24 Oct

Businesses Brace for Soaring Electricity Rates and Consider Going Solar In Massachusetts

Massachusetts electric customers will see their electric bills skyrocket this year. Last month National Grid said its upcoming winter electricity rates would increase by an astounding 37 percent. Northeast Utilities, the parent company of NStar and Western Massachusetts Electric Co., has indicated its winter rates will also rise dramatically.

The increase, which will take effect in November, constitutes a significant burden on Massachusetts businesses. State regulators, who approved the increase for all National Grid customers, indicated that large-business customers would see even higher increases. Business officials say Massachusetts already has some of the highest electric rates in the country even before the rate increase. With increasing electricity rates, going solar in Massachusetts is proving to be an economic solution for more and more businesses.

The increases are blamed on an inadequate pipeline network unable to carry enough natural gas to meet growing demand from households, businesses, and power generators. Because of these constraints, natural gas supplies are limited when they are needed most, particularly during winter cold snaps, and have led to soaring gas prices in wholesale markets. These soaring prices due to limited supply are creating the spikes in electric generating costs in turn increasing electricity bills across Massachusetts. With the price increase, Massachusetts electricity prices are expected to be double the national average this winter. However, there is no shortage of solar panels. According to the Solar Energy Industries Association (SEIA), the average prices for going solar in Massachusetts have fallen by 30% in the last year.

Also putting upward pressure on electricity prices are the closings or planned closings of several power plants, including coal burning plants in Salem, Somerset, and Holyoke, and the Vermont Yankee nuclear plant in Vernon, VT. Compounding the short term factors that are creating an immediate electricity price increase, the long term forecast for natural gas prices indicates a continuing upward trend in pricing. Higher gas prices will be caused by increased exports of Liquefied Natural Gas (LNG) to meet anticipated growth in global demand, creating further price volatility a higher electricity rates in the future.

Unchecked exports could lead to tripling natural gas prices!

A new report from Charles River Associates adds to the growing list of studies that warn against the dangers of unrestricted natural gas exports. According to the report, US Manufacturing and LNG Exports: Economic Contributions to the US Economy and Impacts on US Natural Gas Prices, allowing unchecked exports would have a direct negative impact on US employment, manufacturing, and the economy due in large part to a vast increase in the cost of natural gas. Some of the key findings of the report include:

  • US manufacturing contributes more to GDP, employment, and the reduction of the trade deficit as compared to LNG exports at a commensurate level of natural gas use.
  • US manufacturing is highly sensitive to natural gas prices, and a significant portion of the US manufacturing sector is exposed to impacts from projected increased natural gas prices.
  • A global LNG supply shortage of 20-35 billion cubic feet per day by 2030 is projected, and US natural gas exports would likely play a major role in filling the gap, which in turn could lead to a tripling of natural gas prices from current levels by 2030.
  • Current expectations for a low-cost, gas-driven electricity economy and significant deployment of natural gas vehicles could be foregone due to LNG exports and increased natural gas prices.

According to America’s Energy Advantage (AEA) the findings in this report should be seriously considered by Congress and the Department of Energy when considering approval of new export facilities. Not only will the energy market be directly affected, almost every other market will be inadvertently affected by increasing natural gas prices. In addition to monitoring increasing natural gas prices, the Department of Energy should take into consideration the decreasing solar prices. Every aspect of manufacturing could be positively impacted by the expanding usage of solar panels. For any business, going solar in Massachusetts is a way to keep overhead costs low and to provide protection from natural gas price fluctuation.

AEA’s position is in direct contrast to supporters of natural gas exports including the American Petroleum Institute (API). The API proposes that while America is leading the world in natural gas production, the country needs to unlock the full economic benefits by acting quickly on the permits needed to sell natural gas exports abroad. Further indicating that there is a global race to build this infrastructure and secure a competitive position in the international market. According to the API, export terminals would allow other nations to purchase a valuable American product, support US exports, and help reduce global carbon emissions. However, exporting natural gas would leave American citizens with higher fuel and electricity costs, something they would have no control over.

Regardless of the economic benefits of exporting natural gas or using it for domestic manufacturing, the cost of transmission and distribution infrastructure is significant. Natural gas is classified as a centralized energy product meaning that there are high costs to extract, refine, transport, combust and then deliver natural gas produced electricity to Massachusetts businesses and homes. Those costs will either be subsidized by the government or be reflected in higher costs to the consumer. Either way, local businesses will pay the price. As a distributed energy product, solar provides an opportunity to increase domestic manufacturing and installation jobs and stabilized electricity rates for Massachusetts businesses for up to 25 years. This hedges against the ever-increasing costs of natural gas and will allow businesses to thrive without worry of increasing overhead costs.

Sources: Boston Globe, News Observer, AEA, America's Energy Advantage (AEA) is a group of businesses and organizations dedicated to raising awareness of the emerging renaissance in American manufacturing made possible by the country's new abundant and affordable supplies of natural gas, SEIA, Solar Energy Industry Associates is the “voice” of the solar industry. Through research and education SEIA is working towards a flourishing solar economy in the United States.

Kurt Easton

Kurt Easton

As a Managing Partner of Clean Footprint and professional Urban Planner with over 25 years of consulting experience, Kurt has an extensive background in both public and private sector initiatives. His experience provides valuable insight into public/private negotiations for renewable energy development. His network of municipal contacts through the Florida Redevelopment Association and Florida League of Cities enables direct access to decision makers for the successful development of solar PV projects throughout the State.Contact Kurt at kurt.easton@clean-footprint.com.