MARLBOROUGH, Mass. — Natural gas — and even renewable gas — will be crucial to the national economy and the New England electric power system for years, industry experts told participants at the Northeast Energy and Commerce Association (NECA) 2019 Fuels Conference on Thursday.
If the gas cannot arrive by pipeline, it will arrive by “virtual” pipelines, such as trucks, barges or tanker ships, participants heard.
In her first speech since leaving FERC a month ago and moving back to the Boston area, former Commissioner Cheryl LaFleur shared her perspective on changes she’s seen in the natural gas world in the past decade. Earlier in September, Lafleur was elected to a three-year term on ISO-NE’s Board of Directors. (See LaFleur Elected to ISO-NE Board.)
“Most of our work at FERC over my terms was driven by three big changes. The first is the growth of natural gas; the second is the growth of renewables, storage and demand-side technologies; and the third is the growing understanding of and concern about the climate impacts of energy,” LaFleur said.
Climate is the most prominent of those three issues today, she said.
“But over the sweep of the past decade, I would make a pretty strong argument that the changes in the growth and availability and the affordability of domestic natural gas were the biggest change driver,” LaFleur said.
Gas supply constraints were an issue when Lafleur joined FERC in 2010, and the commission received petitions to build half a dozen LNG import terminals. But as the shale revolution took off and gas production kept increasing, industry players began to think about exporting instead of importing, she said.
People at the time saw natural gas as an environmental hero, cutting emissions as it displaced dirty coal and fuel oil, but the perception shifted when gas became so cheap that it started threatening the margins of nuclear plants and even baseload hydropower, which had been thought of as unassailable, LaFleur said. Suddenly gas was the villain.
“With the growth of pipeline construction, particularly in highly populous regions that were not traditionally producing regions, came an increased focus on the environmental costs of the pipelines, especially the methane leaks,” LaFleur said.
She urged people who operate pipelines to “follow the safety rules,” for an incident of carelessness by one firm taints the reputation of every firm.
Toward a Greener Future
On the Trump administration reversing environmental policies and procedures from the Obama era and earlier, LaFleur said, “My belief is that the long-term trend is still toward a greener electric system and more concern about climate, but it’s obvious to anyone who owns a TV that there’s no national consensus on the climate, that it’s a challenge, or that we need a solution.”
“It’s been a wedge issue that really changed the operation of what has been a bipartisan commission that did most of its work unanimously.
“In Washington, the same people talk to each other in the same echo chamber,” LaFleur said. “The climate-focused people go to their meetings and other people go to their meetings.”
It’s important to listen to people with opposing views and try to understand them, she said.
In response to a question on the states’ rights battle between California and the Trump administration on car emissions, LaFleur said. “If you look at the environmental rules, I believe they were written to set a baseline and allow states to do more. A state could have stronger rules, but it has to meet this environmental baseline.
“You’re not going to put the genie back in the bottle once states that have set their targets,” she said. “Conceptually I am more of a federalist, but you have to look at the situation honestly.”
Although the natural gas industry is at its most robust period ever historically, it’s still subject to much uncertainty, said Jack Weixel, senior director at IHS Markit.
“The ability to build pipelines in various parts of the country is increasingly more difficult,” Weixel said. “Domestic demand growth, as is evident very clearly here in New England, is limited. Basically, that is pushing incremental growth to the export market. LNG exports have come on in a big way and are going to continue to do so for the foreseeable future.”
However, “if you were to stop drilling new wells in the U.S., you’d see production fall off by 28 Bcfd,” Weixel said, cautioning that a federal mandate to stop such drilling would “take a third of the industry away.”
Supply Constraints
Michael Sloan, managing director of the natural gas and liquids advisory services group at ICF, said he has been talking with a number of utilities, including Consolidated Edison, about what pressures they’re facing and the potential for non-pipe solutions to address capacity issues.
“A lot of utilities in the Northeast and in other areas have very significant capacity investment programs,” Sloan said. “Those investments will add significantly to the rate base, and there is a concern about the long-term recovery of those costs, the long-term usefulness of those assets from some of the stakeholders in the process, and the regulators.”
Utilities in different parts of the country are banning new gas connections, and they ask if non-traditional means will enable them to meet customers’ peak energy needs in a cost-effective, reliable and timely fashion, he said. “If the answer is ‘no’ to any of the parts of that question, it is not an effective non-pipeline solution.”
Jordan Stone, principal at Rhode Island-based real estate developer Peregrine Group, said he and his partner panicked last January upon hearing that National Grid might not be able to deliver the gas they had promised to their $29 million Hammetts Wharf hotel project in Newport, for which they had just broken ground.
“As part of the due diligence for a developer, before you close on your debt you go to each utility … and ask for ‘letters to serve,’” Stone said. “We had those. We quickly learned that those letters don’t mean a whole hell of a lot.”
Their initial heating and cooling choices for the hotel were between gas-fired heat pumps, an all-electric, variable refrigerant flow system, or propane, whose tanks could not be placed so close to the water, he said.
National Grid eventually gave assurances to supply the gas, probably with “a non-pipeline solution so this would not happen again,” Stone said. “We’re going into this with our fingers crossed that they can actually deliver gas in January or February, when it’s cold, and they won’t have another shutdown like they did earlier in 2019 when they shut off supply to 7,100 homes and business due to lack of supply.”
Michael Holt, senior director of business development at NG Advantage, a Vermont-based shipper of CNG, said that “as we see gas moratoriums in the northeast, we want to recognize what is causing them.”
“One cause is a lack of gas supply in New England during the coldest periods… and the other part of the problem could be that some of these moratoriums are actually being encouraged by local folks who are more satisfied with the status quo and are not interested in infrastructure development for fossil fuels or economic growth.”
There is growing demand in the northeast, and New York City has been going through a major transition over the past decade away from heating oil and to natural gas, so demand is rising rapidly while supply remains constrained, he said.
“In New England it matters more about the critical hour or day, because most of the time the gas supply is fine,” Holt said.
David Kailbourne, COO of NiCHe LNG, a Pennsylvania-based joint venture between Dominion Energy and REV LNG, said that trucking gas is fast, efficient, affordable and safe.
“We are able to get the gas to customers when and where they need it within a day, rather than the yearslong process of permitting and building a pipeline,” Kailbourne said.
He said his firm handles a range of projects, from bridging a pipeline outage down south and directly serving a chemical plant to supplying a utility in Texas with an LNG solution for a small town reliant on wells with declining yields.
A Changing World
Tamara Nameroff, general manager for policy and advocacy at Shell New Energies, said Shell trades more than 7 Bcf of natural gas a day, controls more than 9,500 MW of generation capacity, and sells more than 270 million MWh of power each year.
The deep pockets of a global company like Shell are one reason why it’s important for them to invest in renewable energy, because it has the balance sheet to “move the needle” on renewables, Nameroff said.
Regarding ambitious state goals to achieve net-zero emissions, Nameroff said, “Parts of the world are changing quite quickly. We found that the policy around that is moving much faster than it might have even a decade ago, so that’s helping us respond more quickly. We need some time to move the ship, but it’s always good to keep the tension on us to get us to move. If you don’t set the bar high enough, you don’t compete.”
One nascent area of development is renewable natural gas (RNG), which is pipeline quality gas made from biomass or other renewable sources that have lower lifecycle CO2 emissions than geologic natural gas.
Brian Jones, senior vice president at M.J. Bradley and Associates, said, “Only when the grid is around 85% zero-emitting will it equal the value of RNG, so [that’s] a pretty compelling emissions signature for RNG.”
Lizzy Reinholt — senior director of sustainability and corporate affairs at Summit Utilities, a small natural gas company that operates in Maine, Missouri, Arkansas, Oklahoma and Colorado — described the company’s RNG work in Maine, where she said about 60% of the state’s homes are heated with heating oil: “just huge emissions.”
Summit in 2012 began “building out natural gas infrastructure in areas where other utilities just wouldn’t go, like the suburbs of Portland and the Kennebec Valley area, where we have a number of industrial customers that were using a lot of oil to power their facilities,” Reinholt said.
“Since coming to Maine, we estimate that we’ve reduced carbon emissions by about 69,000 metric tons a year, which is like taking 15,000 cars off the road,” she said.
About 12% of the natural gas used in Quebec could be replaced with RNG with the technology available today, said Julien Sauvé, RNG and renewable energy adviser at Énergir, the largest natural gas distribution company in Quebec.
“By 2030, with the inclusion of the second technology of gasification of organics, it’s more than two-thirds of all the gas we distribute that could come from renewable sources,” Sauvé said.
– Michael Kuser