On The Road To New England; We're All Screwed

Wow, talk about "themilliondollarway" being ahead of the pack, if only by a week or so.

It was just a week or so ago, I had the "aha" moment, the epiphany. I put one and one together and got two.

Obama's war on coal (1)
natural gas shortage in New England (1)
______________________________
= the US is taking "the road to New England" (2)

There are two facts with regard to the folks in Boston who depend on electricity:

• they were screwed this year
• they will be screwed for about six more years

I think everyone is aware of the energy shortage, specifically the natural gas energy shortage, in New England this year. Among the "everyone," I assume there are a few that are aware that experts suggest it will be at least six more years before the energy issue is fixed in New England.

New England's problems began, as I understand it, when "everyone" switched over to natural gas, eliminating coal and/or heating oil as a source of energy, over the past two years. The natural gas distribution system simply could not keep up. It would have been a challenge even if it had been a normal winter, but global warming resulted in one of the snowiest, coldest winters in New England, which exacerbated the issue.

The president, I guess, naively, had hoped that wind and solar would have taken up the slack as the coal industry slowly died over the next couple of decades. Unfortunately, coal-fired power plants are closing more quickly than anticipated, and more of them are closing than anticipated (previously reported on the blog). Even after a gazillion dollars in federal and state subsidies and tax credits over the past two decades, wind and solar does not come close to closing the gap. With the loss of federal and state subsidies and tax credits, the interest in wind and solar will probably slow down.

XOM had an incredible essay several years ago (it's linked somewhere on the blog). XOM pointed out that the math simply does not work. Wind and solar cannot replace all that coal that is coming off-line. Because Big Oil cannot be trusted, and because XOM is the biggest of Big Oil, it definitely could not be trusted. So folks figured that couldn't possibly be true. Look at all the YouTube videos that show Mr Obama saying wind and solar will solve all our problems, folks said. Folks said XOM is wrong, the community organizer is right.

The "aha" moment came to me some weeks ago: the administration has put the US on the same "road to New England." The administration is moving the US toward a one-energy source for electricity (sort of like one "single-payer health care").  It's really quite interesting to watch.

• wind and solar is dead
• nuclear is stagnant, perhaps dying
• hydroelectricity is stagnant
• of course we're not going to use oil to produce electricity
• algae really hasn't worked out all that well yet
• and, that pretty much leaves natural gas

When I wrote that, I was a bit unsure about the hydroelectricity story. That was one little hole in the theory. My wife mentioned that when we were discussing this, while the DVD was "warming up" to play "Big Bang Theory."

I asked her where does most of our electricity come from. "Dams," she said. Or maybe she said something else. 

So, today's RBN Energy on hydroelectricity was, for lack of a better word, stunning. This was the lede, over at RBN Energy:

Natural gas-fired power generation has always played second fiddle to hydropower in the Pacific Northwest, where dams in the Columbia River Basin typically supply well over half the region’s annual power needs. Gas takes on a more significant role, however, in years like this with lower-than-normal precipitation and hydro generation. And the ongoing phase-out of coal-fired plants in the Pacific Northwest is nudging gas closer to center stage—not just in 2014 but also over the long haul. Today we start a series examining the brightening outlook for gas use in the most hydro-dominant region in the US.

Oregon and Washington State represent the heart of the Pacific Northwest, but it is not uncommon to include northern California, Idaho, and Montana in the region as well, given their location and generally similar terrain. That broader definition also takes in the geographic reach of the 31 federally owned dams in the Columbia River Basin (see Figure 1), which together can generate up to 22 gigawatt (GW)—the equivalent of 20 nuclear reactors. (California also has major hydro assets, and imports a lot of hydropower from the Columbia River Basin dams; we will look into California’s hydro/gas situation—including its historic drought—in a later episode of this series.) The Grand Coulee Dam is by far the largest power generator on the Columbia River, accounting for more than 30% of the region’s hydro capacity. Many of the region’s other large hydro dams are located along the main stem of the Columbia as well; the rest are along the Snake River and its tributaries.

One additional paragraph (you will have to go to the source to read the entire story):

The current NOAA forecast for 2014 would make this year the 16th driest in the region since JFK was elected; 2010 was only slightly drier (it was the 14thdriest iest since 1960), and in that very comparable year gas-fired units in the Pacific Northwest generated far more power than they did in 2012, which as we just noted turned out to be one of the wettest years on record.

In Oregon, hydro plants generated 30.5 million megawatt hours (MWh) in dry 2010, and gas-fired units produced 15.7 million MWh; in wet 2012, hydro output rose to 39.1 million MWh, and gas-unit output fell to 11.6 million MWh, all according to the US Energy Information Administration (EIA).

The hydro/gas dynamic was similar in Washington State. There, in dry 2010, hydro plants produced 68.3 million MWh and gas units 7.8 million MWh; in wet 2012, hydro output jumped to 89.5 million MWh and gas-unit output fell to 5.4 million MWh.

As would be expected, gas consumption by the electric power sector rose and fell with gas-unit output. In Oregon, gas consumption by the sector totaled 108.4 Bcf in dry 2010; in wet 2012 it totaled only 82.0 Bcf; in Washington State, gas consumption by the electric power sector totaled 74.5 Bcf in 2010; in 2012 it dropped to 39.2 Bcf.

Those are pretty big swings that can cause significant volatility in the natural gas market.

And so it goes.