New England’s over-reliance on gas-fired power is the cause of big spikes in electricity prices this winter, the Sierra Club said in a paper published Tuesday.
The report “Fossil-Fueled Rates,” by the consulting firm Strategen, argues for increasing renewable generation and electrification to help customers save money, using this winter and its high prices as a case study.
“Far from being a reason to delay or avoid electrification, the recent electricity price spikes in New England ultimately demonstrate the risks of continuing to depend on an energy system reliant on volatile commodities like fossil gas,” the report says.
According to the Sierra Club’s Sarah Krame, the environmental group commissioned the paper to help educate policymakers and ratepayers about why electric bills have been so high this winter.
“We’ve all noticed the skyrocketing price of electricity in New England. It’s obviously an area of concern, and we’ve heard the concern expressed from policymakers: ‘How can we promote electrification if the price of electricity is so high?’” said Krame, a staff attorney for the Sierra Club’s environmental law program. “I think this paper is really helpful in highlighting that the cost of electricity is very high because we’re over-reliant on fossil gas.”
The paper also tries to explain why the impacts on gas rates have been muted compared to electricity prices, laying out the process through which gas utilities “true up” prices up to a year after incurring their costs.
Customers might feel the impact of volatility later in their gas bills, even though they’ve been relatively stable compared to electricity bills so far this winter, Krame said.
The Sierra Club and Strategen said the solution to the high prices is to build more renewables with lower marginal costs, and then electrify.
In the first three months of 2022, wholesale power prices in New England rose to an average of $137/MWh, an 83% increase over 2021, according to ISO-NE data. Eversource Energy doubled its residential electric supply rate from 12.1 cents/kWh to 24.2 cents/kWh for its customers in Massachusetts and Connecticut.
Rates were especially high in New England because of its reliance on gas, the report argues; the proportion of gas in New England’s fuel mix is roughly 20% higher than the percentage in the country’s fuel mix as a whole. The average settlement price at Henry Hub in January 2022 was up 62% from January 2021. In New England, the report says, the hike was even more pronounced: “Gas prices in New England in January 2022 were approximately 400% higher than they were in January 2021.”
Renewables have “lower marginal production costs” than gas, the report notes.
“As wholesale power prices become less heavily influenced by fossil gas costs, customers will have an opportunity to further reduce their exposure to gas cost spikes by electrifying appliances that currently run on fossil gas directly,” the paper says.
Electrification “can eliminate up to 100% of a customer’s direct gas demand, providing a pathway to completely remove New England residents’ dependence on the fuel,” it continued.
Strategen’s Brad Cebulko, one of the report’s authors, said in a statement that “transitioning New England’s electric supply to clean, abundant renewable energy sources and prioritizing the electrification of residential energy needs holds the promise to pay considerable and enduring dividends to residents for decades to come.”