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New England Burns Jet Fuel To Keep Lights On
First time accepted submitter inqrorken writes "During the recent cold snap, New England utilities turned to an unconventional fuel: jet fuel. Due to high demand for heating, natural gas supplies dropped and prices skyrocketed to $140/mmBtu and prompting the Mid-Atlantic RTO to call on demand response in the region. With 50% of installed generation capacity natural-gas fired, one utility took the step of running its jet fuel-based turbines for a record 15 hours."
You mean, Kerosene? I guess Jet Fuel sounds cooler though.
09 F9 11 02 9D 74 E3 5B D8 41 56 C5 63 56 88 C0 is the magic number.
Why didn't the generators use the derivatives market to hedge against spikes in gas prices so they'd be able to keep buying as demand/price rose?
Well, they might very well have had hedges to allow them to buy at normal prices, but then they're left with a choice - take that super-expensive gas that they can buy and burn it, or turn around and sell it to somebody else at market price and burn something else. If they can get more selling the gas than it would take to fuel their generators with jet fuel, then they're going to sell the gas and buy jet fuel.
Just because they have the option to burn gas doesn't necessarily compel them to do so...
Surely, speculators didn't drive up the price of a commodity right before the storm hit?
Yes, it would have been much better for DEMAND to drive up prices right after the storm hit so that consumers would be unable to see the price rise coming and reduce their reliance on natural gas and suppliers would be unable to increase production to meet (and profit from) the increased demand (perhaps by rerouting from other areas which would not need the natural gas as desperately). Yes, that would be much better. ?s
The truth is that all men having power ought to be mistrusted. James Madison
This is not a problem with market-based solutions. It is a problem with a certain segment of our politicians waging a "war on coal". As to "why drug companies don't make new antibiotics", well that would be an interesting theory, if it were true that they do not actually do so. The main reason that it appears that drug companies don't make new antibiotics is because all of the "easy" ones have already been developed.
The truth is that all men having power ought to be mistrusted. James Madison
Not to mention that storing enough gas on site to run a generation facility is pretty much impossible and dangerous.
Even spec prices don't do you any good unless you have a direct pipeline to the source. Most places are on the large pipe network, and there is no way you can blindly pump gas in form your spec source and expect it to arrive ONLY at the those sites with spec contracts.
Its easier to just add a fuel surcharge to the end user's electric bill. Which is exactly what happens in most places.
Sig Battery depleted. Reverting to safe mode.
Due to high demand for heating, natural gas supplies dropped and prices skyrocketed to $140/mmBtu
Off-topic question: Do these people actually invent new units of energy for each application?
Wikipedia
A BTU is the amount of heat required to raise the temperature of 1 pound (0.454 kg) of liquid water by 1 F (0.56 C) at a constant pressure of one atmosphere.[1] As with calorie, several BTU definitions exist, which are based on different water temperatures and therefore vary by up to 0.5%.
The unit MBtu or mBtu was defined as one thousand BTU, presumably from the Roman numeral system where "M" or "m" stands for one thousand (1,000). This is easily confused with the SI mega (M) prefix, which multiplies by a factor of one million (1,000,000). To avoid confusion many companies and engineers use MMBtu or mmBtu to represent one million BTU.
Somebody must have thought really long and hard to come up with that stuff.
This ain't any "Econ 101" "supply & demand" thing. There's plenty of natural gas around to the extent that it just get wasted:
http://www.theglobeandmail.com...
Natural gas? Cheap and abundant.
Natural gas in pipelines flowing to New England power plants? Not so much.
If you don't understand how that would make a difference, it's likely you never took this Econ 101 you speak of. (That, or perhaps you think pipelines work by magic, and any mass flow rate through any size pipe is feasible from both engineering and economic perspectives? To put it in Ted Stevens-like terms, pipelines are like the internet, not like a truck.)
Not to say the natural gas market in New England is, or bears particularly close resemblance to, the elegant, efficient resource-allocation method modeled and taught in Econ 101, but your attempt to use the practice of gas flaring as evidence that there wasn't a genuine scarcity of usable natural gas in a certain place and time discredits you by revealing a serious failure in competence and/or honesty. (I wouldn't claim to know which.)