Cheap gas, regulatory uncertainties, and a technology revolution are re-making the U.S. utility industry. Top executives at three very different companies—CMS, NRG, and the Midwest ISO—share their...
Transmission expansion is only part of the remedy for system constraints.
few markets for a few periods during the year.” 7
These recent and potentially long-lasting decreases in natural gas prices and congestion could result in significantly reduced electric congestion over the long term. Additionally, as gas becomes the marginal fuel in more places, due to lower prices and the potential implementation of carbon pricing, congestion might be further reduced. New natural gas pipelines also further can reduce congestion by bringing natural gas to local gas-fired generators. This can be the equivalent of electric transmission when natural gas is the marginal fuel that sets the electricity price. This would impact the Northeast, one of the areas that transmission advocates claim is in need of additional transmission. Further, policymakers mustn’t ignore the added benefit of lower gas prices for heating customers, a feature of policy that might be unique to the Northeast with its high concentration of gas heating customers.
New, clean, efficient natural gas generation also can be built in load centers. Approximately 2,000 MW of new generation has commenced operation in New York City over the last nine years, and an additional 550 MW is expected to begin operation sometime next year. 8 Older and less efficient generating units in New York City, totaling approximately 1,000 MW, have retired. The new gas plants are at least 25-percent more efficient than existing baseload plants. 9
These changes in the natural gas market are especially important in light of the recent Department of Energy 2009 congestion study that identifies the Mid-Atlantic region as a “critical congestion area,” specifically highlighting southeastern New York as the single greatest regional challenge. 10 The DOE’s conclusions are based on outdated data and should be revisited in light of more recent studies and changes in the natural gas market.
Recent NYISO studies show there are no reliability needs in New York and that while additional transmission may be beneficial, or useful in some amount, it isn’t a critical need, and not currently justified by the economics. 11 As demonstrated by the NYISO study, the consumer cost to relieve congestion can be greater than the congestion itself (see Figure 1) . Moreover, natural gas prices continue to change, and will continue to affect congestion. And recent natural gas price forecasts are lower on average than the prices that were used for the NYISO congestion study.
Electric transmission investment must continue, but shouldn’t be regarded as a panacea for achieving all energy goals. Electric transmission facility investments can, and should be, part of future energy infrastructure investments, but examining the overall impact on fuel mix and customer supply costs is an indelible part of the equation. In particular, relief from electric transmission congestion could come more quickly and more cost-effectively from energy efficiency, lower natural gas prices, new gas pipelines, and new efficient natural gas plants.
1. The service area of Con Edison’s subsidiary, Orange and Rockland Utilities Inc., includes New Jersey and Pennsylvania. The small amount of generation owned by Con Edison (totaling approximately 700 MW) is associated with the plants that Con Edison owns and