Monday, February 18, 2019

Overheard at NECA 2018 Fuels Conference

MARLBOROUGH, MASS. — Fuel security public policy and the role of traditional and non-traditional fuels in New England highlighted discussions at the Northeast Energy and Commerce Association’s 2018 Fuels Conference on Thursday.

Joseph Fagan | © RTO Insider

“Natural gas is as pertinent and important as ever, particularly in New England,” Day Pitney attorney Joseph Fagan said.

“If it’s not easy — in this region especially — to site pipeline or gas infrastructure, it only makes sense that we’ll see virtual transportation become more important. It makes sense that LNG is going to become more of an issue,” Fagan said. “How is [ISO-NE] going to address fuel security and reliability when we have the reality that we have no new pipelines coming into this state … and we have a large plant [Mystic] that — unless things change — may be retired?”

NECA held their 2018 Fuels Conference on Sept. 27. | © RTO Insider

In July, FERC tentatively accepted a cost-of-service agreement between ISO-NE and Exelon for Mystic Generating Station Units 8 and 9, ordering an expedited hearing process on unresolved issues related to cost justification (ER18-1639). (See “Fuel Security,” Overheard at ISO-NE Consumer Liaison Group Meeting.)

Brian Jones | © RTO Insider

The goal to reduce greenhouse gas emissions is driving policy in the region, said Brian Jones, senior vice president of energy consultancy M.J. Bradley & Associates.

“A lot of the resources that ISO New England manages today are a product of that and have to do with air quality and GHG,” Jones said. “Fuel supply is an obvious one, and pipeline constraints into the region are another. We face a lot of challenges, with six states that have pretty aggressive policies on energy and environmental issues, and I don’t think that’s going to change.”

Virtual Pipelines, LNG, RNG

Andrew Bradford | © RTO Insider

A big chunk of heating demand met by gas cannot be substituted with renewables or energy storage, and Elon Musk has not yet invented a battery-powered heater, said Andrew Bradford, CEO of energy consultancy BTU Analytics.

“What the latent natural gas demand is in New England is a good question,” Bradford said. “We look at 0.75 Bcfd in winter, 1.5 Bcfd max, and 0.5 Bcfd on the peak price day and see there could be demand for around 2 Bcfd.”

Given the constraint on pipeline supplies, “for natural gas end-users in New England, there is no silver bullet,” he said.

There could be a large truck though. The lack of gas infrastructure has created a market for Xpress Natural Gas, a compressed natural gas distributor that now sends trailer trucks from its 40-Bcfd capacity terminal in Montrose, Pa., to inject into the Iroquois Pipeline at a terminal in New York.

Gary Ritter | © RTO Insider

Gary Ritter, XNG’s vice president of sales, said the company serves customers from Prince Edward Island to the Mid-Atlantic states, both companies lacking pipeline access and “to facilities on the pipeline grid, bringing incremental supplies to capacity-constrained areas.”

The Montrose terminal last winter loaded approximately 25 MMcfd filling some 60 trailers at an average capacity of 400 Mcf each.

Jonathan Carroll | © RTO Insider

Shaving of natural gas peak demand is the top use of LNG in New England, such as at National Grid’s waterfront facility in Salem, which holds 12 million gallons of LNG, the equivalent of 1 Bcf of natural gas, said Jonathan Carroll, director of U.S. business development for Energir, formerly Gaz Metro, the largest gas distributor in Quebec.

“This facility or facilities like it are very common in New England,” Carroll said. “As a matter of fact, there are close to 40 of these peak-shaving facilities in the region. Some actually have liquefaction and can produce their own fuel; others do not.”

In addition, he said there are currently three LNG projects under development in the region: Granite Bridge, Northeast Energy Center and REV LNG.

NECA Fuels Conference fuel security natural gas

Kenzie Schwartz | © RTO Insider

McKenzie Schwartz, a National Grid gas analyst, said the market for renewable natural gas (RNG) is taking off because of support from state and federal policies, such as EPA’s Renewable Fuel Standard.

RNG is derived from biomass and is fully interchangeable with natural gas.

“We believe this can help National Grid move our industry toward a lower-carbon future,” Schwartz said.

National Grid pioneered technology in 1982 as the first utility to allow an RNG project to interconnect. Its Staten Island Landfill project is still in operation, injecting 2,000 dekatherms/day into the distribution system.

Electrification: How Much?

NECA Fuels Conference fuel security natural gas

Emily Lewis | © RTO Insider

Emily Lewis, senior policy analyst for Acadia Center, an environmental advocacy organization, said that if states push renewable energy policies, wind and solar energy could generate 45% of New England’s electricity in 2030, versus 24% under current trends.

Lewis and Richard Murphy, energy markets director at the American Gas Association, debated how much electric heat pumps can reduce GHG emissions.

Repeating findings she shared earlier in the month at the ISO-NE Consumer Liaison Group meeting in Connecticut, Lewis said electrification of space heating, under current trends, would reduce GHG by 3% by 2030 and by as much as 16% under an accelerated policy scenario. (See Overheard at ISO-NE Consumer Liaison Group Meeting.)

NECA Fuels Conference fuel security natural gas

Rick Murphy | © RTO Insider

Murphy countered with an AGA study that contends aggressive residential electrification of heating and cooling would reduce national GHG emissions by only 1 to 1.5% in 2035. (See State Regulators Hear Challenges, Promise of Electrification.)

There are three common themes in efforts to achieve deep decarbonization of the energy sector, he said. One is to dramatically increase efforts around energy efficiency. The second is to advance policies that would require up to 100% of all the electricity generated in the U.S. to come from renewable resources. The third is to replace all end-use applications from natural gas or fuel oil to electric alternatives, he said.

“The region uses more than twice as much energy in peak winter months as in the summer, so what would the overall cost be of converting residences away from natural gas and to electrification?” Murphy said. “When we look at the data in the residential market, we really start to think about the impacts on consumers.”

Approximately 60 million homes in the U.S. would have to be converted from natural gas heating to electricity, he said, which is a “massive undertaking” for such a modest environmental gain.

Oil Still Relevant

NECA Fuels Conference fuel security natural gas

Kevin Grant | © RTO Insider

Oil comprises only 1% of New England’s power generation on average. But the fuel remains relevant at times, such as a cold snap last winter when oil accounted for 37% of the region’s electricity generation, said Kevin Grant, an oil trader at Sprague Energy.

The ability of oil to fill the fuel gap in winter is compromised by the cost of maintaining inventory, delivery logistics and the changed nature of the market, he said.

Stephen Leahy | © RTO Insider

“Power generators, while still important, no longer drive the commercial oil market,” Grant said. “A fuel supplier is going to gear their operations to the customer who comes in 300 times a year, not once a year. Logistics is also an issue, with a limited number of barges and trucks. Transportation companies have right-sized their assets in response to market demand the same as everyone else.”

Stephen Leahy, vice president of the Northeast Gas Association, said, “Natural gas is the last fossil fuel left standing for power generation, but oil is still the No. 1 fuel consumed overall in Massachusetts in terms of total Btus. It’s mostly in the form of gasoline, but it’s still oil.”

Nancy Seidman | © RTO Insider

How are we going to balance energy needs with environmental goals? asked Nancy Seidman, senior adviser to the Regulatory Assistance Project.

“The first principle is to put energy efficiency first,” Seidman said. “What it’s done for New England has been huge. … To have demand actually dropping is fabulous.”

— Michael Kuser