The Propane Story In The Midwest; The Natural Gas Story In New England; Grid Failure? Black-Outs? Regional Spread?

For background to this incredibly interesting story, start with this earlier post: propane shortage, winter of 2013 - 2014.

The stories continue:

First, from SeekingAlpha: Natural gas tops $5 for first time since 2010, demand should remain high.

• As the U.S. freezes and stocks plunge, benchmark U.S. natural gas futures topped $5/mmBtu for the first time since Aug. 2010 on expectations that continued cold weather would keep demand high for the heating fuel.
• Natl gas has moved well into overbought territory during the last few days as consumers have pumped up their thermostats, and the spike may last a while longer given that the cold snap is set to continue all of next week.

Second, Texas is responding. Houston Business Journal is reporting:

The widespread propane emergency brought on by freezing temperatures prompted Lt. Gov. David Dewhurst to sign a special declaration that allows other states to tap into Texas’ supply.

The 14-day emergency declaration waives the licensing and rules that prohibit the sale of propane to sources outside the state. The Texas Department of Public Safety has waived restrictions on the hours that propane can be transported for truckers helping with emergency relief.

The shortage has affected 33 states from Oklahoma to Maine. An estimated 7 million homes use propane to heat their homes around the country, which makes the shortage a real health and safety emergency.

Third, a personal story from a reader who has a brother in Minnesota in the propane business:

Propane is now over $ 5.00 per gallon. "Lake country" propane is going to be over $6.00 tomorrow (Saturday). This particular propane dealer and probably others have sold their pre-buy contract of $1.49 per gallon. Newly purchased propane would be purchased at cash/spot price, which can be tracked here: http://www.propanecost.com/index.php?p=btu

Cost works out to:

• electricity at 8 cents/KWH = $23.43/mmBTUs
• propane (91,500 BTUs/gallon, at $5.00 = $54.64/mmBTUs

That's the update for the propane story in the Midwest. Next we go to the energy challenge in New England. One can start by reading this recent post: natural gas prices soar in New England. It's gotten so bad in New England, we're seeing emergency measures -- in both policy and technology.

First, the emergency policy measures, from Forbes:

The regional transmission operator is also seeking temporary relief from the Federal Energy Regulatory Commission (FERC) to temporarily lift the $1,000 price cap it can pay generators through March 1st.   PJM is doing so because available power plants must in fact generate power and submit an offer of no more than $1,000 per megawatt-hour (MWh) into the grid.

However, with natural gas costs so high (a large portion of the generating fleet runs on natural gas), some generators’ operating costs are north of the price cap. Generation costs are high as a consequence of extraordinarily high gas prices. Normally in the $3.50 to $4.50/mmBtu range long-term, spot market gas prices this week have reached$140/mmBtu.

Search the blog for "PJM." 

Earlier in that story:

The early days of yet another prolonged cold weather snap are causing concerns for grid operators along the East Coast.  Daily spot market prices are well above average, but that has not sufficiently dampened demand. Yet again this month, demand response resources have been dispatched. In the PJM power pool that stretches from Chicago to the mid-Atlantic, 150 MW of emergency demand response was called the night of the 22nd.   That number was increased to 500 MW on the 23rd, and it was called upon again this morning, according to RTO Insider, a publication that monitors PJM.

I suppose one question folks might be asking: could a grid failure in New England cascade through the rest of the region? And then spread from there? I don't know. But the next bit from another Forbes article suggests others are asking.

The emergency technology measures being taken. Again, from Forbes:

The grid operators have resorted to some rather unusual steps. Energy Choice Matters reported today that ISO-New England asked Public Service of New Hampshire (PSNH – a subsidiary of NorthEast Utilities) to operate its entire generation fleet this week to help keep the lights on. This included firing up several infrequently-deployed combustion turbines which ran on jet fuel.

Why?

The return of the polar vortex has brought the return of grid reliability issues.  The PJM, New York, and New England power grids have seen significant spikes in wholesale market prices, brought on by huge increases in underlying natural gas spot market prices. In many cases, generators do not contractually have access to natural gas, so they cannot generate electricity. This dynamic is exacerbated in New England, where over 50% of the generation fleet is gas-fired.

From The Union Leader:

Public Service of New Hampshire fired up its supplemental, aviation-fueled combustion turbines and planned to run them for about 15 hours Thursday to help meet the demand brought on partly by the cold snap.

“That’s unprecedented,” PSNH spokesman Martin Murray said of the duration of the turbine use.

PSNH has never before been asked a day ahead of time by ISO New England to run the stand-alone units to supplement energy load, Murray said.

The units typically operate 10 to 20 hours over the course of a year, usually when demand spikes, such as a cold snap or a heat wave.

And, of course, this all brings us to the next story, which will have a stand-alone post.