Motivating natural gas pipeline construction into New England

RBN Energy is one of my favorite sources of education about US energy markets. They publish a daily, song title-themed blog that focuses on a particular energy-related topic and provides useful analysis with a light, often humorous touch. That’s not easy to do when writing about a topic that is as controversial and impactful as energy.

RBN’s May 18 post was titled Please Come To Boston—New England’s Ongoing Gas-Supply Dilemma.

It introduces/promotes a new report produced by the consultants at RBN with the same title as the blog post. That report discusses a topic that has been covered here in some detail – the spiky behavior of natural gas prices in New England.

RBN Energy’s primary recommended solution is building more pipeline capacity into New England. That will enable abundant and affordable natural gas from the Marcellus shale formation to flow more easily into the region.

As much as I appreciate the energy education I’m getting from RBN, I’ve noticed that their preferred method of dealing with the nuclear energy aspect of the market is to ignore it. The ‘N’ word is conspicuously missing from the blog post about New England’s energy supply and it only appears three times in the detailed report.

Here is an example quote where one would have thought that nuclear energy would receive at least a mention.

Mitigation Efforts. Fear that wintertime gas supply shortfalls could leave the region woefully short of generating capacity prompted ISO New England, the electric grid operator, to implement a Winter Reliability Program (WRP) that in its latest iteration (for the winter of 2014-15) provided incentives to gas-fired power plants to stockpile LNG and dual-fuel power plants (ones that can burn either gas or oil) to stockpile oil that could be used to run their plants if gas was not available. ISO New England also is putting in place “pay-for-performance” requirements that will incent generators to line up firm gas supply to meet their winter needs. Are these solutions or just stopgaps?

Competitors to Gas. No energy source operates in a market vacuum. While natural gas has emerged as the go-to power plant fuel in New England, regional powers-that-be are exploring alternatives to going all-in on gas, such as building more wind and solar capacity and ramping up imports of Canadian hydropower. If the most ambitious of these plans were to pan out, future demand for gas would sag, and so would the need for incremental pipeline capacity.

The detailed report takes it as a given that nuclear power is as unpopular as coal in New England and the rest of the northeast. It assumes that the remaining plants will eventually shut down without any potential for replacement. That result would probably please most of RBN’s subscriber base, which the publisher describes as 18,000 + energy execs every day who are making connections “across energy markets – oil, NGLs, Gas.”

One of my self-assigned duties is to remind energy market participants that nuclear energy exists as both an option and as a potential competitor. I’m confident enough in its inherent capabilities that some of the good, well-resourced, and competitive people who populate the industry will break out from the pack and begin seriously thinking about making investments in developing those capabilities.

I’ve sort of given up hope that nuclear industry lifers will be the source of the kind of dynamic thinking and business model development that is required to build a true Renaissance based on the technological advantages provided by an energy dense fuel that produces reliable heat with exceedingly compact waste products that can be safely stored as long as needed.

Here is a comment that I left on RBN’s blog post.

While discussing natural gas price variations in New England, you overlooked the effect that the region’s antinuclear activism has had on the market.

In the 1960s and early 1970s, New England had a hugely volatile energy market dependent on imported oil, coal, and some natural gas. A logical response was to build a substantial nuclear energy capacity in the region.

Starting in the early 1970s, New England – and New York – became a major battleground over nuclear energy development. The Clamshell Alliance and other groups worked hard to halt nuclear energy expansion and then to shut down the capacity that had actually been completed and was operating.

Seabrook was delayed by half a dozen years and Unit 2 was never completed. Shoreham (820 MWe) was completed but never allowed to enter commercial operation. Indian Point 1 (275 MWe), Millstone 1 (660 MWe), Yankee Rowe (185 MWe), Maine Yankee (900 MWe) and now Vermont Yankee (620 MWe) have all been shutdown well before their mechanical end of lives. There is enormous pressure from the activists all the way up to the Governor of New York to shut down Indian Point 2 and 3. Pilgrim is under severe pressure as well.

Ginna (610 MWe) and Fitzpatrick (838 MWe) are both on the list of plants that are threatened by economics – mostly due to the availability of “cheap gas.”

A rough thumb rule is that each 1,000 MWe of nuclear plant capacity that is shut down or not built adds 0.2 BCF/day of natural gas demand.

Is it possible that natural gas interests are quietly – or actively – cheering the actions of the antinuclear activists in order to soak up some of their excess production from fracking the Marcellus formation?

Is it possible that some of them want to firm up their pricing power?

Rod Adams
Publisher, Atomic Insights

As of the time I’m publishing this post, may comment had not been moderated and made available to other readers, but when/if it is, I will provide an update.

Note: In addition to its perceptive analysis, I like RBN Energy because they have an unusual business model compared to many other consulting groups focused on the energy market.

They seek scale by providing value to a large number of customers at an affordable price. All of their in-depth reports are available to people that purchase a “Backstage Pass”, which is available for just $75.00 per month. That might sound like an expensive subscription to some people, but industry insiders that are used to paying several thousand dollars for detailed reports should find it cheap to purchase a pass for a month or so of detailed study.

I finally broke down and purchased my pass this morning. While respecting all copyrights, I’ll still be able to share some of what I learn from these oil and gas industry experts.

In keeping with RBN’s music themed approach, here is an inspirational tune explaining my interest in their information services.

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