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Bloomberg
The arctic blast that’s turning the northern half of the US into a giant icebox this week has been good news for oil and coal.
Plants are using the most fuel oil in three years to produce the electricity that’s powering heaters across New England. In the PJM market, which stretches from Illinois to Washington, D.C., coal has once again surged past natural gas to become the biggest fuel for power generation. Oil demand
has also shot up.
It marks a rare, albeit temporary, reversal of a broader transformation taking place in America’s power mix: The US shale boom has unleashed record volumes of cheap natural gas, turning that fuel into the country’s biggest source of power generation. But the deep freeze triggered gas price spikes across the eastern US, and generators are taking advantage of the rally to burn cheaper oil and coal.
“Most likely gas prices are too high,†said Tai Liu, an analyst at Bloomberg New Energy Finance. At $18 per million British thermal units for natural gas, he said, “I’d rather run my coal units if I can choose between the two.â€
At one hub in New England, spot gas more than tripled earlier this week to over $35 per million Btu, data compiled by Bloomb-
erg show. Gas futures on the New York Mercantile Exchange bri-
efly traded above $3 and reached the highest intraday level since early December.
The increased coal use could add weight to the Trump administration’s push for bigger payments to coal and nuclear power generators. US Energy Secre-
tary Rick Perry has been calling for them to be compensated for the “resilience†they offer the power grid during extreme weather events — like the polar vortex that tripped plants offline in early 2014.
Utilities and grid managers including PJM, the Midcontinent Independent System Operator and New England’s system operator had reported none of the gas pipeline freeze-ups that plagued plants during the vortex.
Coal stocks also froze in 2014. One of the nation’s biggest coal generators, American Electric Power Co., said it had seen no
curtailments due to the weather affecting supplies.
The stakes are higher after PJM imposed rules that penalize generators who fail to deliver supplies that they’re contracted for. Several generators invested in dual-fuel capabilities at plants after the vortex. Northeast pipelines are already starting to show signs of stress. Kinder Morgan Inc. issued operational flow orders on its
system that ships fuel to New England, warning power plants to only take what they’re supposed to because of “very limited flexibility.†Enbridge Inc.’s Algonquin system, which saw prices surge to the highest level in almost three years, issued notices of capacity constraints.
In New York City, power prices surged 47 percent to $245.89 a megawatt-hour for the hour ended 11 a.m., the highest for that period since January 2016, according to Genscape data compiled by Bloomberg. In PJM’s Western hub, prices pulled back from highest levels in nearly three years. PJM has issued cold weather alerts and is preparing for what could be the highest power demand since February 2015 to come on Tuesday morning, a spokeswoman said by email.
The National Weather Service is warning that “dangerously cold†temperatures and strong winds will continue to chill the North-ern and Central Plains, Great Lakes and Northeast into the weekend. Wintry weather is also coming to the Pacific Northwest and Northern Rockies, where heavy mountain snow will make for more difficult travel.
Temperatures in Boston are forecast to fall as low as 2 degrees Fahrenheit (minus 17 Celsius) on Dec. 31, 22 degrees below average, according to AccuWeather. New York City will see a low of
9 degrees Fahrenheit that day.