What’s the issue?
Over the last eight years, New England environmental activists have been urging the states to shut down coal and nuclear power plants, and the coal plants have mainly been replaced with natural gas-fired plants.
Why does it matter?
However, those same activists have been resisting all gas pipeline expansions into the region, so now it finds itself with limited pipeline capacity, which drives up natural gas prices and leads to increased usage of oil in dual-fired facilities.
What’s our view?
During the first month of this year, ISO New England reported that oil-fired plants were used more in the first part of this year than in the past three years combined. The extensive use of oil in place of natural gas means that in the first 37 days of this year, New England power plants produced in excess of 600,000 metric tons of CO2, which could have been avoided if the environmental purists would allow pipelines to connect the region to Pennsylvania and West Virginia production. This problem is growing as other states are retiring coal plants and replacing them with natural gas-fired power plants, and actions expected at FERC’s open meeting on Thursday are expected to make the situation even worse.
Over the last eight years, New England environmental activists have been urging the states to shut down coal and nuclear power plants, and the coal plants have mainly been replaced with natural gas-fired plants. However, those same activists have been resisting all gas pipeline expansions into the region, so now New England finds itself with limited pipeline capacity, which drives up natural gas prices and leads to increased usage of oil in dual-fired facilities.
During the first month of this year, ISO New England reported that oil-fired plants were used more in the first part of this year than in the past three years combined. The extensive use of oil in place of natural gas means that in the first 37 days of this year, New England power plants produced in excess of 600,000 metric tons of CO2, which could have been avoided if the environmental purists would have allowed pipelines to connect the region to Pennsylvania and West Virginia production. This problem is spreading to other regions as coal plants are retired and replaced with natural gas-fired power plants, and actions expected at FERC’s open meeting on Thursday are expected to make the situation even worse.
It is understandable why the environmental purists object so much to coal-fired plants because, according to studies by the U.S. Energy Information Administration (EIA), coal plants put out the most greenhouse gas emissions per kWh of fossil-fuel fired power plants, 2.23 pounds per kWh, compared to 2.13 pounds for oil-fired power plants and only 0.91 pounds for gas-fired power plants. The opposition to nuclear plants, however, clearly has nothing to do with their impact on climate change as they are essentially a carbon-free source of power. However, the attacks have been mounted against both in New England, leading to a reduction in the electric production for each fuel source since 2014.
As seen above, nuclear production fell by almost 10 million MWh between 2014 and 2021 and coal production almost disappeared entirely in that time frame. We previously noted in EPA Urges FERC to Follow Pseudoscience in its Review of Pipeline Applications that pipeline capacity expansions over that same period have brought substantial “climate benefits.” As natural gas production from shale and tight resources increased, it lowered the cost of natural gas production and made it competitive with coal for electric power generation. The problem for New England, however, is that as they replaced much of that coal production with natural gas-fired power plants, the environmental purists and the state of New York blocked almost every pipeline expansion that would have allowed deliveries from the Marcellus/Utica region to satisfy the increasing demand for natural gas in the region.
This has led to not only a physical constraint on the gas to the region, but also to substantially higher prices for natural gas in the region as compared to neighboring states. The lack of pipeline capacity led FERC Chairman Glick last October to “implore all entities with capacity supply obligations in the [Northeast] to take all necessary measures to ensure they meet their commitment to serve load this winter.” Many of the power plants in the region are able to burn either oil or natural gas and so the implications of the chairman’s request were clear — get ready to burn some oil to keep the lights on.
The result of these efforts by environmental purists to force coal and nuclear out of the mix and block any increase in the supply of natural gas has become apparent in the most recent fuel mix reports from ISO New England.
As seen above, the mix of fuels between oil and natural gas changed dramatically in the first 37 days of this year, with oil-fired generation going from almost nothing to over ten percent. In fact the total generation from oil-fired plants was so high in the first 37 days of the year, it exceeded the total production from such plants over the last three years combined. Using the ghg data from the EIA, we are able to calculate how much more ghgs were produced by this shift in the production from natural gas to oil. The production from the oil-fired power plants in the first 37 days of the year would have emitted just over one million metric tons of carbon dioxide. Had this same amount of electricity been generated by natural gas instead, the carbon dioxide emissions would have been less than half of that. More than 600,000 metric tons of unnecessary carbon emissions were produced in New England so far this year because of the choices made to retire nuclear and coal plants, while simultaneously restricting access to Marcellus/Utica gas. According to the EPA’s Greenhouse Gas Equivalencies Calculator, that is the equivalent of adding 134,000 cars to the roads of New England for an entire year, just to power the region for a single month.
A similar scenario is spreading around the country. For instance, North Carolina’s Clean Energy Plan calls for it to reduce electric power sector greenhouse gas emissions by 70% below 2005 levels by 2030 and attain carbon neutrality by 2050. The vast majority of these near-term reductions are to be achieved by retiring coal-fired power plants and replacing them with natural gas-fired power plants as seen below.
However, a key source of natural gas for the region, the Mountain Valley Pipeline, has been tied up by environmental purists for years. We last discussed that project in November in A Fresh Look at MVP and Its Projected In-Service Date, but since then it has suffered a couple of major setbacks in the courts and our current projection is that it has less than a 50/50 chance of being in service by the end of next year and there is about a 20% chance that it will eventually be canceled. If it is further delayed or ultimately canceled that will likely lead to delays in the ability of North Carolina to reduce its ghg emissions as well.
Similarly, in the long-term reliability assessment by the North American Electric Reliability Corporation (NERC) that we recently discussed in NERC Speaks to Future of Natural Gas - Will FERC Certificate and GHG Policies Reflect It?, NERC noted that the Midcontinent Independent System Operator (MISO) area could face the retirement and resultant loss of over 13 GW of resource capacity over the 2021–2024 period. According to NERC, at that level of retirements, a capacity shortfall is likely unless resource additions increase beyond current projections. MISO is not the only area with substantial coal retirements planned, however.
As seen above, the PJM region is also facing substantial coal retirements as well.
The future for reducing ghg emissions by supplanting coal and oil-fired plants with natural gas may grow even more discouraging following the FERC open meeting scheduled for this Thursday. The open meeting agenda indicates that the Commission will vote to consider its revised certificate policy statement and its policy regarding the mitigation of ghg emissions from pipeline projects. As we noted in NERC Speaks to Future of Natural Gas - Will FERC Certificate and GHG Policies Reflect It?, a key indicator of whether FERC is going to make the situation better or worse is whether Commissioner Phillips joins with the other two Democrats to “expeditiously” issue these policies. The fact that they are on this week’s agenda is a very bad sign for the industry.