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Report: New England Region Is at Great Risk of Higher Energy Costs

October 12, 2016 By Cheryl Kaften

New England has among the highest natural gas and electricity prices in the nation: Energy infrastructure constraints reportedly already have cost the region an extra $7.5 billion over the past three winters, alone. And now, based on the findings of a new study sponsored and released by the New England Coalition for Affordable Energy, things are about to get worse.

The research paper, New England Energy Landscape Update, finds that the region is at greater risk of higher energy costs and price volatility than estimated a year ago,

Conducted on behalf of the Boston-based advocacy coalition by the consulting firm, Daymark Energy Advisors, the study found that recent delays and cancellations of energy projects in the region combined with new energy policies could have greater adverse economic consequences through 2020 than previously estimated.

The study, sponsored by business and industry associations in Connecticut, Massachusetts, and New Hampshire; assessed energy marketplace changes that have occurred since August 2015. At that time, Daymark, in cooperation with Economic Development Research Group, found that failure to expand the region’s energy infrastructure – natural gas pipelines, electricity transmission lines and electricity generation – could lead to $5.4 billion in higher energy costs to the region by 2020.

The researchers also found that the higher energy costs could result in a reduction in disposable income of $12.5 billion, and over 167,000 jobs lost or not created, mostly in 2019 and 2020.

“It is fair to say that the current energy landscape in New England is in flux and there is a higher degree of uncertainty than a year ago regarding outcomes over the next three to five years and beyond,” said Daymark President Marc Montalvo.

According to the researchers, three changes to New England’s energy landscape over the past year that have resulted n greater uncertainty about the timing and composition of needed energy infrastructure include:

  • State clean energy policies have led to unintended economic challenges to wholesale electricity markets;
  • Electricity market drivers, such as installed costs and fuel prices, have affected generation resources and costs; and
  • Natural gas infrastructure has either been delayed or cancelled.

Given the level of uncertainty highlighted in the report, Daymark recommends a regional planning strategy that looks at state-by-state actions through an integrated approach covering electric supply reliability, environmental goal achievement; and the cost impacts of electricity and natural gas on the region’s economic outlook and competitiveness.

The report also recommends a two-step process for regional planning that would consider economic, environmental, and reliability impacts over the near-term; defined as the next five to ten years, as well as over the longer-term defined by the outer limits of policies and legislation to address climate change.

“The report – and a recent warning by ISO New England that the electric system may become unsustainable during extreme cold weather due to energy supply constraints – [represent] stark reminders that events of the past year put the region’s economy and competitiveness in an increasingly perilous position as we approach 2020,” said coalition spokesperson Carl Gustin. “Timely actions to add new energy infrastructure and address energy market uncertainties are needed.”

Energy affordability remains a key concern in New England. A coalition survey conducted earlier this year found that nearly nine out of ten consumers are concerned. A business survey also revealed that nearly 80 percent of respondents are concerned about reliability of energy supplies during periods of high demand; and 86 percent said energy costs are important to their business success.

In closing, the report states, “Policy developments over the past year in New England and adjacent regions to address infrastructure needs have introduced additional uncertainty to the timing and composition of infrastructure additions to the regions over the next five years. This uncertainty translates into greater electricity price uncertainty and the potential for greater adverse jobs and disposable income impacts for New England consumers and businesses in the 2019-2020 period and years immediately following, as compared to the estimates in the August 2015 report. Overall affordability and price volatility remain important issues in the next three to five years.”

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