Why you’ll pay for Beacon Hill’s pipeline folly
COMING SOON to your electric bill: a pipeline tax.
When members of the Legislature, egged on by Attorney General Maura Healey, blocked financing for a new natural gas pipeline into New England in 2016, they claimed to be saving money for ratepayers and helping the environment.
But nearly the opposite has happened instead. And now the damage — environmental and financial — is starting to pile up.
The environmental toll this year has been eye-popping: Greenhouse gas pollution exploded during this winter’s cold snap, leading generators to burn 2 million barrels of oil, forcing the region to rely on imported Russian gas, and sparking a mini-revival for the region’s moribund coal industry. In January New Hampshire burned more coal than New York, according to federal statistics.
All that extra pollution was also expensive. Energy cost totaled more than $700 million compared with the same period last year; if past cold winters are any guide, that premium will trickle down to consumers’ electric bills next winter.
Now, in a potential additional cost, a power plant and liquefied natural gas importer in Everett is demanding extra financial support to stay in business — a foretaste of what’s likely to come as long as Massachusetts continues to block regional efforts to relieve pipeline shortages.
The costs to the region’s consumers, and the needless environmental damage, are the direct result of Massachusetts elected officials’ decisions. And those costs should lead the Legislature to rethink its stance and join efforts by other New England states to expand the region’s pipelines — before federal regulators and the region’s grid operator start taking decisions into their own hands.
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The problem stems from a success story: Massachusetts, and the rest of New England, built a fleet of cleaner gas-burning plants over the last two decades, which have lowered electricity prices, reduced greenhouse gas emissions, and made renewables like solar and wind more viable by providing an on-demand, dispatchable fallback on days when it’s not sunny or windy. Emissions from the power sector have plummeted, outpacing reductions from cars and houses.
But when there’s not enough natural gas available, those newer plants don’t operate — and suddenly 1999’s energy grid wheezes back to life. On cold days, including the extended frigid period this winter, the region snaps back to dirtier coal- and oil-burning power plants.
Many of those coal and oil plants are financially marginal and overdue for retirement. Yet by keeping pipeline constraints in place, Massachusetts has ensured that New England still needs those dinosaurs. That has forced the region’s electricity grid operator, ISO New England, to look for ways to cajole them into staying in business.
That’s what just happened in Everett. In late March, the owner of the money-losing Mystic Generating Station announced that in 2022 it would mothball the 2,000 megawatt plant, which runs off oil and liquefied natural gas imported by ship, both of which are unaffected by pipeline constraints — unless it got a rescue commitment. “We’re not in a position to continue to suffer losses while we wait for a long-term fix,” Joe Dominguez, an executive vice president of the owner, Chicago-based Exelon, told the Globe.
ISO quickly stepped in and said it would rescue the plant — with ratepayers footing any costs. Mystic is the Commonwealth’s single biggest generating facility. Losing it in 2022, said Vamsi Chadalavada, the grid’s chief operating officer, would pose “an unacceptable fuel security risk to the region during the winter months.”
The costs of that intervention are unclear, and will depend partially on the weather. The difference between what the company bid in the last capacity auction — the annual process whereby power plants name the minimum price they would need to stay in business — and the actual market-based price would amount to about $15 million annually.
But there’s a wildcard: Exelon also just announced it would buy the liquefied natural gas import terminal in Everett from the French energy giant Engie, and Dominguez said Exelon would also seek to recover the costs of operating the terminal, since they’re part of the cost of fueling the plant. (Exelon, he said, had nothing to gain, since any revenues would also be passed back to ratepayers. “We’ll have no incremental profit opportunity. We’re in a pure treading water standpoint,” Dominguez said.)
By itself, any additional costs to keep the Mystic plant operating might be a drop in the bucket. But a cost-recovery arrangement there could give other generators in New England ideas. And the long-term fix in the works may leave lawmakers wishing they’d okayed the pipeline.
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The long-term fix is a market reform ISO New England is expected to consider this year that would provide new incentives for generators that offer “fuel security” to the electric grid. That’s a hazily defined term that generally means generators either keep their fuel on site or have firm arrangements to get it on demand. By definition, intermittent renewables like solar and wind don’t qualify, since there’s no way they can promise the wind will be blowing or sun will be shining at the moment they’re needed. Instead, under most definitions of “fuel security,” coal, nuclear, and oil generators would cash in.
Potentially, such reforms could also provide an incentive for those new gas-fired power plants to contract for pipeline capacity, so that they’d be considered secure. Right now, almost all those generators just buy whatever is left over from the interstate pipelines that already serve New England. That’s why their supplies get so precarious during cold snaps: Gas utilities have first dibs on pipeline gas, and use almost all of it when homeowners crank up their thermostats. Algonquin, one of the major pipelines serving New England, said last year that less than 4 percent of the natural gas supplied to gas-fired electric generators in New England came under firm contracts.
But many gas-fired generating plants also have the ability to burn oil, and the ISO’s rules are fuel neutral; generators might also just take any incentives for greater fuel security as a cue to stock up on oil.
The better strategy would be for Beacon Hill to do what it failed to do in 2016: Join with Connecticut and Rhode Island, which have already authorized pipeline financing, to ensure that the region’s fuel security problem is solved in ways that mitigate the environmental damage as much as possible. Until battery storage capacity becomes viable on a much bigger scale, that means natural gas. A ratepayer-financed pipeline would cost money, but would also result in lower energy costs; even opponents like Healey concluded that ratepayers would come out ahead.
Opponents of the ratepayer-financed pipeline plan have argued that it would both lock the region’s electric grid into fossil fuels deep into the future and become stranded assets. Both criticisms can’t be valid, and neither need be. The state’s electric utilities are legally required to obtain an increasing share of electricity from renewables, new pipeline or not; state-sponsored projects like the ongoing hydro and offshore wind procurements would be unaffected.
And if demand for natural gas for electricity generation declines in the future, any capacity that’s freed up could still be put to good use: About a third of homes in New England, and about a quarter in Massachusetts, still heat with oil, and states across the region want to switch homeowners from oil to gas as part of their climate mitigation plans. Unlike emissions from electricity, which are way below 1990 levels, emissions from buildings have barely budged.
Blocking pipelines was pure symbolism. But the resulting emissions — and the resulting costs that Massachusetts legislators imposed on their constituents and the rest of New England — are all too real.