New England's energy crisis and the case against 'one-of-the-above' energy policies

A cold winter has turned back the clock on clean air in New England, pushed energy prices through the roof and made a persuasive case for rethinking the Bay State’s “one-of-the-above” energy policies.

Massachusetts Governor Deval Patrick has not been shy about claiming claimed credit for the avalanche of accolades recognizing his state’s leadership on green energy. That avalanche includes winning the top spot in the American Council for an Energy Efficient Economy‘s annual ranking of the most energy-efficient states for the past three years running. It also includes the 30-fold increase in solar power capacity installed in Massachusetts over the past five years.

“The clean energy industry grew nearly 7% in Massachusetts [in 2011], and added thousands of kilowatts of renewable generation and thousands of jobs – not by accident but because we passed the Green Communities Act and joined the world’s fundamental shift towards efficiency and renewable energy,” said Patrick during his State of the Commonwealth speech in 2012.

While the Bay State has been remarkably successful at promoting renewable energy and energy efficiency, it may soon become the poster child for the perverse consequences of pursuing myopic energy policies.

objective of state energy policy is protecting the environment and strengthening the economy, the past three months have made a mockery of Patrick’s track record on clean energy. The average price of natural gas in New England reached a record high of $24.19 per million British thermal units (MMBtu) in January, 34% higher than the previous record of $18.01/MMBtu. The average price of electricity also reached a record high of $162.88 per megawatt-hour (MWh) in January, 46% higher than the previous high of $111.64/MWh that occurred after hurricanes damaged the Gulf Coast’s natural gas infrastructure in 2005.

But the price spike is arguably less troubling than the associated air pollution spike. During the past several decades, the share of electricity generated using oil in New England has dropped from 17% in 1973 to less than 1% in recent years. That trend has turned on its head in the past 18 months as limited pipeline capacity forced electricity generators to replace natural gas with residual and distillate fuels for power generation.

For two days in late January, New England generated nearly one quarter of its electricity using oil, according to the Independent System Operator for New England (ISO-NE). The icing on the cake is that New England residents had to pay oil-fired power plants a subsidy of about $75 million to ensure those plants bought enough fuel oil to keep the lights on this winter.

The subsidy, which the awarded to oil-fired generators as part of the ISO-NE’s most recent Winter Reliability Program, compensated power generators for burning about 2.3 million barrels of oil, or the equivalent of 1.4 million MWh.

In other words, New England is paying a premium to pollute. For better or worse, the U.S. Energy Information Administration has predicted that it will likely continue to do “[a]bsent infrastructure changes that significantly increase the capacity of natural gas suppliers to meet peak winter loads in the region.”

That is why the regional grid operator requested the owners of one the region’s largest and dirtiest power plants, the Brayton Point coal-fired power plant in Somerset, MA, not to shut the facility down in 2017.
Connecticut regulators have led the charge for expanding regional natural gas infrastructure, but it virtually impossible to address regional energy issues in New England without Massachusetts.

With nearly half of New England’s total population, Massachusetts accounts for 46% of the region’s total electricity consumption, which makes its energy policies especially important for shaping regional energy markets. This is especially so in the context of natural gas infrastructure, given the Bay State’s massive fleet of gas-fired generators.

Boston?

http://www.forbes.com/sites/williampentland/2014/03/05/new-englands-energy-crisis-and-the-case-against-one-of-the-above-energy-policies/?ss=business:energy