Feds predict winter oil heating cost increase; Maine pursues heat pumps

U.S. households that rely primarily on heating oil for heating will spend more this winter on heating compared to last winter, according to a federal projection.

The U.S. Energy Information Administration's 2023 Winter Fuels Outlook supplement to its October 2023 Short-Term Energy Outlook includes heating data, projections, and analysis. Based on NOAA data and a 30-year weather trend, EIA projects that this winter will be colder than last winter, driving an increase in demand for heating fuels and energy. 

For households that heat primarily with heating oil, most of which are located in the Northeast, EIA projects a 40-gallon increase in oil consumption per household relative to last winter. Even accounting for a small projected decrease in oil pricing, EIA expects expenditures for these households to increase by 8 percent year-over-year.

Notably, only 4 percent of U.S. households heat primarily with oil. By contrast, in 2022 over 60 percent of Maine households relied primarily on oil for heating, according to the Governor's Energy Office. 

To reduce Maine's reliance on oil, the state legislature, Governor Janet Mills, and various agencies have adopted policies favoring the deployment of heat pumps powered by electricity. Earlier this year, Maine surpassed the state's targeted level of 100,000 heat pump installations, and established increased goals for beneficial electrification of the state's heating systems. Incentives available depend on the circumstances of each deployment, but generally can include rebates and grants as well as tax credits.

Solar, wind, and natural gas power plant construction costs declined in 2021

Construction costs decreased for several types of new power plants on average in 2021, according to federal data. The Energy Information Administration reports that compared to 2020, average construction costs for natural gas-fired generators fell by 18% in 2021, with average construction costs for solar and wind systems declining by 6% and 5% respectively.

Source: U.S. EIA

Average U.S. solar project construction costs in 2021 were $1,561 per kilowatt. Crystalline silicon tracking systems, which accounted for 56% of the nation's utility-scale solar capacity installed in 2021, had a slightly lower per-unit cost, at $1,423 per kilowatt.

Average onshore wind turbine construction costs were slightly lower, at $1,428 per kilowatt. In general, larger projects tended to have smaller per-unit construction costs, implying efficiency due to economies of scale.

Natural gas provided the lowest average construction cost per unit of installed capacity, at $920 per kW. Within natural gas units, combustion turbines had the lowest average cost per unit of capacity, at $512 per kW.

According to EIA, solar, wind, and natural gas collectively account for over 91% of the electric generating capacity added to the U.S. grid in 2021. 

Over 2 million light-duty EVs registered in the US in 2021

The number of light-duty electric vehicles registered in the U.S. reached 2.13 million in 2021, according to federal data. The Energy Information Administration reports a "sharp increase from the less than 100,000 EVs on the roads in 2012". The lagging nature of this data set and continued growth in EV adoption mean that an even greater number of EVs are now registered in the U.S.

EIA's annual EV registration data is segmented into two categories: battery-electric vehicles (without any internal combustion engine) and plug-in hybrid electric vehicles (with both batteries and a traditional engine). Both categories show strong growth since 2012, with BEV adoption growing even faster in 2021.

Consistent with the recent growth of EVs, the average EV registered in the U.S. was 3.6 years old in 2021, considerably younger than the 11.1-year-old age of the average non-EV. 

To explain the rise of EVs, EIA cites factors including changing consumer preferences and an increasing number of EV models, particularly in the "luxury" sector. EIA also notes the effect of government policies supporting beneficial electrification of the carbon-emission-intense transportation sector. Policies designed to increase EV uptake include purchase incentives like tax credits and rebates, zero-emission vehicle sales mandates, and fuel economy standards.

US added record amounts of small solar power in 2022

A recordbreaking amount of small-scale solar electric generating capacity was added to the U.S. grid in 2022, as the nation added more distributed solar than in any prior year according to federal energy data. 

The U.S. Energy Information Administration tracks the nation's portfolio of electric generation resources. EIA considers solar-power systems with one megawatt (MW) of capacity or less to be "small-scale solar", also called distributed solar or rooftop solar.

According to EIA, U.S. small-scale solar capacity has grown consistently year-over-year since the agency started tracking it in 2014. In the ensuing eight years, U.S. small-scale solar capacity grew from 7.3 gigawatts (GW) to reach 39.5 GW in 2022. 

About one-third of the total solar capacity in the U.S. now comes from small-scale systems. EIA reports that rooftop solar panels installed on homes make up the majority of the nation's small-scale solar capacity. Additional small-scale solar power systems are installed in commercial and industrial contexts.

EIA attributes growth in small-scale solar capacity over the past decade to tax credits and incentives, public policy, and higher retail electricity prices, as well as falling solar panel costs. The federal tax code includes tax credits for investments in small-scale solar power and other forms of clean energy. The scope and value of these credits was enhanced by the enactment of the Inflation Reduction Act. 

In addition, many states offer state-level incentives for solar power production. Diversity among state levels of solar adoption isn't just about how sunny a place might be, as EIA posits that the levels of state incentives affect the degree to which solar projects are developed in each state. 

EIA also notes that while many states with the most small-scale solar capacity also have large populations (like California and New York), some smaller states like Hawaii, Rhode Island, Maine, and Vermont have high levels of market penetration on a watts-per-capita basis.

Natural gas pricing drives New England's electricity costs

Two factors are the main drivers of wholesale electricity prices in New England, according to the region's grid operator: the cost of natural gas and other fuels used to generate electricity, and the level of consumer demand for power.

Fuel costs are a key component of the cost of electricity, and natural gas is the "predominant fuel in New England", used to generate 52% of the power produced in 2022 by New England’s power plants. According to ISO New England Inc., the regional transmission organization, natural gas-fired power plants usually set the price of wholesale electricity in New England.

As a result, the grid operator says that "average wholesale electricity prices are closely linked to natural gas prices." The chart below, prepared by ISO-NE, shows the close correlation between wholesale electricity and natural gas prices between for the past two decades:

ISO-NE reports that demand for electricity is the second main driver of the region's wholesale electricity prices, and that demand "is driven primarily by weather, as well as economic factors." The extent to which consumers rely on electricity-powered heating and air conditioning equipment means that peak demand is driven by weather. 

While New England's original electric system reached peak demand in winter, the region shifted to summer-peaking in the early 1990s due to increased air conditioner use and decreased reliance electric heating. The grid operator's records as of mid-2023 show that the all-time high winter peak of 22,818 MW occurred during a cold snap in January 2004, and the all-time peak demand of 28,130 MW occurred during an August 2006 heat wave. 

ISO-NE projects future growth in consumer demand for electricity and a shift back to a winter-peaking system by 2035, as beneficial electrification of the region's heating and transportation sectors add heat pumps and electric vehicles to the grid.

U.S.-Canada energy trade reached record-high value in 2022

Energy trade between the United States and Canada reached record high levels of value in 2022, according to the U.S. Energy Information Administration.

EIA tracks and reports statistics concerning energy matters, including volumes and values of international trade. According to EIA, high energy prices contributed to a total of $190 billion in energy trade between the U.S. and Canada in 2022, when adjusted for inflation.

EIA tracks four main types of energy commodity transacted between the U.S. and Canada: crude oil, other petroleum products, natural gas, and electricity. In recent years, crude oil has represented the largest fraction of these countries' energy trade on a value basis, followed in turn by the other commodities listed above.

The value of energy trade is driven by a combination of factors, including the volumes of energy imported and exported, as well as the prices for those transactions. EIA reports that volumes of energy trade between these two countries were nearly unchanged between 2021 and 2022. 

Meanwhile, the value of energy trade increased by 41% in 2022. According to EIA:

• The U.S. imported a greater value of trade from Canada ($156.3 billion, inflation-adjusted) than it exported to its neighbor ($33.8 billion, inflation-adjusted). 
• U.S. crude oil imports in 2022 averaged 3.7 million barrels per day by volume, while U.S. crude exports to Canada averaged 305,000 barrels per day. 
• Natural gas imports from Canada averaged 7.6 billion cubic feet per day (Bcf/d), while exports to Canada averaged 2.5 Bcf/d. 
• Petroleum product trade was closer to even, with 580,000 barrels per day imported and 524,000 barrels per day exported. 

Maine considers distributed generation interconnection reforms

The Maine legislature has enacted a law designed to reform the state's procedures for interconnecting solar projects and other forms of distributed generation resources to the electric grid. The law, An Act to Provide Maine Ratepayers with Equitable Access to Interconnection of Distributed Generation Resources, requires the Public Utilities Commission to appoint an "interconnection ombudsman". The law also requires the PUC to align its interconnection rules with best practices and to prioritize interconnection of solar resources and energy storage systems used to serve on-site load.

Interconnection is an essential component of distributed generation project development and operation. Policies enacted since 2019 have led to a flood of interconnection requests by project developers, seeking access to the grid. Each request must be studied, sequentially, to identify what grid upgrades and interconnection facilities must be built for safe and reliable operation. Large projects and those connected to the interstate transmission grid generally interconnect under federally jurisdictional procedures, like the interconnection procedures adopted by regional grid operator ISO New England. 

Smaller distributed generation projects in Maine generally use the state-jurisdictional interconnection process, which operates under the PUC's Chapter 324 rule. The rule specifies rights and responsibilities of both the project developer as interconnection customer and the utility. The recent flood of interconnection requests has caused project developers to complain about lengthy timelines, inflexible procedures, and missed deadlines by utilities.

To address these concerns, the Maine legislature recently enacted the distributed generation interconnection reform act, Public Laws of 2023 chapter 307. Introduced as LD 327, the law as enacted requires the PUC to appoint an interconnection ombudsman to assist people seeking state-jurisdictional interconnection of solar resources and energy storage systems. The interconnection ombudsman's duties include tracking interconnection disputes, facilitating their efficient and fair resolution, reviewing utility policies to assess opportunities to reduce disputes, convening stakeholder groups, and reporting. The position must be funded by interconnection fees or sources other than general ratepayer funds, and the PUC must make a good faith effort to appoint the ombudsman within 12 months of the law's effective date.

The law also requires the PUC to adopt interconnection rules that prioritize interconnection of solar resources and energy storage systems owned by customers of investor-owned transmission and distribution utilities and used to serve an on-site load. It also requires the PUC to convene an interconnection working group.