Update on New England natural gas system study

Two whitepapers recently published as part of Phase Two of the study

Since identifying the region’s reliance on natural gas for electricity production as a key strategic risk for New England in 2010, a number of studies on the capability of the region’s natural gas system to serve increasing demand have been conducted and are continuing to help the ISO and the electric industry better understand this challenge and its effect on power system reliability.

Phase One

In 2011, ICF International, on behalf of ISO New England, conducted an assessment of the ability of New England’s natural gas system to serve the combined demand of both the gas and electricity sectors through 2020. The analysis focused on the availability of gas transportation during the highest peak demand day in the winter and summer and sought to quantify the amount of natural gas supply available to natural-gas-fired generators after all firm contracts held by local gas distribution companies and others were met.

The results confirmed what the ISO and others in the industry have been concerned about: that on a peak winter day, not enough gas transportation capacity remains after all firm contracts have been served. Further, the regional gas system is in very tight balance on a winter peak day even before any gas sector demand growth is assumed. This suggests that, unless the regional pipeline infrastructure is expanded, gas supply capability is inadequate to satisfy regional electric sector gas demands on a winter peak day through 2020.

Some other observations from the gas system study:

• New England’s gas delivery system is in much tighter balance on a winter peak (design) day than it is during a summer peak day
• The projected deficits in gas supply apply only to the regional power sector; gas supply capabilities are adequate to meet core firm gas demands

Read more about the objectives, inputs, and study results in the Phase One ICF presentation and full report.

Phase Two

Building on the results and findings of the 2011 natural gas study, the ISO and ICF initiated a second phase of study that includes several components: two recently published whitepapers and a continuation of the Phase One study elements to assess additional “sensitivity cases” for a broader look into how the regional gas system would perform under different scenarios.

Two whitepapers now available
The first whitepaper, Gas-Fired Power Generation in Eastern New York and its Impact on New England’s Gas Supplies, explains how regional natural gas pipeline constraints can lead to gas price volatility in New England and describes how natural gas-fired generators in New York and New England compete for Marcellus shale gas supplies. The analysis indicates that New York gas generators have several competitive advantages to access gas supply over New England gas generators: the geographic location—New York generators are connected to the pipelines upstream of New England generators and are therefore closer in proximity to the gas supply; and their wholesale energy market schedule—New York ISO’s market timing allows for generators in New York to know their commitment schedule earlier, giving them earlier access to the gas trading markets. See an overview presentation of the findings.

The second whitepaper, Gas Demand-Side Management in New England, assesses the region’s natural gas sector efficiency programs (also referred to as demand-side management, or DSM programs) and their effect on natural gas demand in the region. The paper concludes that natural gas demand-side management has had a relatively minor impact on total natural gas consumption; savings resulting from these programs in 2013 are estimated to be less than 1% of total gas local distribution company (LDC) demand. The whitepaper also notes that while DSM programs are aimed at reducing an individual customer’s use of natural gas, they are also likely to result in an overall increase in customer growth (and natural gas demand growth over time), because they encourage consumers to switch to natural gas from other fuel sources. See an overview presentation of the findings.

Phase Two study continues: reviews additional sensitivity cases
While Phase One of the study focused solely on the ability of the existing natural gas infrastructure to deliver gas into New England on a single peak demand day, Phase Two expands the scope of study to include additional inputs such as what would happen to the Phase One results if regional imports of liquefied natural gas were significantly decreased. Phase Two also explores the ability of the regional natural gas pipeline system to serve gas demand for both heating and electricity production on a near-peak day, with no additional gas injects into the system from local gas distribution companies’ peak-shaving facilities (LNG or other gas storage facilities that can provide additional fuel supply during peak gas-demand periods).

In addition, Phase Two will assess the impact of the ISO’s long-term energy-efficiency forecast on the results of Phase One and Phase Two analysis as well as quantify the duration of risk for electric sector gas deliveries resulting from pipeline constraints or supply-side deficiencies.

This portion of the study is still underway and is scheduled to be presented to regional stakeholders in the coming months.