Policy Obstacles to Natural Gas Delivery Pose Winter Danger

The North American Electric Reliability Corporation (NERC) just released its 2023-24 Winter Reliability Assessment and it has concerning implications for the winter ahead. 

The report highlighted many points of grid stress, especially during colder months, pointing out that, “a large portion of the North American BPS is at risk of insufficient electricity supplies during peak winter conditions”. Another key element of the report is NERC’s discussion of the importance of reliable natural gas supply chains.

When it comes to grid reliability, policymakers are imposing self-inflicted wounds. The United States has the most natural gas production in the world. But, current policy choices limit our ability to rely on domestic gas. The Jones Act makes it difficult to move natural gas around the country by ship, and the failure to permit new pipeline capacity means that moving it over land is similarly difficult. 

This need for reliable gas supplies is especially apparent in New England, which is hamstrung by the absence of good pipeline infrastructure and by restrictions imposed by the Jones Act.  The Jones Act bars the transport of goods (including LNG) between two US ports by any ship that is not US-owned, -built, -crewed, and -registered. Unfortunately, there are no Jones Act compliant LNG tankers. As a result, these obstacles make the region predominantly reliant on imports 

The NERC report highlights the limited natural gas infrastructure of New England, pointing out that, “potential constraints on the fuel delivery systems and the limited inventory of liquid fuels may exacerbate the risks for fuel-based generator outages and output reductions that result in energy emergencies during extreme weather.”

For grid operators, maintaining adequate gas supplies in cold weather is a balancing act. Some portion of the infrastructure will inevitably be taken out of service during a winter storm or an especially cold period. In these situations, even if the best infrastructure were in place, it’s still difficult to ensure reliable natural gas delivery from well-head to power plant because of the effects of the low temperatures. It’s difficult enough to maintain adequate supply during these periods, artificial constraints on energy supply only make matters worse. 

One key example of the supply issues for New England is its reliance on fuel oil for power production on the coldest days. Although most natural gas plants are capable of burning oil, they don’t often do so because it is a comparatively expensive fuel and is also not efficient for electricity generation purposes. Therefore, power plants don’t generally burn oil for power unless the grid is in a pinch for supply. In New England, this option is regularly taken on the coldest days to make up for supply shortfalls (that are created in large part by the region’s lack of gas infrastructure).

In fact, there are even some days in New England where more electricity is generated from oil than from any other source. For example, from Christmas Eve to the Day after Christmas in 2022, freezing cold temperatures throughout the Northeast resulted in oil dominating the grid. 

The use of oil for electricity, given all of its shortcomings for power plant operators, shows that something is seriously amiss on the New England grid. 

Natural gas-fired generation has reliable output, but its fuel availability is not always similarly reliable, largely due to poor policy choices. Working to ameliorate these issues by permitting new pipeline capacity and reforming the Jones Act would go a long way toward firming up reliability and resilience for winter weather events. The situation in New England serves as an example of the need for pipeline infrastructure, and Jones Act reform.