Cost, Reliability, and Risk
March 7, 2017
By: Cameron P. Wake, Matt Magnusson , Christina Foreman, Fiona Wilson
New England does not need to increase energy use to continue to grow its economy. From 2005 to 2015, real state GDP in New England grew by 9.7 percent while energy use fell by 9.6 percent. Over the same time period real GDP for the entire U.S. grew by 15.2 percent, while energy use fell by 3.4 percent.
COST While the price per kilowatt hour of electricity in New Hampshire has been higher than the national average for decades, the average residential electricity bill is equal to the national average and the average commercial electricity bill is lower than the national average. New England has adapted to higher electricity prices via improvements in energy efficiency and a transition to a less energy-intensive economy. The energy intensity of the New England economy is much lower than the national average.
https://carsey.unh.edu/publication/perspective/nh-electricity-markets New England’s electrical grid has proven itself reliable during periods of high energy demand associated with cold winter temperatures, including the extreme polar vortex event of January 2014.
RELIABILITY New England’s electrical grid has proven itself reliable during periods of high energy demand associated with cold winter temperatures, including the extreme polar vortex event of January 2014.
RISK During this period of rapid transformation in the global and regional energy markets, there is significant stranded cost risk to electricity ratepayers for large infrastructure investments with uncertain return on investment. This includes publicly-funded expenditures for new natural gas capacity.
Over the past decade a number of factors have transformed global and national energy markets. Access to low-cost natural gas has been a significant part of this trend. Nationally, natural gas-fired power generation was expected to have exceeded coal-fired power generation for the first time in 2016,1 and in New England about 50 percent of electricity is now generated from natural gas.2 With natural gas now such a large part of New England’s energy mix, there is a concern that the demand for heating and electricity during cold periods will cause spikes in wholesale electricity prices and that demand may be greater than the available pipeline capacity to deliver natural gas.3 The region’s utility industry has proposed the expansion of pipeline capacity to meet this seasonal increase in the demand for natural gas.
In light of the trends influencing energy markets, this perspectives brief and a related report examine the cost of electrical power in New Hampshire and New England, the reliability of the electrical power system in terms of its ability to meet demand, and the risk New Hampshire ratepayers might face from various proposals to secure or increase the supply of electricity. We find evidence that near-term levels of demand and supply pose no threat to grid reliability, that current pipeline capacity is adequate, and that better contracting practices and other “soft-infrastructure” changes combined with the promotion of energy efficiency and renewable energy will have at least as large a return on investment as expanded pipeline capacity, without exposing ratepayers to higher electricity rates stemming from expensive infrastructure investments."
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