A Blizzard of Meetings
The winter energy situation in New England has led to a blizzard of meetings, including an all-day meeting sponsored by FERC and held in Vermont, the New England Winter Gas-Electric Forum. The last time FERC held a meeting of this kind in New England was ten years ago.
Quoting Utility Dive on the conclusion from this meeting:
“We’re going into this winter basically crossing our fingers and hoping,” FERC Commission James Danly said
A Mild Winter with Sky-HIgh Prices
The best explanation for all these meetings is the graph at the head of this post. This slide was part of a slide deck that ISO-NE staff presented to the NEPOOL Markets Committee on July 8, 2022: “Considerations for Winter 2022-2023 ISO Presentation.” I discussed this presentation before, in my blog post LNG for the Winter in the Northeast. I am discussing it again because all the recent meetings (the FERC meeting was 9 hours!), presentations, and discussions are people explaining their opinions of this situation in the Northeast for this winter. They have informed opinions, interesting opinions, and so forth. But the actual situation is described in that slide deck.
The slide at the head of this post shows what the Northeast can expect, The chart shows projected forward prices for several types of energy, based on S&P research. The highest line is for the future wholesale price of electricity at the Mass Hub in New England. The electricity price rises to almost $300 per MWh, which is 30 cents per kWh (price on the left side of the chart). The other prices are for different types of hydrocarbon fuel: those prices are shown by energy value: $ per MMBtu. The natural gas price, for pipeline gas at the Algonquin Hub in New York, goes up to around $35 MMBTU.
For context, about natural gas. At the Henry Hub in Louisiana, natural gas has spent most of the last twenty years between $2 and $6 per MMBtu. and is now over $8. (It reached prices higher than $8 in 2008. It has never been higher than $14.)
What about other fuels? The chart in the slide contains two more lines: the cost per MMBTU of distillate (think diesel fuel) and residual oil (think heating oil). Neither of these prices shows any dramatic change. Both prices fall below the natural gas prices, starting in December of this year.
Looking at this chart, we can see the reasons why ISO-NE decided not to bother with a winter reliability project this year. With sky-high prices for electricity and high prices for natural gas, power plants will buy oil as the economically reasonable thing to do. This assumes of course, that enough power plants can burn oil. My recent post on this subject started with a graphic of the MW of power plants with stored fuel that have shut down since 2013. Five thousand MW of power plants with fuel on site have shut, and three thousand MW have opened. Unfortunately, the new plants (dual-fueled) can store far less fuel on-site. The closed plants (including nuclear plants) kept much more fuel on-site.
Once Again, LNG
We need LNG in the Northeast. Slide 11 (of the slide deck described above) says that the average LNG use in New England has been 32 BCF per year. That is about eleven 3 BCF LNG tankers. Assuming we use the same amount this year, we will be using more BTUs of LNG than fuel oil. Many of these tankers unload cargo at the Everett LNG port in Massachusetts. The Everett LNG port is scheduled to be shut down in two years. It would be shut down because Mystic Station (located conveniently near the LNG port) would no longer be operating.
As I noted above, the recent meetings were full of opinions on what this all means. In the FERC meeting, Chairman Richard Glick wanted a broader focus on the future. Glick was a lobbyist for Iberdrola in the past, and he is a great champion of the Energy Transition. As quoted in RTO Insider, Glick said: “If we spend all our time thinking about how we’re going to keep the Everett LNG facility open … today will be a failure,”
Everett LNG port: A resource
In contrast, ISO-NE is thinking very hard about keeping the LNG facility open. Shortly before the September 8 forum, ISO-NE issued the following Problem Statement and Call to Action on LNG. A quote from that statement:
Most immediately, the region must ensure the continued operation of the Everett LNG Facility to maintain reliable electric and natural gas service for New England consumers. (emphasis in the original.)
So what will happen to Mystic and its LNG facility? Mystic has a Cost of Service agreement (a Reliability Must Run type of agreement) until May 2024. For this winter, Mystic will be open, and the LNG port will be open. LNG can be imported to the Northeast this winter. We will be competing with the whole world for the LNG, but at least we will be in the game. The LNG facility may close in 2024. Or it may not.
At least for this winter, I taking FERC Commissioner Danly’s advice. I am crossing (my) fingers and hoping.