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Sunday, March 17, 2013

New England came close to ‘rolling blackouts’ in January and February snowstorms

NASHUA – “This was a normal January and February, yet we came very close to having rolling blackouts. What happens if we have a very cold winter? We could be in trouble.”

That startling assessment was made Wednesday by Michael Harrington, who as a commissioner with the New Hampshire Public Utilities Commission knows more about the region’s electricity system than most people. ...

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NASHUA – “This was a normal January and February, yet we came very close to having rolling blackouts. What happens if we have a very cold winter? We could be in trouble.”

That startling assessment was made Wednesday by Michael Harrington, who as a commissioner with the New Hampshire Public Utilities Commission knows more about the region’s electricity system than most people.

Just as startling is the fact that his audience, consisting of representatives from the power industry, large corporations and regulators who are also knowledgeable about the electricity system, wasn’t startled.

The standing-room-only crowd came to the innocuously named Consumer Liaison Group meeting largely to discuss what happened in late January and early February, when bottlenecks in natural gas shipments, a shutdown of Pilgrim Nuclear Generating Station on Boston’s South Shore, and a couple of snowstorms almost overwhelmed New England’s ability to provide electricity.

ISO-New England, the nonprofit agency that manages the electricity grid throughout the six New England states, organized the meeting. A report issued described “extremely vulnerable and likely unsustainable operating conditions,” which it called “a highest-priority strategic risk for the region” that “will threaten the reliability of the power system.”

“We’re looking for solutions, and I don’t think we have anything yet,” said Harrington.

The liaison group is overseen by ISO-NE, which has several other meetings scheduled in coming months to discuss steps to ward off power shortages next winter.

News of electricity problems comes as a surprise to the New Hampshire public, which has seen no effects of it. The state suffered few outages during the winter’s two big snowstorms, and regulation provides a shield from the wild swings in wholesale power prices that have rocked the industry.

The only visible repercussion of the winter problems is the problems of PNE, an alternative electricity provider that was squeezed by sharp hikes in wholesale electricity prices, which doubled in January and quadrupled in February. PNE has been banned from providing power in New Hampshire, a topic that will be the subject of a March 20 meeting by the PUC in Concord.

Last Wednesday’s meeting at the Crowne Plaza Nashua showed that New England faces many longer-term effects, including possible increases in electricity prices to cover infrastructure costs.

As was made clear by several speakers, including Stephen Leahy, vice president for policy of the Northeast Gas Association, and Tracy Babbidge, from the Connecticut Department of Energy & Environmental Protection, the driving factor is the soaring supply of natural gas from shale formations in the U.S., particularly in Pennsylvania and New York state. Those supplies have driven down the cost of natural gas to historic lows.

That should be good news for the region, since more than half of New England’s electricity is generated by natural gas-fired power plants – far more than any other part of the country. Those plants are relatively inexpensive to build and operate, and have been replacing power plants that use other fuels, notably oil.

In a way this is good news, since wholesale electricity prices have fallen sharply in the past two years, leading to the explosion in alternative-electricity companies that allow home power bills to be cut by up to 15 percent.

The difficulty, however, is that relatively few natural gas pipelines enter New England to carry all this gas – in 2012, the region’s gas pipelines were full to the brim almost 300 days, vastly more than in past years. New England is “at the end of the pipeline,” as several speakers put it.

Further, natural gas used for heating usually has priority in pipelines.

As a result, when gas-fired power plants need more fuel in winter to increase their electricity output on an emergency basis, it may be unavailable or, due to the economics of supply and demand, prohibitively expensive. This isn’t a new situation but today’s shortage of alternative-fuel plants, pushed aside by the low cost of natural gas, means that it is far more of a problem than it would have been in past cold snaps.

The scenario came to a head in late January, when New England saw the coldest five-day stretch since 2009. ISO-NE called on power providers to generate more electricity, but those without long-term contracts for gas found themselves in a pinch, unable to get more natural gas shipped because the pipelines were already full.

According to ISO-NE, natural gas that had been selling at $4 per million British thermal units soared to $35 in late January as users without long-term contracts scrambled to find supplies. Very short-term trades were even more expensive.

Many power plants couldn’t get, or couldn’t afford, enough gas to meet ISO-NE’s needs. When ISO-NE called on other types of power plants to help out, another problem came to the fore.

Natural gas has been so cheap that power plants using other fuels, notably fuel oil, have been virtually mothballed. Oil was once the
region’s dominant power-producing fuel, and more than a fifth of New England’s electricity plants were designed for it, but few run any more because natural gas is so much cheaper.

Even those that remain open are less useful. ISO said in a report titled “Winter Operations Summary” that fuel-oil power plants no longer keep multiday supplies of fuel on hand, because they sit idle for so much of the year that such stockpiling isn’t economical.

“Almost half of those resources would become unavailable after 48 hours,” the report said.

Combined with the problems at Pilgrim Nuclear Station, which shut Jan. 21 after local power lines were downed by a snowstorm, a soaring need for power in the evening of Jan. 21 produced a sudden crunch. Reserve margins – the amount of power production held back to handle sudden emergencies – became “razor thin” in ISO-NE’s words, falling basically to nothing.

Any other strain on the grid, such as a big power line failure in the snowstorm, would have “put the region immediately into a reserve shortage” and led to steps that could have “included controlled power outages – i.e., load shedding,” the ISO-NE report said. “Load shedding” is another term for rolling brownouts or blackouts.

The situation was largely repeated two weeks later, on Feb. 8-9, when a major snowstorm drove up system usage and caused price spikes and a near-shortage of electricity output.

Although both crises were prompted by big snowstorms, the worrisome fact is that these weren’t historic storms along the lines of the 2008 ice storm or the 2011 October snowstorm. They were almost predictable and yet still caused havoc.

“Having an unusual snowstorm is not unusual in New England,” as Harrington put it.

Short-term solutions possible by next winter include paying oil-fired power plants to store more fuel and buying more gas shipments from Canada, which has a massive liquid natural gas facility in New Brunswick, and possibly pursuing incentives for oil-fired power plants to become “dual fuel” so they will run more often.

The best long-term solution would be to build more pipelines to bring a flood of natural gas, but the meeting noted financial problems blocking that investment.

Most significantly, pipeline developers generally use 20-year contracts to cover their huge costs whereas power generating stations generally use five-year contracts, which means they can’t guarantee a customer base for longer enough period to lure more pipeline construction.

ISO-NE is also debating changes in its financial operation, notably going to a “pay for performance” system that would “link revenue to performance during stressed system conditions,” giving financial incentives for electricity providers to invest in ways to overcome winter shortages.

David Brooks can be reached at 594-6531 or dbrooks@nashua Also, follow Brooks’ blog on Twitter (@GraniteGeek).