Maine’s Impending Energy Crisis

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We have been watching the natural gas storm on the horizon for some time, and this is the first major lightning strike.  We’ve theorized that LNG (liquefied natural gas) would be exported to Europe soon, raising prices for all gas consumers in the United States.  While that is still probable, there is a more immediate, domestic dilemma that Maine residents and small business owners will soon face.

It hasn’t been a secret that we have limited natural gas pipeline availability in New England, and the major pipelines coming to us from the south are not nearly large enough to meet the requirements for our demanding heating season.  For example, since July, Maine Natural Gas has been unable to connect new customers to the gas mains until an uncertain date in 2015 (we suspect it will be late in the year).  While at Thayer we strive to remain fuel-neutral, we question whether it is in everyone’s best interest to connect to natural gas, with many reasons listed in one of our previous articles (read more here).

The Maine Public Utilities Commission (MPUC), along with representatives from other state agencies, has issued a press release to the public, warning them to prepare for a surge in the price of electricity during the upcoming winter months.  Over half of the electricity in Maine is generated from natural gas.  Increased demand for gas and an inability to meet that demand has directly caused the price of electricity for Mainers to skyrocket.  While homeowners will not see price spikes until March of 2015, small-to-medium businesses should brace for impact since rates will more than double for standard rate customers by January; CMP customers, for example, will see price spikes from $.06 to $.15 cents per kilowatt hour, according to the press release.

Individual consumers and businesses alike make financial decisions based on electricity being available at predictable costs; not priced on crisis.  The fact of the matter is that the natural gas pipeline is constricted, and that is not going to change for several years at best.  After the method of funding new pipelines is determined, political wills of many must align.

Fortunately, there are several things you can do before the onslaught of this energy crisis; all relating to energy efficiency.  Both Michael Stoddard, Executive Director of Efficiency Maine, and Tom Welch, Commission Chairman of Maine Public Utilities Commission believe that now is the perfect opportunity to take a proactive stance and make energy efficient decisions.  At the beginning of October, the MPUC has approved the increased allocation of funding to Efficiency Maine.

There are a number of changes to existing programs, which when combined with the rising cost of energy actually makes for better incentives, equaling quicker payback.  We have effectively bundled several of the existing Efficiency Maine programs with new ones to yield larger incentives for our client/partners.  Call one of our project engineers today and have your building benchmarked using the Energy Star rating system, which will give you a starting point of things to consider.  There are almost always cost effective improvements that can be made to make you more money.

“Cold War Two”

Russia’s Annexation of Crimea: All About Energy?

Checkpoint Charlie

It’s a strange time to be traveling in Europe, and no stranger was a visit to Berlin, which is becoming the new epicenter for what a local paper coined today, “Cold War Two.”  Germany has accused Russia of tearing Europe apart (read more here).  Yesterday I visited Friedrichstraße, or as it’s better known, “Checkpoint Charlie.” that, along with the Berlin Wall, symbolized the divisiveness and threat of tensions between Russia and the world. Following Putin’s fabricated “crisis,” the Russian invasion, and soon-to-be annexation of Crimea, the west once again finds itself asking itself collectivity, “how could this be?” If you look beyond the media hype and blame games, the reasons are quite evident and implications chilling.

The original Cold War rose along lines of political ideology. Today, it’s more about Russia’s most valuable currency: energy. Like the US, Europe has a thirst for cheap energy, the opiate of modern economies. Putin has skillfully leveraged Russia’s vast energy reserves to make much of eastern Europe dependent on Russian energy, mostly natural gas. For example, approximately 90 percent of Bulgaria’s gas comes from Russia, 70 percent in both Hungary and Poland, 35 percent in Germany and 25 percent in Romania. As we can now see, the strategy has been very steady and highly effective.

 

South Stream Pipeline

 

The mainstream press hasn’t covered much about what may be the biggest reason for the Russian annexation of Crimea: the South Stream Pipeline Project. For approximately seven years, Putin has been negotiating a path from southern Russia south-easterly to eastern Europe extending Russia’s influence, control and income from gas. A main spur of this pipeline was blocked by the Ukraine from passing over their Exclusive Economic Zone in the Black Sea without a large scale environmental impact study and Ukrainian permits possibly allowing the competitive White Stream Pipeline Project from neighboring Georgia to beat them to the prize. Although the South Stream pipeline could be re-routed around the Ukrainian continental shelf, it would be far more expensive and take longer to complete. This is just my left-field theory, but control of Crimea and the Ukrainian Navy could now allow Putin a prize that’s far more valuable than Crimea: access to more wealth and influence. That’s how “petrodictators” gain and maintain control.

EU leaders are meeting now discussing ways to reduce their energy dependence on Putin. The most favored strategy is to accelerate importation of relatively cheap American shale gas. Today, Germany is paying approximately 300% more for gas than US consumers pay. The US gas industry is ready to leap on this opportunity for significant and profitable gas trade to Europe, but investment and infrastructure are being held up by Washington lawmakers. This trade would benefit not only producers but also the many pipeline owners, shippers and refiners. Natural gas would need to be pressurized and converted to LNG for shipping. This is a an energy intensive process.

There are those in Washington that feel that cheap American gas should be reserved for the US market while opposing views favor profitable, sustainable US foreign trade. This is also likely one of the best strategies for diminishing Russia’s influence and overt power plays that is destabilizing all of Europe. This, along with significant banking sanctions could break the choke-hold Putin has on the region. Without a steady flow of income from energy, petrodictators seldom retain power. Just ask Gaddafi, Chavez and Ahmadinejad.

So what does this all mean to Thayer Corp and our customers? Expect gas prices to rise steadily and relatively quickly. Natural gas is still a great choice for buildings, but shouldn’t be favored over you best investment; comprehensive preventive maintenance: the “lowest hanging fruit” of your conservation program.

Dan

Dan Thayer, P. E.

President, Thayer Corporation