With the first real cold snap in the Carolinas behind us, Energy Consumers of the Carolinas is revisiting an energy source big during the heating season: Natural gas. We are doing this because a recent report said that natural gas in storage is 17 percent below the average of the last five years. Natural gas is a major source for heating buildings and also electric generation.
Looking at the logic of supply and demand, consumers may wonder if that means higher prices to heat homes and businesses this winter. Maybe not, at least not as it has happened in the past.
The amount of natural gas in storage will usually go up from spring to early fall because gas has not been in demand as much – no home heat needed. These inventories have been typically drawn down during heating season when natural gas is needed – November through March.
In 2016 there was a change, though, when natural gas hit a point when it was used to make more electricity overall. The heating season wasn’t the big main stage anymore. In the past coal has been the major way to generate electricity. However: “In 2016, natural gas provided 34% of total electricity generation, surpassing coal to become the leading generation source. Natural gas first exceeded coal as the most common electricity fuel on a monthly basis in April 2015 and on an annual basis in 2016,” says the Energy Information Agency.
In the gas industry that is headline news.
Supplies and prices of gas have several components worth noting these days, different than in the past.
New, ample supply: U.S. natural gas production flagged until a boom last decade with the wider use of fracturing rock formations to let more gas get migrate to wells. (“Fracking” is the short phrase used.) The gas was in the ground and did not have an easy way out. That changed. “Production grew in the U.S. by an astounding 51% from 2005 to 2015, which pushed the U.S. back into the global lead,” said an article in Forbes magazine.
The Marcellus Formation has been a natural gas production superstar. The major parts of the geology with the gas-laden shale covers parts of Ohio, West Virginia, Pennsylvania and New York. It is important because it is a lot of natural gas that is close to a lot of cities that can use it.
Storage is not as critical: There is enough natural gas production that utilities can pull directly off a pipeline as opposed to paying ahead for gas and paying for storage to get through winter.“It seems to me that we’re seeing that supply mix shift maybe away from inventories to flowing gas. Maybe the market is shifting in terms of how it meets peak supply in the winter,” said an official from the American Gas Association. In other words, utilities used to buy gas and put it aside for use. Now some can take it right from the pipes.
More avenues for delivery: There are additional ways to get gas to the market. The Atlantic Sunrise Pipeline has opened, connecting gas-producing areas of Pennsylvania to markets in the Mid-Atlantic and southeastern states, including the Carolinas.
An interesting issue in parts of the U.S. (not in the Carolinas) is whether regions and localities can get enough natural gas. These are capacity constraints not supply constraints; power plants could use the gas, gas could fill pipelines, but pipes to deliver gas do not exist. Maine Public Radio reported one utility official saying, “The region has sufficient generating capacity to meet the winter demand for electricity, but the natural gas pipelines that bring fuel to the region are not sufficient to guarantee natural gas power plants can stay online.”
Weather is still a factor. More supply and more ways to get natural gas are cushions for consumers. The weather is still a wild card, however. ECC asked Charlotte meteorologist Brad Panovich, WCNC-TV, how this winter may look: “Typically during EL Nino winter, we have cooler and wetter conditions in the South and Southeast. It’ milder in the north and northeast, but this year is a very weak El Nino setting up. Couple that with low October snowfall in Siberia and a warming climate I could see a mild winter for most of the U.S. That’s doesn’t mean there won’t be snow or cold snaps. In fact with the pattern setting up I would expect a lot of wild swings from warm to cold especially late winter.”
An added view about the next several months: “The Southeast, Tennessee Valley, Ohio Valley and Mid-Atlantic all have equal chances for below-, near- or above-average temperatures. No part of the U.S. is favored to have below-average temperatures,” said the U.S. Climate Prediction Center.
Short term weather for this week? “A weather pattern more typical of late December or early January will continue across much of the eastern U.S. this week,” said Accuweather.
In the Carolinas, of course, we typically don’t have the cold weather extremes as other parts of the country. (But then again, recall the 2014 Polar Vortex?) We know it will be cool, but maybe not vortex-cold.
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Natural gas is the current royalty among the energy sources for the U.S. The interplay of supply, pipes, prices and temperatures are a dynamic model. “That trajectory has been clear for much of 2018, but up until only recently, traders were not concerned about shortages. Natural gas production continues to soar, and several new pipelines in the Appalachia region are expected to unlock new markets, allowing drillers to produce even more natural gas.” (OilPrice.com) There are even some who say that the ample production of natgas can push prices down in 2019. (source)
Energy Consumers of the Carolinas has written about the increase is natural gas usage before. Here’s our blog from June this year: Natural Gas and Our Power Portfolio.