Severe U.S. winter leaves questions for gas, power markets

marinelink.com
Friday, March 07, 2014

Natural gas pipelines and power utilities across the United States struggled for several weeks to keep lights on and homes warm through the coldest winter in decades, but it may take many months for the cost and the fallout of the so-called "polar vortex" to work through the energy chain.

As sub-freezing temperatures spread in January and February, spot natural gas prices spiked at many gas delivery points in the Midwest, Northeast and New York, pushing wholesale power prices above $100 per megawatt-hour for days at a time.

Customers will soon receive gas and electric bills, reflecting the higher cost of gas in January.

In unregulated power markets, January bills will present a "double whammy," said Nick Akins, chief executive of American Electric Power Co, one of the largest U.S. electric utilities that generates and delivers power to 5 million customers in 11 states.

"The energy price took off and they are going to get a big surprise since they are using more electricity to start with and prices went way up," Akins said.

In regulated markets, utilities may be able to pass on higher fuel costs quickly. Elsewhere, higher winter gas prices may not be seen until utilities seek regulatory approval later this year.

Across the country, the U.S. National Oceanic and Atmospheric Administration said the 2013-2014 winter season so far has been 4 percent colder than normal and 12 percent colder than last year.

While painful, those utility bills represent a sliver of the potential cost and impact of the harsh winter, gas and power industry executives said at the IHS CERAWeek conference in Houston, an annual meeting of global energy leaders.

The stress seen on both the gas and power infrastructure raises questions about fuel diversity, environmental regulation, grid operation and market structure, participants said.

Akins said 89 percent of the nearly 7,200 megawatts of coal-fired generation that AEP expects to retire in the next two years was running during the recent arctic blast.

"You have to think twice about taking capacity out of the market; that's, in effect, is what the (environmental) regulation and the market construct is doing," said Akins.

As the nation increases its reliance on gas for power generation, performance of the natural gas network should be reviewed, Akins said.

"We need to make sure that the underlying gas infrastructure is good if we are going to rely on it," he said.

The cold snap showed that the current gas market, while tested, is much more robust than during previous weather or supply events that pushed gas prices at the Henry Hub above $10 per million British thermal units for extended periods, said the head of a gas industry trade group.

"To see record-setting cold, record-setting demand for gas and daily draws from storage and we only saw (Henry Hub) gas to $6 and quickly recede shows how robust the system is," said Marty Durbin, president of America's Natural Gas Alliance.

In New England, where gas delivery was hampered by constrained pipelines, Durbin said just 1 percent of the trades for 18 billion cubic feet of gas needed on Jan. 7 came at the very high spot market price.

The severe weather showed more investment is needed to move abundant new supplies of shale gas to markets, said Gregory Ebel, president of Spectra Energy Partners

It also showed how such investment can dampen gas volatility, he said, citing a new 12-mile pipeline built by Spectra to supply gas to New York.

The new supply line reduced the premium New York customers paid for gas this winter to 13 percent over the nearby Pennsylvania market, down from a 64-percent premium seen last winter, he said.

"Are we going to get rid of (price) volatility? Probably not," said Ebel.

Lynn Good, chief executive of Duke Energy, the nation's largest utility with 7 million customers, said many lessons will be learned from the polar vortex.

"I view this as a warning," Good said. "It gives us chance to understand where the gas infrastructure is; to understand the value of very diverse resources and how well they worked. We need to stress the system every once in a while," Good said.

 

By Eileen O'Grady

Maritime Reporter January 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

NewLead Expands Fleet to 10 Vessels

NewLead Holdings Ltd. announced that it recently added five bitumen tanker vessels, expanding its fleet to 10 vessels in less than a year while performing on its

Tanker with Kurdish Crude Leaving U.S. After 6-month Dispute

After being stuck in legal limbo for six months, a tanker loaded with 1 million barrels of Kurdish crude headed east on Tuesday to leave U.S. waters after Baghdad

Hellman & Friedman Sells Out of GTT

Gaztransport & Technigaz S.A. (GTT) announces that H&F Luxembourg 1 S.à.r.l., an affiliate of Hellman & Friedman, has completed the sale of its remaining holding

Energy

Libya Returns Fuel Tanker to Rival Government

Libya's recognized government has released a tanker forced to dock at a port under its control after originally banning it from delivering fuel to its rival administration,

US Proposes Allowing Oil, Gas Drilling off Atlantic Coast

The Obama administration on Tuesday proposed allowing for the first time oil and gas exploration in a wide swath of U.S. waters off the Atlantic Coast.   The

NOIA: Draft Offshore Lease Program Both Hits and Misses

National Ocean Industries Association (NOIA) President Randall Luthi issued a statement on the 2017-2022 Draft Proposed OCS Oil and Gas Leasing Program, stating the U.

Fuels & Lubes

Tauber Oil Opens West Calcasieu Port Operations

Tauber Oil Company of Houston has become the West Calcasieu Port’s newest tenant.    “Tauber Oil is a service-oriented wholesale energy marketing company with

Tanker with Kurdish Crude Leaving U.S. After 6-month Dispute

After being stuck in legal limbo for six months, a tanker loaded with 1 million barrels of Kurdish crude headed east on Tuesday to leave U.S. waters after Baghdad

LNG

‘Landmark Year’ for RS in 2014

For Russian Maritime Register of Shipping (RS), 2014 marked the 101st year of its activities. The classification society said 2014 also marked a landmark year,

Hellman & Friedman Sells Out of GTT

Gaztransport & Technigaz S.A. (GTT) announces that H&F Luxembourg 1 S.à.r.l., an affiliate of Hellman & Friedman, has completed the sale of its remaining holding

CFE to Lift Eight LNG Cargoes

Mexican state-owned utility CFE has bought eight cargoes of liquefied natural gas (LNG), four traders said. Swiss trading house Trafigura was awarded the bulk of the volume,

Logistics

CakeBoxx, Globe Tracker Partner for Asset Tracking

Globe Tracker International, a company in global autonomous asset tracking, monitoring, remote management and data sharing services, and CakeBoxx Technologies,

Northeast Winter Storm Disrupts Shipping

Winter Storm Juno, which has brought snow and gale force winds to the North East Coast of the United States, is causing severe disruption to shipping across the entire coastline.

Carnival, China Merchants Sign MOU

MOU will explore both Port & Destination Development and Ship-Owning joint ventures with the goal of potentially launching China’s first world-class domestic cruise brand.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Naval Architecture Navigation Offshore Oil Pipelines Ship Repair Ship Simulators Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1375 sec (7 req/sec)