Polar Vortex Analysis (ICF International)
The winter of 2014 Polar Vortex events severely tested eastern U.S. natural gas and power grids, and the organizations that operate them. Although both industries ultimately met their service obligations as planned, these events revealed vulnerabilities in the adequacy and costs of energy supply in many regions of the country when cold weather hits. The Northeast U.S., in particular, experienced some of the tightest demand and supply conditions, with regional electric grids pushed to capacity limits, and natural gas prices that soared to record highs. Conditions such as these highlight the increasing integration between natural gas and power, can serve as a warning that merits attention.
To this end, ICF International was retained by Port Ambrose LNG to prepare an independent report on the New York - New Jersey (“Market”) natural gas and power grids, the implications of high gas prices during the Polar Vortex. Natural gas prices are increasingly important to the Market’s residence because they not only reflect the cost of heating homes and businesses, but also because they set the price of electricity for millions of consumers. Our objective is information that will inform stakeholder decisions regarding energy policy, permitting and the need for new natural gas supply infrastructure. The views expressed in this report draw on decades of independent ICFs energy market research and our understanding of the implications for future energy infrastructure and costs.
See Recent Reports
Letter to United States Coast Guard Summarizing Reports
Reduced Natural Gas Prices in the New York Area
Port Ambrose will introduce a substantial new source of competitively priced natural gas into the pipeline capacity constrained downstate New York area and will have a significant downward impact on natural gas prices in the area, as well as on the price of gas-fired electricity. The Project’s impact will mostly be felt on peak cold winter days, which can see the price of delivered natural gas quadruple on the spot market (see image below). ICF International estimates the pricing impact to be as much as a 4% reduction in the overall annual price of natural gas in the region, with much greater price stabilization impact on cold peak winter days. This has already proven to be the case in New England over recent winters, where, following the opening of the Northeast Gateway and Neptune deepwater ports off the coast of Massachusetts and the availability of supplies from the Canaport LNG terminal in New Brunswick, the spot market premium paid for natural gas in New England over Texas (Henry Hub) prices dropped by up to 50% relative to previous years.
Comparison of Power and Natural Gas Prices for NYC/NJ Region
Source: SNL Energy, PJM and NYISO
Winter Natural Gas Price Levels - New York, 2012/2013
Source: Black & Veatch
