Major Natural Gas Expansion Underway in New York Metro Region

There will be a significant increase in the volume of natural gas being brought to the New York Metro region as a result of multiple pipeline expansion projects from the Marcellus shale region. Several distribution pipelines will be put into service this winter.  According to the US Energy Information Administration, the pipelines will bring “3.5 billion cubic feet per day (Bcf/d) of additional capacity to New York/New Jersey and Mid-Atlantic markets”. In addition to this, the Federal Energy Regulatory Commission granted permission to Spectra Energy to put into service a new pipeline that has been run to Manhattan from New Jersey to bring additional natural gas from Marcellus to the city. The expansion will provide enough energy for Con Edison to heat about 2 million additional homes.

National Grid also appears to be expanding its gas distribution on Long Island. For the fiscal year 2013, which ended March 31, the utility added 8,815 new commercial and residential customers. Because of the lack of natural gas main expansion on Long Island, only about 43 percent of Long Island businesses and residents use natural gas as a primary fuel. As demand continues to grow, the utility has undertaken an $83 million expansion project that will install 1.6 miles of new pipeline under the Rockaway Inlet, connecting parts of Queens, Brooklyn and Long Island to existing natural gas lines. “We’re making large infrastructure investments,” said Kenneth Daly, president of National Grid New York. “You have to build out the network, which we’re doing.”

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

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Conversion from Fuel Oil to Natural Gas Even Sweeter in 2013

Spot Market Prices 2013In our annual review of home heating fuels on Long Island, nothing has changed except for the widened gap between fuel oil and Natural gas prices. Today, “Prices for crude oil and natural gas moved in opposite directions after the U.S. government issued weekly supply reports for both fuels. Benchmark oil for October delivery gained 93 cents, or 1.1 percent, to close at $108.37 a barrel on the New York Mercantile Exchange. But natural gas futures fell 10.5 cents, or 2.9 percent, to $3.575 per 1,000 cubic feet.” Read more here

The impact that shale hydraulic fracturing has had on the suppression and reduction of natural gas prices is phenomenal. According to an article this week in USA Today, “Now, the United States produces more natural gas than it can use. As a result, prices have plummeted… When supply eclipses demand, the only way to increase prices is to reduce the supply or increase demand. Reducing the supply is not an easy proposition for natural gas producers — their contracts on wells often require them to keep drilling in order to maintain the lease. That is why natural gas producers, like Exxon Mobil have pushed the Department of Energy to speed up its approval of applications to export natural gas.

In fact, while home heating oil and gasoline prices continue to escalate, the natural gas glut continues to suppress natural seasonal price spikes. The wellhead price of natural gas is down to less than $4 per thousand cubic feet. This is why it is an extremely good time for those who can convert to natural gas from oil to do so now.  According to NYSERDA, the current price of natural gas in New York State is $1.56 per Therm (or 100 CCF). There are 100,000 BTUs per Therm of natural gas.  Therefore, if you were to price natural gas versus no. 2 fuel oil by the BTU content of a gallon of oil (138,000 BTUs) the current rates would be $4.07 for a gallon of oil and $2.17 for a “gallon” of natural gas with the same heating capacity. Here in the northeast, a consumer can easily burn 1000 gallons of No. 2 fuel oil in a heating season, when equated to about 1000 CCF of natural gas for the same BTU output at $4.07 per gallon of oil and $2.17 per Therm, this equates to a $1900 savings in just one heating season. Based upon a 5 year Return On Investment payback, even a $9500.00 oil to gas conversion would put you ahead of the game.

For more information on heating fuels comparisons, including propane and geothermal, see our previous article here.

Try the following calculators for your own comparison:   ConEd Oil to Gas Heat Conversion Calculator     PSE&G Residential Oil to Gas Spreadsheet Calculator

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Tough Heating Season Forecast in the Northeast for Oil Consumers

With home heating oil prices currently at $4.25 per gallon here on Long Island and a much colder season forecast ahead, this Newsday article predicts a difficult winter for those heating with fuel oil.  Two thirds of Long Islanders still heat their homes with oil and the majority of those would choose to convert to natural gas, if given the opportunity. Unfortunately, Long Island’s natural gas pipeline infrastructure (see Northeast map above) is not being expanded and  National Grid, the private entity responsible for local gas service, is loathe to invest shareholder money to do so.  Michael White, executive director of the Long Island Regional Planning Council, has been an advocate for gas infrastructure expansion to improve Long Island’s economy. White was quoted in the Long Island Business News stating, “it appears we are dependent upon the interests and investments of private fuel suppliers and pipeline companies to actually get approved, construct and operate infrastructure to supply us with natural gas. This paradigm clearly constrains Long Island’s ability to have an adequate and reasonably priced supply of natural gas to support our on-Island generating facilities, as well as conversions from heating oil to natural gas and overall growth.”

Because Long Island’s energy utility infrastructure is controlled by a host of players including private entities (National Grid, ratepayers and private contractors) and public entities (the Public Service Commission, Iroquois Pipeline, NY State and local government), expansion of main and branch service is an excruciating process. This unfortunate stalemate has historically left the majority of Long Islanders with only the costly options of No. 2 fuel oil, electric or propane heating.  We have previously written here about which of these energy options gives you the best bang for your buck.

Taking into account federal tax credits of 30% and LIPA incentives, it is clear that any Long Islander who plans to remain in their home for 5 years or more can get the best rate of return or return on investment by installing a geothermal ground source heat pump to heat their home. Unfortunately, there is a significant initial investment to make in order to convert to geothermal, which has scared away many consumers, even with a financial investment analysis proving out its viability and sound capital return. However, a new program allowing Long Islanders to pay for this conversion through NYSERDA with 2.99% on-bill financing may just be the answer for those too far from the pipeline for gas conversion and hesitant to put savings at potential risk. In order to obtain this financing, a homeowner participates in the Home Performance with ENERGY STAR program, where a BPI accredited contractor approved by NYSERDA will perform a comprehensive home energy assessment to identify opportunities for energy savings. The contractor will write a report that recommends specific energy improvements for your house along with cost figures for making the improvements and estimated energy savings. This program also includes air sealing, energy-efficient furnaces, boilers, water heaters, air conditioners, lighting fixtures and appliances. A homeowner can finance up to $25,000 with this program. An On-Bill Recovery Loan is 2.99% for terms of 5, 10, or 15 years. Once approved for the loan, the consumer’s interest rate is fixed for the life of the loan.

With the advent of variable speed and inverter driven compressors, another efficient option for consumers looking to move away from oil is VRF or “variable refrigerant flow” heat pumps. The market is now flush with systems manufactured by Mitsubishi, Fujitsu, Daikain, Samsung and the like, which have dominated Asian and European markets, but have only recently caught on here. These systems are extremely beneficial to multi-family residential complexes like condominiums and apartment complexes because they are modular, expandable and very efficient at part-load. They achieve their efficiencies because they can operate at partial loads from 10% to 130% in diverse settings, even at low ambient temperatures.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Oil to Gas Conversions – The Time is Now!

Natural gas prices have plummeted in the past 5 years and are now lower than they were 20 years ago. The chart shows the progression of natural gas prices over the past 20 years. You can actually see the effect that shale hydraulic fracturing had on the market price of natural gas starting in 2005 after a decade long gradual increase. This chart was put together by the US Energy Information Administration in the first quarter of 2012, so its projection of 2012/2013 price stabilization is already an anachronism. In fact, while home heating oil and gasoline prices continue to escalate, the natural gas glut continues to suppress natural seasonal price spikes. The wellhead price of natural gas is down to less than $4 per thousand cubic feet.  This is only the case in the United States. The current gas glut in the U.S.–driven by an unconventional extraction technique–has driven prices down to average $2 to $3 per million British thermal units this year, far below the $13 to $18 level seen in Asia and Europe.  Unfortunately, liquefied natural gas (LNG) is very difficult to store and transport and can really only be done so at reasonable cost via pipeline. Therefor, it would be difficult for the US to do anything but consume its own production. Hence, the glut and the price deflation and decrease in oil and gas imports.

This is why it is an extremely good time for those who can convert to natural gas from oil to do so now.  Here in the northeast, a consumer can easily burn 550 gallons of No. 2 fuel oil in a heating season, when equated to about 740 CCF of natural gas for the same BTU output at $3.85 per gallon of oil and .93 per CCF, this equates to a $1450 savings in just one heating season. Based upon a 5 year Return On Investment payback, even a $7150 oil to gas conversion would put you ahead of the game.

National Grid is forecasting natural gas heating costs this winter could be reduced by as much as three percent for homeowners during the upcoming winter season. The company is basing its prediction on current forecast market conditions. A typical residential heating customer using around 711 therms during a normal heating season from November to March would pay about $644, which is $21 less than last year for the same amount of usage.

Try the following calculators for your own comparison:   PECO Residential Oil to Gas Heat Conversion Calculator     PSE&G Residential Oil to Gas Spreadsheet Calculator

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Natural Gas Glut is Double Edged Sword

Natural gas prices have plummeted over the last two years due to the market glut as a result of the shale gas explosion created by hydrofracturing or “fracking”.  For energy consumers, this is a major financial benefit in that the market price for those heating with natural gas has fallen significantly.  This is also a boon to the electric generation industry, which has shifted new power generation facilities to natural gas turbines. The result has been a 50% reduction in costs for the US Power industry for national electric generation. How this has only equated to a LIPA 4.5% rate reduction is a question that should be asked of the State Public Service Commission. LIPA has said it is using the savings to write down losses and loans.  Still, LIPA’s rates are now at their lowest in 5 years.

There is such a glut of natural gas on the market that drillers and energy companies are cutting extraction and production in a play to increase and stabilize market prices. As energy companies have reaped windfall profits at higher energy prices, it behooves them to use Keynesian supply and demand principles to manipulate profits. Unfortunately, capital expansion of gas pipelines has not increased significantly to increase consumer demand. For example, I’ve been trying to get our local utility to extend the gas main 300 feet for the past 20 years.

An unfortunate byproduct of this natural gas boon is the effect that it has had on alternative energy sources. The combination of a harsh recession, disappearing federal tax credits and lower natural gas prices has seen consumers and municipalities running from alternative energy capital improvement projects. Wind power, solar and geothermal projects have all taken a hit since the return on investment has increased because of falling natural gas prices. “Cheap gas makes it difficult for rival forms of fuel to compete”, said Sam Brothwell, a senior utility analyst with Bloomberg Industries. Add to this that in an election year politicians are loathe to suggest energy taxation measures to create a level playing field and it pushes our window to achieve a fossil fuel free future into the next generation.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Northeast US Feels the Economic Crush of Home Heating Oil

It seems my last blog post was timely indeed as the New York Times did a piece this weekend on the high and ever-increasing cost of home heating oil and how it mostly affects the northeastern United States. The poor infrastructure for access to natural gas pipelines in our area is a testament to how poorly northeastern utilities are managed, how often they change ownership and what little oversight both the Public Service Commissions and state governments have provided over the last few decades. New England and New York State gas utilities have been reticent to extend natural gas pipelines into many neighborhoods.  I tried for years to get the gas main pipeline extended down our cul-de-sac, but was told this can’t happen unless all of my neighbors agree to convert.  During the two decades I have lived in my home, the gas utility ownership entity has changed hands at least five times.

Welcome to the northeast, the oldest area of the United States with the most dilapidated infrastructure. At times it seems that our world is crumbling around us and every public works project is a patch job. We have the highest concentration of the oldest bridges, tunnels, roads and buildings. Many of them were civil engineering wonders and the pioneering projects of their time (the NYC Subway, the Brooklyn Bridge, The Verrazzano Narrows Bridge, the Empire State Building), but for those that are not designated landmarks, not much has been done to keep them from crumbling. With that in mind, the extension of underground gas mains in the northeast will probably not become a major focus for Federal or State government until our transportation infrastructure has had its first overhaul since the New Deal nearly 80 years ago.  Of course, it will take a well-managed public utility with a stable plan for expansion and the trust of ratepayers before the Public Service Commission will allow an increase in gas rates to include significant extensions. The price of natural gas has plummeted over the last few years because of the discovery of increased reserves created by shale hydrofracturing in the northeast. This graph shows that the average oil customer pays nearly $2400 per year to heat their home, while the average natural gas customer pays only $951. With this in mind, why isn’t now the right time to keep the price of natural gas at a stable plateau by adding an excise tax or rate line item to help pay for the extension of gas mains into additional suburban areas?

This map of the United States shows how dependent the northeast is on home heating oil. The rest of the US (with the exception of Alaska) has much greater access to natural gas or inexpensive electricity. The high cost of home heating in New York and New England is one of the main reasons so many northeasterners are flocking south and west. They just cannot afford the high cost of living here, especially in retirement. Utilities (including home heating), housing costs and property taxes are the main culprits. The mass exodus of the northeastern population also increases the burden on those who stay in hopes of a brighter economic future here. Its time for the state governments and the public utilities to come up with a master plan to provide lower cost natural gas and electricity to all who want and need it. Until then, the best bet for anyone who can’t get natural gas and plans to stay in their home for the next 5 years is to install a geothermal heating and cooling system. The 30% Federal Tax Credit will be available until 2016 and this combined with utility rebates makes it your best return on investment for the long term. However, 2016 isn’t that far off and it is best not to wait for the crush that will ensue in 2014 and 2015 when the price of oil is even higher and the threat of the sunset of the 25C Renewable Tax Credits is upon us.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!