Time to fire up boiler$, put cheaper fuel in pipeline

Published in Boston Herald

Winter is coming. Northeasterners are bracing for what promises to be another brutally cold winter with below-average temperatures. This will be especially problematic with high home heating bills as a result of the region’s excessive energy costs. New England continues to suffer from extraordinarily high energy prices that exceed the rest of the nation, with the exception of Alaska and Hawaii.

Solutions to this regional problem are within reach if Massachusetts’s leaders are willing to get on board. The key is to produce and provide more affordable sources of energy. Around the nation, we are experiencing an energy renaissance that many states are leveraging to their advantage. Robust supplies of natural gas are being harnessed to provide affordable energy to consumers and job creators alike. The performance of the U.S. oil and gas industry has been one bright spot in a sluggish American economy, accounting for GDP boosts and millions of direct and indirect jobs.

Personal income and job growth in major energy-producing states such as North and South Dakota, Texas, Oklahoma, Montana, Wyoming, and Colorado have been much greater than in other states and their unemployment rates are lower than the national average. A report by the McKinsey Global Institute estimates that if the U.S. fully realizes its opportunity, shale oil and gas could add 2 percent to 4 percent ($380 billion to $690 billion) to annual GDP and create up to 1.7 million permanent jobs by 2020.

The Northeast region has a great opportunity to transport much needed energy resources that will lower utility bills and also provide new jobs. To do so requires a collaborative effort of all of the states involved. Last year, the New England States Committee on Electricity representing Maine, Massachusetts, Connecticut, Rhode Island, Vermont and New Hampshire took promising steps in the right direction calling for expanded natural-gas pipeline capacity financed through a ratepayer tariff to serve the region.

Unfortunately, pressure from environmental groups has stepped into the process and is creating unnecessary delays. Gov. Deval Patrick stepped back from initial support for expanding natural gas capacity in order to further study impact of expansion. A Patrick spokesperson noted that New England’s energy challenges should be met through “additional clean energy resources such as renewables and large hydro and the associated transmission, as well as natural gas capacity constraints.”

The state’s two U.S. senators, Ed Markey and Elizabeth Warren, echoed opposition to the pipeline expansion. Warren recently stated, “Before we sink more money in gas infrastructure, we have an obligation wherever possible to focus our investments on the clean technologies of the future — not the dirty fuels of the past — and to minimize the environmental impact of all our energy infrastructure projects.”

While renewable energy sources should continue to be studied, they remain too inefficient and too costly to meet New England’s current dire energy needs. According to the Department of Energy’s data, new electric generating capacity using wind and solar power tends to be considerably more expensive than conventional natural gas and coal. The total cost of offshore wind, at $222 per megawatt-hour (MWH) is almost 240 percent higher than for advanced natural gas–fired plants, which cost only $66 per MWH.

Perhaps renewable energy sources can play a more prominent role in New England’s future portfolio, but that future is much further off than the first cold front that will hit the region within weeks. Residents will soon be cautiously adjusting their thermostats in fear of excessive energy bills. Leadership, collaboration and smart choices are necessary to relieve the pains of the coming winter.

Margo Thorning is senior vice president and chief economist for the American Council for Capital Formation, a nonprofit, nonpartisan organization promoting pro-capital formation policies and cost-effective regulatory policies. Talk back at [email protected]