After years of trying to bring more natural gas to New England, the industry may finally have run out of ideas.
Since 2013 utilities and pipeline companies has tried to bring lower-cost shale gas into parts of New England with the highest gas prices in the US. It was envisioned that local electric utilities in multiple states would sign long-term contracts needed to support the construction of new pipelines and ensure less expensive fuel for merchant power plants. This included projects such as Spectra Energy’s Access Northeast pipeline and Kinder Morgan’s Northeast Energy Direct project.
But unfavorable court rulings and regulators finding fault with the approach have left the idea in tatters. The latest blow came when Connecticut regulators last week canceled a request for proposals related to the initiative. Massachusetts and New Hampshire have put their efforts on hold because of legal problems.
Industry groups have to yet to formulate a clear idea for how to move forward. Companies are “struggling” to find an answer for how to get merchant generators to purchase pipeline capacity when it would be hard for them to recover their costs, says American Petroleum Institute chief economist Erica Bowman. Pipeline companies are frustrated with the process of building projects in New England, trade group Interstate Natural Gas Association of America president Don Santa said earlier this month. Santa has previously said pipeline companies will redirect their resources away from New England if it is not “hospitable” to pipelines.
This leaves the region heading toward higher energy prices and a less reliable grid. New England gas generators have been switching to fuel oil in recent winters, a more expensive option that is still often cheaper than spot natural gas prices. And the region’s share of generation capacity from natural gas, now at 44pc, is projected to reach 57pc by 2024, or three times higher than it was in 2000.
New England leaders also appear to be losing their interest in building pipelines, which are politically challenging to build even when they have willing customers. On the same day Connecticut was canceling its gas-related request for proposals, it announced a joint decision with Massachusetts and Rhode Island to support the construction of 460MW of wind and solar energy.
The pileup of adverse rulings led Spectra this week to say that Access Northeast would be delayed at least until 2019. The company is now considering modifying the project so it would cater to local gas utilities, instead of power plants.
“We’re back to the drawing board,” said president of US transmission Bill Yardley.