No Gas Crunch This Winter, Forecasts Say

With a warmer winter projected this year, according to recent forecasts from the National Oceanic and Atmospheric Administration (NOAA), last year’s record upheavals in the natural gas market appear unlikely to recur.

Especially in the eastern and northeastern U.S., this winter should be substantially warmer than 2013–2014, when the Polar Vortex hammered much of the nation with severe storms and sustained low temperatures. According to the NOAA and the Energy Information Administration (EIA,) temperatures in the Northeast and Midwest should be around 11% and 16% warmer than last year, respectively.

The severe weather sent shock waves through the natural gas market in early 2014, with record demand sending regional spot prices to record highs. That in turn upended the gas-fired power sector, with the cold and pipeline constraints conspiring to knock substantial capacity offline.

Though total seasonal gas demand is not projected to fall meaningfully this winter as coal plants continue to retire and consumers switch to less-expensive gas heating, continually booming production coupled with strong storage rebuilds this summer—storage levels are currently only 11% under the five-year average despite a record drawdown last winter, according to the EIA—means shortages are unlikely, observers note.

In addition, new pipeline capacity coming online this fall and winter should ease pipeline constraints, especially in the Marcellus and Utica regions. The Northeast will remain constrained for several more years until major pipeline projects are completed. However, the region has worked to increase dual-fuel capacity since the demand shocks of the past few years, which means generators should be able to weather any short-term crunches. Last winter, for example, while PJM lost around 38 GW of capacity due to the Polar Vortex, much of the Northeast successfully switched over to fuel oil, losing only 1.5 GW

 —Thomas W. Overton, JD is a POWER associate editor.