Higher electricity prices are coming for Granite Staters this August. As you shake your fist and yell at the electricity gods, just remember one thing:
More fuel = lower prices, and that includes the fuel we call natural gas.
Confusingly, the media won’t stop suggesting the opposite.
Here’s how New Hampshire Public Radio reported on the price increases this week:
“The Northeast already has some of the highest electricity prices in the country, in part because of its reliance on natural gas which is subject to global market pressures.”
We don’t mean to pick on NHPR. Many media organizations repeat the claim that our high electricity prices are caused by our “reliance on natural gas.”
It’s a talking point radical environmental groups have spent years pushing into the energy conversation. Two years ago, a coalition of 90 environmental activist groups demanded that Northeast governors oppose a gas pipeline expansion because, among other claims, they said it would “raise our energy bills.”
But does that make any sense?
It’s true that the Northeast is reliant on natural gas for its electricity generation.
In 2000, natural gas made up just 15% of New England’s energy mix, according to the region’s energy grid operator, ISO New England. Oil and coal were 40%. Nuclear was another 30%.
Today, natural gas is 55% of New England’s energy mix, and nuclear is down to 25%. Renewables are up to 13%. Oil and coal combined are down to 1.25%.
“As lower-cost, highly efficient natural gas plants displaced older oil and coal plants in New England, wholesale electricity prices declined,” ISO New England helpfully explains.
The U.S. Energy Information Administration has documented this too. “Favorable natural gas prices in recent years have contributed to increased natural gas use by the electric power sector.”
A 2015 study documented that the shale boom cut natural gas prices by about half, and those lower prices generated $74 billion a year in consumer welfare benefits.
Saying that Northeast electricity prices are high because of our “reliance on natural gas” makes it sound like we could lower our prices just by using less natural gas.
But it’s easy to see why this makes no sense.
Imagine that you’re on a low-carb diet and you get 55% of your calories from chicken. You’re just as reliant on chicken for your bodily energy as New England is on natural gas for electricity.
That makes you fairly sensitive to the price of chicken. If there’s an outbreak of avian flu, you’ll pay more for chicken, just as New Englanders will pay more for electricity if there’s a disruption in the natural gas supply.
But chicken is much cheaper (and leaner) than beef. That’s why you eat so much of it! You certainly wouldn’t replace a significant portion of the chicken you consume with beef just to reduce your “reliance on chicken.”
Likewise, replacing cheap natural gas with more expensive energy sources just to “reduce our reliance on natural gas” is not a strategy for bringing prices down.
Texas relies on natural gas for 51% of its electricity generation, according to the Energy Information Administration. But its electricity rates are about 37 percent lower than New Hampshire’s—in part because pipelines provide Texas with an abundance of natural gas.
The Northeast doesn’t have too much natural gas. It has too little. As the Northeast Power Coordinating Council wrote in a 2023 report:
“Despite the abundance of shale gas that has driven down both commodity prices for firm LDC entitlement holders [local distribution companies] and wholesale electric energy prices for electric generators, a lack of incremental pipeline capacity into New York and New England has kept the northeast reliant on oil….”
That’s crazy because not only is natural gas cleaner than oil, it’s closer.
The largest oil fields in North America are in Texas, New Mexico, North Dakota, Montana and Alaska.
The largest natural gas reserve in North America is in the Northeast. It runs from West Virginia through Pennsylvania into New York. It’s named after the town of Marcellus, New York, less than half a day’s drive from New Hampshire.
It’s right next door.
If anything, the Northeast should be using a lot more natural gas than it does. It’s cheap, reliable, and really close by.
But we can’t because politicians, catering to political activists, have restricted our supply. So we have less natural gas than the market would provide us with if left to its own devices, which pushes our electricity prices higher.
The next time someone tells you that electricity prices are high because of New England’s “reliance on natural gas,” here’s a question to ask in response.
If natural gas were as abundant as water, would our electricity prices be higher or lower?
Having too much of a reliable fuel doesn’t push prices up. Having to little of it does.
