A Few Cold Days Should Not a Pipeline Make

Tom Gilbert | January 18, 2018 | Energy & Environment
Most natural gas used by residents and businesses is bought under long-term contracts unaffected by sudden jumps in spot-market prices

Tom Gilbert
As New Jerseyans shivered through the recent cold spell, PennEast tried to use our discomfort with the wintry weather outside as one more opportunity to make a bogus case for an expensive and dangerous pipeline that isn’t needed to meet the state’s energy demands — today or in the future.

It is a knee-jerk reaction to claim that more pipelines are needed because prices increase during periods of cold weather. The industry knows better, which explains why Ralph Izzo, CEO of PSEG, told investors in November, “You don’t want to build an interstate pipeline capability for a polar vortex. It’s unnecessary. It’s expensive. There’s no need to do that …”

The connection PennEast tries to make between a cold snap and its unneeded project just doesn’t exist. And here are the facts to prove that.

Prices consumers paid for natural gas didn’t skyrocket during the deep freeze.

Sustained periods of cold weather bring higher demand for gas to heat buildings, and lead to higher spot prices, the daily market cost for gas. But most gas used by residents and businesses is bought under long-term contracts unaffected by sudden jumps in spot-market prices. It’s mostly industrial users and gas-fired electric generation plants that rely on spot markets, and they anticipate and plan for paying higher prices for some days every year.

Furthermore, regulated gas companies in New Jersey are required to hedge their purchases to protect consumers against price spikes, and had no trouble doing so through the recent cold spell.

Gas supplies were in no danger of running out.

New Jersey Division of Rate Counsel director Stefanie Brand reports, “We have not heard from any of New Jersey’s local gas distribution companies that they had insufficient gas to provide reliable service to their customers during the recent cold spell.”

On January 5, when demand came close to breaking records, PJM Interconnection, the 14-state electric power grid that includes New Jersey, said it “had no generation or transmission issues and no major issues with natural gas pipelines. All reserves were maintained.”

There are better alternatives than building excess, expensive pipeline capacity to meet temporary demand spikes.

Businesses have found less costly alternatives, such as importing liquefied natural gas (LNG) during winter cold spells, drawing on gas in storage, or switching to other fuels when temperatures drop to extreme levels for a small number of days each winter.

For example, gas pipeline experts at Skipping Stone energy consultants evaluated whether LNG imports could meet the approximately 20 days of peak winter demand in New Jersey. They found that, first, new supply could readily be brought to New Jersey using only existing infrastructure. Second, gas from PennEast’s proposed pipeline would cost more than 10 times the LNG alternative.

The bottom line is that pipelines are a very expensive and damaging way to address temporary demand spikes during cold spells.

There were no reliability issues with the regional electric grid during the cold snap.

From the beginning, PennEast has used the “polar vortex” in 2014 — extreme cold across large areas of the United States — to justify its pipeline proposal. According to PJM’s statement following the recent record cold, lessons learned from the 2014 experience made the electric grid more resilient and better prepared. PJM also reports that the supply issues that occurred in 2014 haven’t happened again, despite bouts of colder weather. That proved true during this cold snap.

Renewable energy sources will help improve the reliability of our electric grid.

Increasing the percentage of New Jersey’s energy that comes from renewables, like solar and wind, and providing incentives to reduce usage during peak periods, would further improve reliability, and reduce the state’s overdependence on natural gas. The truth is that wind and solar can make up at least half of New Jersey’s energy mix in just 12 years — reducing reliance on gas — if state policymakers take a set of achievable, affordable steps.

Remember, natural gas is a far more harmful greenhouse gas than carbon dioxide in the short run. While PennEast feigns concern that temporary jumps in coal and oil use in cold weather are environmentally unsound, its own proposed pipeline would have the same impact on emissions as building 14 coal-fired generation plants, according to the research and advocacy organization Oil Change International.

Energy experts and New Jersey’s Division of Rate Counsel have found no evidence of public need for PennEast’s proposed pipeline. Consumers would pay for the pipeline, and its owners would make huge profits from selling pipeline capacity to their own affiliates, while existing pipelines would be underutilized.

It’s ironic that PennEast is expressing “concern” about consumers’ gas bills when, on the other hand, it is those same consumers who would pay the price if its unneeded, damaging pipeline is built.

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