Entergy’s recent decision to decommission Vermont Yankee’s 620MW of nuclear electricity generation by the end of 2014 brings to light a growing problem for New England’s electricity grid—reliability. Since 2003, New England has increased its reliance on natural gas for electricity generation by 30%. The Vermont Yankee announcement means that New England ratepayers will be even more beholden to the fluctuations of the natural gas markets and the intermittency of when the wind blows. More fuel diversity for reliable, affordable base-load power is needed.
The New England Independent System Operator (ISO-NE) recently stated: “The retirement of this large nuclear station will result in less fuel diversity and greater dependence on natural gas as a fuel for power generation…the ISO has identified New England’s dependence on natural gas for power generation and the potential retirement of generators as key strategic risks, and is developing solutions to address these and other strategic challenges.”
Compounding the problem is the limited natural gas pipeline capacity in New England. Right now, most of the firm supply for natural gas capacity is contracted to local distribution companies (LDCs) for home heating fuel. This means that in the winter when the thermometer drops, LDCs are first in line for natural gas and electricity generators are left to fight over what is left—often at a price premium. That price premium is passed onto the utilities, competitive suppliers and ultimately the ratepayers. This past winter, due to tight restrictions on natural gas supply, marginal rates for electricity soared to 20 cents per kilowatt-hour. Even this summer, during a July heat-wave in the Northeast, marginal rates soared to 40 cents/Kwh—all because of our overreliance on natural gas that is magnified by New England’s geographical location near the end of the pipeline. At least in the near term, the possibility of supply disruptions, electricity price spikes and blackouts is going to go higher until natural gas pipeline capacity is expanded – and even then it may not be enough.
In 2012, natural gas and nuclear generation accounted for approximately 80% of the electricity generated in the region. If nuclear plants continue to close, coal plants shutter and we can’t gain access to natural gas supply–where is inexpensive and reliable power going to come from? Some will argue for increased renewables—namely solar and wind projects, but they are very expensive resources, requiring massive taxpayer subsidies. Not only is the cost prohibitive, but they are intermittent power sources—not the base-load power we need to replace sources like Vermont Yankee. The intermittent nature of wind and solar also require natural gas combustion turbines to be on “spinning reserve” which does nothing to mitigate the natural gas supply shocks that plague New England. Compounding the problem is that those reserve units still have to be paid to be ready, which means ratepayers get hit twice – once for expensive wind power and then again for the “spinning reserve” charges.
One generation source that can provide us with affordable and reliable base-load electricity is large-scale hydropower. States like Washington, Oregon and Idaho, which have large-scale hydro as a prominent generation source in their electricity portfolios have some of the lowest electricity costs in the country—in some cases less than half of what New England ratepayers pay.
One project that could provide this type of relief to the region is the proposed Northern Pass project, which will bring 1200 MW of reliable, affordable, base-load hydroelectric power from Canada. There are still many questions officials need to ask about the project such as: What is the status of the Power Purchase Agreement between PSNH and Hydro-Quebec? Do we know what ratepayers will pay for this PPA? Are ratepayers at risk for the cost of construction for the project? Will New Hampshire ratepayers, who are most impacted by the project’s infrastructure, receive direct benefits from the project through the PPA? Will Northern Pass benefit ratepayers throughout New England by lowering the marginal rates paid by the New England Independent System Operator?
These questions notwithstanding, those who oppose Northern Pass based on the transmission corridor would be remiss to overlook the potential benefits to not only reliability, but also the affordability of hydroelectricity provided by the Northern Pass Project. The likelihood of new nuclear or coal plants being built in New England is slim-to-none. Combine that with a restricted pipeline capacity that will handcuff natural gas generators and you have limited options to a dwindling base-load power supply that has become over-reliant on natural gas. ISO has gone on record as stating that we are going to have to replace an expected 8,000MW of retired capacity in the not-too-distant future. With the closing of one of the last nuclear plants in the region, Northern Pass is going to have to be part of the solution.
Marc Brown is the Executive Director of the New England Ratepayers Association, a nonprofit dedicated to protecting ratepayers.
(A version of this column originally appeared in the Connecticut Post.)