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

Finance

Bollore First Half Boosted by Transport, Advertising Unit

French industrial group Bollore said first-half operating income rose 11 percent to 314 million euro because of strength at its transport business and advertising agency Havas,

CMA CGM Continues Expansion, Confirms Profits

The Board of Directors of CMA CGM Group, the world’s third largest container shipping company, met under the chairmanship of Jacques R. Saadé, Chairman and Chief Executive Officer,

Odfjell Drilling in Tighter 2Q North Sea Market

Odfjell Drilling reports second quarter 2014 financial results showing a profit of US$29-million. Profit & loss Q2 2014 Operating revenue for Q2 2014 was USD 272 million (USD 289 million),

Energy

East and South China Sea Disputes Need Creative Diplomacy

China and the United States appear headed for a damaging confrontation over the extent of China's territorial claims in the South and East China Seas. Now that

Iraqi Kurdistan Oil Shipments Reach 8.8m Barrels

Iraqi Kurdistan has shipped 8.8 million barrels of oil from the Turkish port of Ceyhan since May, Turkish Energy Minister Taner Yildiz said, as the autonomous region

BMT WBM to Showcase TUFLOW at World Bank Seminar

BMT WBM ( (BMT), a subsidiary of BMT Group Ltd, a leading international engineering and risk management consultancy, is delighted to announce that it will be presenting

Fuels & Lubes

Iraqi Kurdistan Oil Shipments Reach 8.8m Barrels

Iraqi Kurdistan has shipped 8.8 million barrels of oil from the Turkish port of Ceyhan since May, Turkish Energy Minister Taner Yildiz said, as the autonomous region

Rosneft and AVTOVAZ Strengthen Strategic Cooperation

Rosneft President, Chairman of the Management Board Igor Sechin and AVTOVAZ President Bo Inge Andersson signed an Agreement of development of strategic cooperation,

Ecospeed Fuel and Cost Saving Solutions at SMM

Ecospeed announced it will exhibit its line of fuel and cost saving solutions at SMM in Hamburg. Ecospeed and fuel savings Routine in-water cleaning results

LNG

Policy Uncertainty Threatens to Slow Renewable Energy Momentum

IEA forecast sees renewable power as a cost-competitive option in an increasing number of cases, but facing growing risks to deployment over the medium term. The

SHIPPINGInsight Extends Early-bird Registration

SHIPPINGInsight 2014 is extending the deadline for early-bird registration to Sept. 15. Attendees registering online at www.shippinginsight.com/choose-event prior to midnight Sept.

LNG Finalizes Acquisition of Bear Head LNG Project

Liquefied Natural Gas Limited today informed having finalised the acquisition of 100% of Bear Head LNG Corporation (BHLC). This follows the announcement

Logistics

Dool to Serve as Chair of SLSMC Board

The St. Lawrence Seaway Management Corporation (SLSMC) announced that Tim Dool has been named as Chair of the Board of Directors, effective September 1. Dool was

Bollore First Half Boosted by Transport, Advertising Unit

French industrial group Bollore said first-half operating income rose 11 percent to 314 million euro because of strength at its transport business and advertising agency Havas,

Iraqi Kurdistan Oil Shipments Reach 8.8m Barrels

Iraqi Kurdistan has shipped 8.8 million barrels of oil from the Turkish port of Ceyhan since May, Turkish Energy Minister Taner Yildiz said, as the autonomous region

 
 
Maritime Contracts Naval Architecture Navigation Offshore Oil Pipelines Salvage Ship Electronics 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: 0.1668 sec (6 req/sec)