Shortage of Natural Gas to Seriously Impact New England

As we go deeper into the winter months, the demand for natural gas is increasing and U.S. shale producers are grappling to meet the requirements. The cost to heat homes this winter will be quite high, which means that Americans will need to dig deeper into their pockets to stay warm. In New England, the situation seems to be more serious as power producers can foresee a potential strain on the grid. Due to a surge in the demand for natural gas abroad, the New England region, which relies heavily on natural gas to generate electricity, is bound to suffer. 

The situation in New England

New England is competing with European countries for shipments of liquefied natural gas (LNG) after Russia put a stop to most of the gas pipeline to Europe, following its invasion of Ukraine. Hence, LNG shipments that were supplied to New England’s pipelines now go to other countries, which is causing the shortage.

The power-grid operator of the region, ISO New England Inc., has warned that there will probably be a need for rolling blackouts to balance the supply and demand of electricity. The power producers in the region lack the capacity to store fuel on site and since most pipeline supply is spent on businesses and homes, they are faced with challenges in contracting gas supplies. To fill shortfalls, most generators rely on the spot market with volatile prices, as they only procure a portion of imports with fixed prices.

Earlier in September, the Federal Energy Regulatory Commission (FERC) held a seminar in Burlington, Vermont, during which energy stakeholders outlined the possible catastrophe that could occur in New England over the winter. This, however, has been the energy industry’s concern for years because around 50% of the region has been relying on natural gas.

New England’s largest utility, Eversource Energy’s CEO, Joe Nolan has requested President Biden to help protect the region from drastic outages this winter. He wrote a letter to the President addressing the concerns of New England’s limited access to natural gas and asked him to take action.  Nolan stressed that there is a need to plan in advance and a solution has to found to this ever-growing problem.

The Jones Act of 1917

There is a federal law known as the Jones Act. This law restricts any kind of cargo ship from moving between US ports and prevents any LNG movement by ship from the Gulf Coast to New England. Nolan has requested Biden to waive this law to allow more shipment of natural gas to the ports of New England from other US ports. Under the current rules, the US is unable to deliver domestic natural gas since they don’t own any tanker ships to specifically transport natural gas. Nolan also suggested that Biden should consider issuing an emergency order under the Federal Power Act, The Natural Gas Policy Act, or the Defense Production Act. He urged Biden to direct Secretary Granholm to begin convening stakeholders “without delay” to start the process in case such an emergency situation arises.

To read the letter by Eversource Energy’s CEO Joe Nolan, click here.