The availability of heating oil and related fuels was the key to protecting New England residents from dangerous electrical blackouts this winter, according to a recent article on Forbes.com.
The Forbes article draws heavily on a recent report by ISO New England, the operator of the regional power grid, that highlights severe supply challenges for natural gas in the region. “Demand for gas in New England has risen significantly over the past several years, driven by residents and businesses converting to natural gas for heating purposes and the increased use of the fuel to generate electricity,” ISO New England reported last month. “However, the existing natural gas pipeline infrastructure was not designed to serve this increasing demand, which has resulted in pipeline constraints at times of heavy demand.”
The ISO reported that cold weather caused demand for natural gas to soar. “In fact, at times, all five natural gas pipelines that serve New England were operating at or near full capacity. Some of the pipelines saw record throughput,” the agency reported.
The supply constraints caused natural gas prices to spike. “The heavy demand for natural gas combined with a constrained delivery system caused extreme volatility in gas prices,” ISO New England reported. “Gas prices during December, January and February averaged $19.33 per million British thermal units (MMBtu) at the Algonquin pipeline delivery point in Massachusetts—almost double what they were during the 2012/2013 winter. … In January, the average natural gas price rose to $24.19/MMBtu at the Algonquin delivery point, the highest average price in more than 10 years. The daily gas price spiked to a high of more than $78/MMBtu on a day in January.”
“The sustained high prices resulted in an uncommon reversal of the relative price of oil and natural gas—for much of the winter, gas was often more expensive than oil,” the ISO reported.
As gas prices soared, power companies turned to distillate petroleum fuels such as heating oil to keep the power flowing in New England. “The economic consequences were bad, but not as bad as they would have been without oil,” Forbes reported.
“Use of fuel oil by generators in New England kept gas prices considerably lower than other parts of the Northeast during several cold weather events,” Forbes reported. “If anything, oil seems likely to become more – not less – critical for maintaining reliability in the near-term future.”
To read the Forbes article, click here.