The recent spell of frigid weather has driven up natural gas prices in New England and New York, exposing the region’s vulnerability to price shocks caused by a shortage of pipeline capacity, according to an analysis by Reuters.
Rises in the spot gas market for natural gas forced buyers in New York and New England to pay prices as much as 20 times higher than the rest of the nation. “The volatility shows that nearly a decade into a drilling boom that has flooded much of the country with gas, a lack of pipelines has left some areas vulnerable to shortages this year and potentially for years to come,” the article states.
“There's a reason why New England is the most volatile power and gas market in the country,” Addison Armstrong, senior director of market research at Tradition Energy in Stamford, Conn., told Reuters. “It has been slow on the uptake and now we’re behind the curve in terms of getting additional capacity brought in there.”
In New York on Monday, natural gas traded at an average of $55 per million British thermal units on the Transco pipeline, with highs for the day reached $90, the article states. “The average price broke highs first recorded in 2001, years before the region began importing gas from the Marcellus,” Reuters wrote.
Despite years of supply bottlenecks, only one announced project is targeting New England states, according to Reuters. “Spectra Energy’s Algonquin Incremental Market project will expand an existing system through Connecticut and Massachusetts carrying 342 million cubic feet of gas per day. The pipeline is not scheduled to be completed until November 2016, however, and will not reach past Boston,” the article states.
It is a tough break for the six New England states that have been quick to change from coal to gas-powered electric plants, according to Reuters. New England is switching half of its coal-fired power generation to natural gas by 2017, the article states.
To read the Reuters article, click here.