:
With colder days surely ahead this year and in the years to come, Northeast energy decision makers must act quickly to ensure there is adequate infrastructure for the region to take advantage of its massive supplies of affordable natural gas. The benefits of natural gas are clear: to our economy, environment and energy security.