By Michael DeCaluwe, CEM | October 21, 2021
When you think of Celtics and Lakers fans, you probably can’t think of two groups of NBA fans that are more different.
But they actually do have something in common: They’re both getting especially hurt by the energy crisis.
Energy rates are increasing around the world.
The recent run-up in electricity and natural gas rates has particularly been seen in the international market.
- England has seen rates for electricity double over the past year.
- Natural gas costs in Europe and Asia have shot up over 500% in one year.
- And some European manufacturers are actually shutting down due to the high cost of energy.
Meanwhile, natural gas rates in the United States have doubled over the past year, while electricity rates have seen moderate increases of about 20 percent across the country.
But in the US, the international energy crisis has been especially felt in New England and states west of the Rocky Mountains.
Why? Logistics and pipeline access.
Energy in California
States like California have instituted very limiting greenhouse gas limits, which have also diminished the use of natural gas.
The western US already had limited pipeline access for natural gas. Coupling this with the greenhouse gas limits has led to fewer investments for new pipelines to bring gas to this market. Experts are anticipating that natural gas usage will decrease over the coming years due to these laws.
California relies on hydroelectric power plants for up to 15 percent of its power supply. However, with the west in the midst of a historic drought, electricity from these power plants have been extremely diminished this year. With water reservoirs at dangerously low levels, many hydro plants have simply shut down.
Supply strains of both electricity and natural gas is the reason energy rates have skyrocketed in the region. Consumers in these states have been left with the adage “pray for rain.”
New England’s Energy Challenges
Meanwhile, on the other coast, New England is facing its own high energy rates. While other states typically use natural gas as the primary heating sources for homes and businesses, New England uses heating oil for its heating needs.
There is still very limited natural gas pipeline access to the region. Even though only a few hundred miles separate New England from Pennsylvania (the state that serves as a major source of our country’s gas supply due to fracking), there is actually an LNG import facility in Boston.
That’s right. The gas pipeline to New England is so limited that gas is brought into New England via ships to supplement the area’s gas needs.
The problem is that as soon as gas gets put on a ship, it competes on the international market, where rates are five to six times greater than in the US.
This has led to spikes in both power and gas rates in the region. Electricity rates for winter are up 70 percent for some consumers who haven’t previously locked rates.
What do you do?
The easy answer to these higher prices is to build more pipelines. But this won’t happen overnight — or at all for California.
So, what can you do as an energy consumer in one of these markets?
If you haven’t fixed over winter, long-term rates, although still high, aren’t as ugly as short-term rates.
The other option is to take the pain over this winter and pray that the worldwide energy crisis ends soon.
There are also ancillary options for customers in these areas, like solar. Massachusetts and California are two of the four states with vibrant state subsidies for solar, with paybacks as little as three years.
Another idea is to conserve energy as much as possible…maybe by not watching Lakers or Celtics games on your TV.
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