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New England, which partially relies on LNG imports to cover fuel shortfalls during the winter, could see its power grid exposed to reliability issues that could necessitate rolling outages to ease the strain on the electricity system.
ISO New England Inc, the operator of the power grid in the U.S. northeastern region, warns that in case of a severe cold spell and amid global gas market volatility, consumers could face blackouts due to not enough gas for power generation.
“The most challenging aspect of this winter is what’s happening around the world and the extreme volatility in the markets,” Vamsi Chadalavada, COO at ISO New England, told The Wall Street Journal.
Spot LNG prices are sky-high and will likely move higher as winter comes, meaning that power generation firms would have to pay astronomical prices to bring natural gas to the U.S. Northeast. Europe and Asia will be competing for LNG this winter, which may leave New England with fewer LNG cargoes.
Natural gas pipeline constraints also prevent the nearby Marcellus-Utica basin, the largest U.S. gas-producing region, from sending additional supply to the Northeast. More pipeline capacity is needed for New England’s energy demand, the Interstate Natural Gas Association of America (INGAA) said last month as energy prices spike in the region.
“BandAid fixes” to New England’s gas supply, such as suspending the Jones Act to temporarily ease receipt of more LNG imports and federal assistance in paying for New England consumers’ energy bills, “are not lasting or affordable solutions to addressing electric reliability concerns,” INGAA president and CEO Amy Andryszak wrote in an op-ed in Boston Herald last month.
Meanwhile, U.S. electricity prices are rising the most in New England. According to the EIA’s latest Short-Term Energy Outlook published last week, wholesale electricity prices at major power trading hubs in the U.S. will be about 20-60% higher on average this winter.
“The highest wholesale electricity prices are likely to be in New England because of possible natural gas pipeline constraints, reduced fuel inventories for power generation, and uncertainty regarding liquefied natural gas (LNG) shipments given the tight global supply conditions,” the EIA said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.