New Study Finds No Need For Additional Pipelines In New England

December 07, 2015

A new study commissioned by Massachusetts Atty. Gen. Maura Healey has concluded that New England does not need new natural gas pipelines to guarantee a reliable flow of energy in the region over the next 15 years.

Undertaken by the economic and financial consulting firm Analysis Group Inc., the study found that while investment in new interstate pipeline capacity would generate wholesale price benefits, it would require “up-front and long-term ratepayer commitments.” It went on to say that the region will be able to meet its electricity needs through 2030, even on the coldest winter days, “with or without electric ratepayer investment in new natural gas pipeline capacity.”

The report determined that increased energy efficiency and demand response could address “the identified stressed system deficiency” and represent “the best solution from the perspective of ratepayer costs.” They would save consumers $146 million per year through 2030; on the other hand, increasing the supply of natural gas through expanded pipelines would save $133 million annually.

“New England’s existing market structure, including recent changes to address reliability during

challenging system conditions at the time of winter peak demand, will provide the resources and

operational practices needed to maintain power system reliability,” the study explained. “The region will continue to rely on natural gas as the dominant fuel of choice, but we find that under existing market conditions there is no electric sector reliability deficiency through 2030.”

In its findings regarding winter reliability, the report considered a worst-case scenario that was based on the severe cold during 2004 and assumed short-term disruptions in other fuel sources. It concluded that an additional 2,400 MW could be needed for just a few hours over nine days of extreme cold by 2029 and 2030.

“This study demonstrates that we do not need increased gas capacity to meet electric reliability needs, and that electric ratepayers shouldn’t foot the bill for additional pipelines,” Healey said. She agreed that embracing energy-efficiency and DR programs represented a better option to “protect ratepayers and significantly reduce greenhouse gas emissions.”

In its Summary of Observations, the report stated:

We find that power system reliability will be maintained with or without electric ratepayer investment in new natural gas pipeline capacity. This outcome is consistent with the current and expected future conditions facing our region. New England has maintained reliability through cold winter conditions over the past few years, and going forward, the regional grid operator forecasts declining peak demand for electricity during winter months. 

Further, recent changes to wholesale markets provide strong financial signals for resource developers and operators of existing assets to ensure unit reliability during periods of winter scarcity. In short, the combination of declining demand and the success of new market initiatives will likely accomplish intended results: power system reliability will be maintained going forward, including at the time of winter peak demand.

Healey’s study is the second this year to conclude that New England does not need additional pipeline capacity.

An August report by Energyzt Advisors, which was commissioned by an affiliate of GDF SUEZ Energy Resources, determined that ratepayer funding of new pipeline capacity would be a costly and risky proposition in terms of both ratepayer expense and a healthy energy market in New England. It found that the existing energy infrastructure in New England is more than adequate to handle the region’s energy needs.

Echoing Healey’s study, the Energyzt report said, “(C)ertain market participants have advocated for extraordinary government intervention to mandate regulated electric ratepayer funding of a new pipeline, implicitly claiming that high prices are signaling a shortage of pipeline delivery capability and a failure of the market to respond appropriately. Some have gone as far as to claim that New England gas and electric reliability are at risk. These claims are unsupported.”

It further noted, “The electricity system has maintained required reserve margins during some of the most extreme conditions over the past three winters despite numerous temporary system problems. The issue is not lack of infrastructure, but lack of commercial contracts to access existing energy infrastructure. 

In arguing against the need for subsidized pipelines, the Energyzt report also said: 

• New England has not begun to see the benefits of existing pipeline expansions already underway that will provide the region more than 600 million cubic feet per day of additional capacity.

• Existing public policy calls for diversifying the region’s energy portfolio into renewables, and continuing to implement energy efficiency, demand response, and market-based incentives. This diversification should result in low-load growth – or even load reduction – which would reduce generators’ future demand for natural gas. 

• Under projected conditions, ratepayers would be required to pay for a new pipeline that would create a glut of pipeline capacity in New England. This would likely lead to higher total costs to ratepayers and support the export of U.S. natural gas to Canada and overseas markets. 

To view Atty. Gen. Healey’s report, click here http://www.scribd.com/doc/290193152/AG-Maura-Healey-s-Energy-Study

To view the Energyzt report, click here http://nebula.wsimg.com/bb7e738fbf3b67cfc923f218fbebd118?AccessKeyId=0CF32B0C493F619624BA&disposition=0&alloworigin=1