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 June 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

Cat Financial Announces Second-Quarter 2014 Results

Cat Financial reported second-quarter 2014 revenues of $728 million, an increase of $34 million, or 5 percent, compared with the second quarter of 2013. Second-quarter

General Dynamics Gets $67mi Order from Peruvian Govt.

The Peruvian Ministry of Defence has awarded a USD$67 million contract to General Dynamics Land Systems-Canada for 32 Light Armoured Vehicles (LAVs) for the Peruvian Marines.

BW Offshore to Fully Own FPSO Petroleo Nautipa

Following to BW Offshore's announcement of 9 July 2014, BW Offshore has signed a sale and purchase agreement with Yinson to take 100% ownership of the FPSO Petroleo Nautipa,

Energy

Turkey Approves EIA Report for South Stream’s Offshore Section

The Ministry of Environment and Urban Planning of Turkey approved the Environmental Impact Assessment (EIA) Report and issued a positive opinion of the EIA results

Iain Conn to Leave BP

BP today announced that Iain Conn, Group Managing Director and Chief Executive, Downstream, is leaving the company and is to step down from BP’s board by the end of the year.

Rosneft Produced 1st Lot of Fischer Tropsch Synthesis Catalysts

Rosneft has proved its leadership in national GTL (gas-to-liquid) technologies development. First pilot batches of Fischer Tropsch synthesis catalysts have been

Fuels & Lubes

Nation’s Vessel Operators Join EPA as SmartWay Affiliate

The American Waterways Operators, a 350-member trade association representing the U.S. tugboat, towboat and barge industry, announced today that it joined the SmartWay Transport Partnership,

Phillips 66 Marine Fueling Facility Nears Completion

Phillips 66’s previously announced marine over-the-water fueling facility at its Richmond, Calif. terminal is nearing completion. The facility, located on Canal Boulevard, and known as Pier No.

ABS, MPA to Collaborate on Maritime R&D

ABS and the Maritime and Port Authority of Singapore (MPA) signed a memorandum of understanding (MOU) today to promote maritime research and development (R&D) and innovation.

LNG

ABS, MPA to Collaborate on Maritime R&D

ABS and the Maritime and Port Authority of Singapore (MPA) signed a memorandum of understanding (MOU) today to promote maritime research and development (R&D) and innovation.

GTT Wins DSME Order for 9 More Icebreaking LNGCs

Gaztransport & Technigaz (GTT), a designer of membrane containment systems for the maritime transportation and storage of Liquefied Natural Gas (LNG), announced

Wilhelmsen Secures Inert Gas System Orders

Breakthrough order in Japanese shipbuilding market sees largest ever capacity Maritime Protection IG units delivered for leading domestic owners. Wilhelmsen

Logistics

Nation’s Vessel Operators Join EPA as SmartWay Affiliate

The American Waterways Operators, a 350-member trade association representing the U.S. tugboat, towboat and barge industry, announced today that it joined the SmartWay Transport Partnership,

House Subcommittee Hearing Highlights “Dismal State” of U.S. Icebreaking Capability

At the July 23, 2014, hearing of the House Subcommittee on Coast Guard and Maritime Transportation on “Implementing U.S. Policy in the Arctic” the committee chairman, Rep.

Thome Is the First to Sign up to IMPA Act

Leading integrated ship management service provider Thome Ship Management has become the first ship management company to join IMPA ACT, the responsible supply chain management initiative,

 
 
Naval Architecture Offshore Oil Pipelines Pod Propulsion Port Authority Ship Electronics Ship Repair Ship Simulators Shipbuilding / Vessel Construction 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: 0.0900 sec (11 req/sec)