Though this winter has been relatively mild across the US, historically, frigid New England winters have put significant pressure on the region’s natural gas pricing and infrastructure. As regulatory delays and grassroots opposition prevent new natural gas infrastructure from bringing incremental supply to New England, LNG imports are increasingly a topic of discussion. Though most New England states are focused on bringing less gas into the region, they are also equally committed to reducing their carbon footprint. Could LNG imports (specifically imports from US export facilities) be the answer to reducing the region’s carbon footprint?

The US has an abundance of LNG export facilities located on the Gulf Coast, with dozens of additional terminals planned in the Wave 2 LNG build-out. Unfortunately, LNG cannot be shipped between US facilities due to limitations in place via the Jones Act. BTU has written about the impact of the Jones Act in a previous Energy Market Commentary. In brief, the Jones Act stipulates that goods transported between US ports must be transported on ships owned by US citizens, built in the US, and operated by US citizens (or permanent residents). No LNG carriers in service are compliant with the Jones Act. But what if the Jones Act was repealed? Could that help New England meet its greenhouse gas emissions goals?

First, let’s focus on New England’s emissions goals and the current generation mix. All six New England states have passed either binding mandates or non-binding goals for reducing their greenhouse gas emissions significantly by 2050. The table below outlines each state’s goals. Vermont has set the most ambitious goal, seeking to reduce emissions by up to 95% below 1990 levels by 2050.

In 1990, New England generated almost 50% of its power from coal and petroleum products, such as fuel oil. By 2019, that percentage shrunk to only 1%, with natural gas now making up 50% of the region’s generation mix. Very few coal or dedicated fuel oil plants remain to be displaced by either natural gas or renewables. However, wind and solar only make up 5% of New England’s generation mix, though the build-out of renewables is of increasing focus in the region.

If all the remaining coal and fuel oil plants in New England were retired, the equivalent natural gas burn required to replace the lost generation would be only around 15 MMcf/d. The LNG import terminals in New England (Everett, Excelerate buoys, and Suez) have more than enough capacity on a typical day to support an incremental 15 MMcf/d in the region. The chart below shows monthly equivalent natural gas burn from coal and fuel oil plants compared to the average available LNG send-out capacity that month.

LNG carriers from the US Gulf Coast are likely not needed for such a small volume of incremental demand. Thus, replacing coal and fuel oil generation with natural gas, fed by LNG delivered from the US Gulf Coast, is unlikely. So, how will the region reduce its carbon footprint? Since natural gas makes up 50% of the generation mix, the region will likely need to retire natural gas plants to materially reduce emissions from the power sector.

Using Continuous Emissions Monitoring (CEMS) data from the EPA, we can approximate carbon dioxide emissions for each fuel type in each state in New England. It is important to note that not all power plants have available CEMS data and the sample below uses a relationship between electricity generation data and carbon dioxide emissions to approximate total carbon emissions. New England states will need to retire all-natural gas generation to work towards their 2050 goals, but even retiring 100% of their fossil power generation fleet will not be sufficient to hit their goals.

In addition to retiring hydrocarbon generation, New England will need to focus on reducing emissions from transportation, improving energy efficiency, and reducing regional demand. In 2017, carbon dioxide emissions in New England from the transportation sector were over three times larger than emissions from the electricity sector. The transportation sector is a key focus of many of the states’ mandates and goals. By setting goals to reduce emissions well below 1990 levels, New England states have set themselves on a trajectory to completely move away from not only natural gas generation but for all non-renewable fuels. Though increasing natural gas generation may not be the path for New England to reduce its carbon emissions, coal-generation weighted regions like the Midwest may still greatly benefit from coal-to-gas switching. What is the role of natural gas in the generation mix across the US as renewables build-out continues, and what will its role be in the future? Email info@btuanalytics.com to request more information about our forthcoming Gas-Renewables Outlook.