Rising natural gas costs and what they could mean for you


Natural gas prices are the highest they have ever been in over 10 years. In New England especially, this has many worried about the obvious global energy shortage. We are deep into the winter season, where natural gas is critically important to heating homes and businesses. At this crucial juncture, why are gas prices surging, and what can you do to protect yourself and stay warm this winter?

What is the situation?

According to Forbes, natural gas provides upwards of 30% of all American electricity, especially in the wintertime, and has doubled in price year-over-year. In Europe, the situation is even more dire – where prices have peaked to the energy equivalent of paying $180 for a single barrel of oil. Exporting to Europe means our prices also domestically rise, since we end up with a shortage through covering their deficit. This CNN article states that in East Asia, natural gas prices have risen approximately 85% since the start of September 2021, equal to about $204 for a single barrel of oil. It is becoming globally apparent that with the variable weather conditions and the resurgence of demand going into winter, every country is scrambling to acquire enough resources.

It is clear that there is a global energy shortage. Increasing liquefied natural gas (LNG) exports are contributing to rising U.S. natural gas prices by reducing domestic supply, which could have a major effect on New England’s energy markets and reserves this winter, according to FERC staff. Although regions across the country have reserve margins of at least 26%, FERC Chairman Richard Glick warned that that metric of adequate power supply may no longer be valid in the face of extreme weather, which can knock large numbers of power plants offline. New England is particularly at risk in this shortage because it relies solely on one import port and no ground pipelines, which has been affected by global supply chain problems. There are very few gas import terminals, and if there are any issues with a terminal, places like New England, which is not served by a land pipeline and can only receive supply via its import terminal, are at particular risk.

Many energy companies that utilize natural gas are worried about their dwindling backup fuel reserves with the upcoming winter, especially considering the disastrous weather conditions in Texas last year. In 2020, companies had more natural gas storage inventory than in 2021 moving into the winter. This lack of inventory is the first time our supplies have been lower, year-over-year, going into winter.

How can district energy companies like Vicinity help?

While the global energy shortage will impact everyone, there are strong benefits to being part of a district energy system. Here are a few ways Vicinity’s status as a district energy provider will help serve its customers through this global challenge:

  • Vicinity can negotiate fixed prices and better rates due to its superior bargaining power as a participant in wholesale energy markets, compared to a single building purchasing gas for its own boilers.
  • Vicinity monitors customer usage carefully to ensure there are enough supplies to keep all our customers functioning at their normal levels, even during an extreme weather event or a shortage. This is a huge advantage over individual boilers, where building owners must try to anticipate their load and make sure to order enough on an individual basis.
  • Most Vicinity district systems are fuel-agnostic, meaning its generators (chillers, boilers, etc.) can utilize various fuels, including renewable and alternative fuels instead of being at the mercy of gas companies.
  • Vicinity uses a diverse fuel mix, including renewable biogenic fuel, so the company is not reliant on natural gas.
  • Furthermore, with the electric grid’s growing adoption of more renewable sources, Vicinity is working on electrifying its district systems – a move that will drastically reduce its use of natural gas and conventional fossil fuel use.

The global movement away from fossil fuels

Without a doubt, there are challenges ahead for all building owners that rely on natural gas – and not just in terms of cost. As reliance on fossil fuels continue to exacerbate climate related impacts and global leaders implement legislation to aggressively reduce carbon emissions, it’s clear that natural gas is not a progressive or healthy solution for our collective future.

However, despite the global energy shortage, Vicinity is well equipped to navigate these difficult times, unlike buildings with boilers that rely solely on natural gas. With multiple power supplies, back-up generation, and several water and fuel sources, district energy systems are reliable, robust, sustainable, and provide safeguards to ensure 24/7 energy delivery. Like Vicinity, many leading district energy systems (including those in Vancouver and Copenhagen), are implementing innovative strategies, like renewable fuels, heat pumps and electrification, to further reduce its use and reliance on fossil fuels.

The truth is, our society needs to pivot away from fossil fuel use, including natural gas. Fortunately, other much greener energy solutions and technologies exist for buildings. District energy provides a tremendous opportunity for building owners to not only benefit from energy reliability and cost, but also a lower carbon footprint.

Learn more about our electrification plan in our white paper.

Vicinity Energy White Paper - Revolutionizing Urban Sustainability

Rohan Sinha

Rohan Sinha is Vicinity's Director of Procurement, responsible for leading the company’s sourcing and execution strategies, including energy supply and risk management of commodities. He writes about topics related to energy markets, climate finance, and working towards a clean energy future.