Spot prices for gas and electricity rose sharply across the continent in recent months, primarily because of cold weather and various kinds of constraints on delivery. The effects on consumers may be longer-lasting as gas companies expect higher costs over the medium term and planners consider whether parts of the system need to be expanded. Enbridge Gas Distribution recently applied for approval to raise its rates by 40% in Ontario, and Ontario’s energy Minister Bob Chiarelli acknowledged that rising gas prices will likely drive up electricity costs.
In the US, Thomas Overton reports that, “Numerous pipeline companies had to issue operational flow orders restricting delivery, and no interruptible service was available on the worst days of the Polar Vortex. ... On Feb. 6, CAISO was forced to issue a conservation alert because of gas shortages in Southern California.” Several electric system operators in the US reported reaching or approaching new all-time peaks in demand during the coldest parts of the winter. Writing in Power Magazine, Overton noted that estimates from the consulting firm ICF International indicate that PJM lost 20% of its capacity on January 9, amounting to 38 GW, and other electric system operators had similar problems, related largely to difficulties securing adequate supplies of gas.
Representatives of the American Coalition for Clean Coal Electricity were quick to point out that these challenges are exacerbated by the general transition away from coal-fired electricity in North America, considering that coal generation would not have suffered from the same kinds of price spikes or delivery constraints.
Demand for gas in the US broke a number of records in recent months, including reaching an all-time high of 78.3 billion cubic feet on January 7, according to Bentek Energy. Spot prices for both gas and electricity were hitting high marks at several points during the coldest part of the winter.
To mitigate the risk of shortages in future, both gas companies and electric system operators will likely be studying the experiences of this winter, and considering whether and where their systems need to be reinforced or expanded. Such changes would inevitably have cost impacts on consumers of both gas and electricity.