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Cold spell drives up wholesale electricity costs as power plants burn oil

  • Merrimack Station in Bow is shown in 2014. Three years ago, a pair of week-long cold snaps similar to the current deep freeze pushed the power grid to the edge of rolling blackouts because the supply of natural gas – the fuel that produces about half the region’s electricity – was being used for heating, forcing many gas-fired plants to stand idle. AP file



Monitor staff
Monday, January 01, 2018

This year’s version of the polar vortex has driven wholesale electricity prices through the roof and given fuel oil a new lease on life as a way to create power, but so far is not straining New England’s power grid as did its 2014 namesake.

“The New England power system is currently operating under normal conditions, but the cold weather is having an effect on wholesale energy prices and which power plants are being dispatched,” Matthew Kakley, a spokesman for ISO-New England, wrote Friday in an email response to a Monitor query. ISO-New England is the group that oversees the power grid in the six-state region.

“Sufficient capacity is expected to be available to meet demand and reserve requirements, and there’s no request for public conservation at this time,” Kakley wrote.

The group’s seven-day forecast says available generation of almost 27,000 megawatts will easily exceed expected demand of 20,000 megawatts, although the margin is small enough that an emergency such as a major power plant going offline could cause officials to scramble. A megawatt is the amount of power used by roughly 1,000 homes.

Wholesale prices of electricity have soared during this cold snap, topping $200 per megawatt-hour, more than 10 times their usual level. Prices for natural gas have also spiked, roughly tripling in one day. These are wholesale prices paid by the owners of power plants, not retail prices paid by customers, but these wintertime spikes can eventually raise retail prices.

Three years ago, a pair of week-long cold snaps similar to the current deep freeze pushed the power grid to the edge of rolling blackouts because the supply of natural gas – the fuel that produces about half the region’s electricity – was being used for heating, forcing many gas-fired plants to stand idle.

Since then, ISO-New England has instituted a number of rules known as the winter reliability program. They include incentives for dual-fuel power plants to store enough fuel oil so they can switch from using natural gas if need be, and what is known as demand response, a program in which large commercial users of electricity agree to ramp back their demand quickly if a shortage looms.

On Friday, as an example, a full 37 percent of the electricity produced in New England came from plants burning fuel oil. Usually that figure is less than one percent.

Even if brownouts aren’t likely, conservation remains a good idea, and not merely to save on power bills. The New Hampshire Department of Environmental Resources sent out a tweet Friday saying “do your part to keep winter peak electric load down all this week,” urging people to avoid unnecessary electricity usage between 4 and 8 p.m.

Their concern involves pollution. When electricity usage peaks, less efficient and more polluting plants are turned on, increasing air pollution. People living near coal-fired Merrimack Station power plant in Bow, for example, will notice that it has been running far more often than usual lately.

A relatively small amount of reduction in peaks of usage can produce large benefits in curbing pollution.

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com.)