New England Energy Market – Summer Update

What a difference six months makes.  In early January, we were braving the 2017-18 North American Cold Snap brought on by a “Bomb Cyclone that delivered arctic temperatures not seen in this region for 100 years.  Fast forward six months to late June/early July, and New England was witnessing one of the longest heat waves on record with a week straight of temperatures of 90 degrees or greater.

It is not surprising that when temperatures approach 90 degrees and higher, we seek relief with more air conditioning, and that increases our demand for electricity. The ability to meet the regional electricity demands is contingent upon a number of factors, including ample energy infrastructure and fuel to run our power plants. ISO-New England – the entity that oversees the New England electricity grid – has indicated that it expects to have the resources necessary to meet the electric generation needs this summer season.  Electricity demand is forecasted to be 25,729 megawatts (1 megawatt is said to be enough capacity to power 1,000 homes), or as many as 28,120 megawatts if extreme summer conditions arise. Last summer season, peak electricity demand was 23,968 megawatts, and the all-time New England system peak is over 28,000 megawatts. If extreme weather conditions do occur, ISO-New England has a process in place to manage the power system in order to maintain system integrity and operations.

New England is heavily dependent upon natural gas as a fuel for electric generation, and natural gas’ share of the electric generation mix has gone from 15% in 2000 to essentially half of the mix today.  In New England, a few recent policy developments could affect the electric generation capacity in the region: (1) The Access Northeast Project is a joint initiative between Algonquin and Eversource Energy proposed to upgrade an existing natural gas pipeline and construct liquefied natural gas storage facilities that would provide enough natural gas capacity to support 5,000 megawatts of electric generation capacity in the region.  The New Hampshire Supreme Court recently found that the New Hampshire Public Utilities Commission erred in dismissing the petition and is sending it back to the Commission for further proceedings.  Eversource has notified the Commission that it intends to update its proposal and resubmit it to the Commission for consideration. (2) The Northern Pass Transmission Project – a $1.6 billion project proposal comprised of 192 miles of high-voltage transmission lines from Pittsburg, NH to Deerfield, NH – that would provide for approximately 1,100 megawatts of hydro-electric power to be imported into the region – was denied by the New Hampshire Site Evaluation Committee and the fate of this project is now unknown.  However, the New England Clean Energy Connect project – a $950 million, 1,200 megawatt high-voltage direct current transmission line through Maine that would provide for the importation of hydro-electric power from Canada – has won approval from Massachusetts state regulators and is continuing on with other state and federal approvals being sought. 

Many things can affect energy markets, including weather-related events and operational factors that alter energy generation and delivery. These events can arise quickly and result in significant market changes that influence your energy costs. Sprague can help you understand and manage your business in a changing energy marketplace.

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