Changes in how New England generates electricity

Tuesday, April 30, 2013

Society can use a number of different energy resources to generate electricity.  We typically rely on a portfolio of multiple fuels to meet our needs, but the composition of this energy resource mix can affect the reliability, cost and environmental impacts of electricity generation.  Through most of the twentieth century, in most regions of the United States, coal dominated the mix.  Today, new resources like natural gas and nuclear power play major roles.  The resource mix continues to evolve, with significant changes since 2000 alone.

New England provides a prime example of these shifts.  According to regional grid operator ISO New England's 2013 Regional Energy Outlook (48-page PDF), in 2000 the largest share of power generated in the region came from nuclear power (31%).  Nuclear power continued to provide a similar share of our electricity in 2012, but it has been bypassed by natural gas-fired generation as the largest source of our power.  While natural gas contributed just 15% of regional electricity in 2000, last year it provided more than half (52%) of all electricity in New England.  The growth of natural gas comes as the result of several trends, including the availability of relatively low-cost gas as well as natural gas's favorable emissions and environmental impacts compared to oil and coal.

Indeed, the amount of power generated by burning oil and coal in New England has fallen sharply.  While oil-fired generation provided 22% of our needs in 2000, last year less than 1% of our power came from oil.  The high cost of oil, combined with the availability of extensive capacity to generate electricity from natural gas, drove this marked decrease in the electric power sector's use of oil.  Likewise, coal-fueled power has declined from 18% in 2000 to just 3% in 2012.  Tighter federal air emissions standards and pollution control requirements, combined with the age of the coal-powered fleet and the availability of low-cost natural gas, have made coal-fired power largely uneconomic in New England.

According to the numbers, natural gas's ascendancy has not come at the expense of renewable power.  The share of regional electricity produced from hydropower and other renewable energy resources held steady at 13% from 2000 to 2012.

What are the implications of this shift in New England's portfolio of energy resources?  Lower average wholesale energy prices are one result.  As electricity produced from oil and coal became more expensive, the cost of electricity produced from natural gas fell.  Combined with the shift in the resource mix, these changes have led to relatively lower prices for electricity.  This price decrease has been partially offset by increases in the cost of utility transmission and distribution service, but most consumers see lower electricity prices today than they did in 2000.

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