Full Title: New England Energy Market Outlook: Demand for Natural Gas Capacity and Impact of the Northeast Energy Direct Project
Author(s): ICF International
Publisher(s): ICF International
Publication Date: September 1, 2015
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Description (excerpt):
CF International (“ICF”) was engaged by Kinder Morgan Inc. (“KM”) to analyze the New England natural gas and power markets and the need for new natural gas supplies and capacity to serve the region. As part of this study, ICF was also asked to analyze potential energy market, reliability and other benefits that may arise from the construction of their proposed Northeast Energy Direct (“NED”) pipeline project to serve the New England region. As described in more detail in this report, the NED market project would originate at interconnects with interstate pipelines near Wright, New York and terminate at interstate pipeline interconnections near Dracut, Massachusetts.
In this study, ICF projects natural gas demand and supply in New England through 2035 and assesses the demand/supply capacity balance on a daily basis for discrete years. Emphasis is placed on understanding the demand for capacity during the winter season, when natural gas is in high demand as a fuel for heating and power generation. Sensitivity analyses consider the implications for capacity under both normal and “design” weather conditions.1 The design weather condition is analyzed because it is a utility planning standard that recognizes the essential nature of services and the consequences of disruptions under extreme weather conditions — since a few hours of electricity disruption could result in loss of life and economic loss worth hundreds of millions of dollars, it is important to know what the system can tolerate. NED’s benefits to the New England electric market are estimated for the 10-year period after the project is placed into service. Findings and conclusions integrate base case analysis produced using ICF’s proprietary market models and market data.
ICF’s analysis of energy demand/supply trends supports a finding that New England faces the risk of persistent and growing natural gas supply constraints, absent new sources of capacity. Given the current structure of the regional energy markets, such risks could disproportionately affect electricity markets, raising economic and potential service reliability concerns for consumers across the region. This report provides quantitative assessments of the timing and magnitude of the impending gas supply constraints, and the potential benefits associated with the development of new pipeline capacity that NED offers. NED’s contribution to reduced and more stable gas prices is derived from providing incremental transportation access to economic natural gas supply sources.