API Northeast Region Director Michael Giaimo

Michael Giaimo, Northeast region director, American Petroleum Institute

Energy infrastructure is an ongoing conversation here in New Hampshire, and as the Northeast region director for the American Petroleum Institute (API), Michael Giaimo is in a unique position to analyze recent trends. In prior years, Michael was a commissioner for the NH Public Utilities Commission after spending time with the Business & Industry Association, then ISO New England, where he spent a decade working for the power grid operator. In 2020, Michael started at API, representing several states including New York, New Jersey, Delaware, Pennsylvania and Maryland.

Q. There’s been so much in the news lately about energy options here in New Hampshire. Can you give us a rundown of what we’re seeing today?

A. Consumers have multiple options. De-regulation started percolating in the mid ‘90s and was brought to New Hampshire in about 2000. The whole purpose of it was to give consumers a choice as to where they get their energy from. So, your traditional utilities were the supplier of last resort. If people didn’t go out and find their own supply source, the vast majority of residents stayed with the utility.

A lot of large businesses who have elaborate processes in place and dedicated people to do energy procurement went on their own and were able to choose energy suppliers on their own. So those are the two general options.

The state is allowed for community aggregation, where communities can band together and get the economies of scale. And they basically look more like a large business, right? When you take a bunch of residents, you put them together, their load would look better and get some of the benefits associated with going out to market yourself. The challenge I think that that people have is the public utilities set the rates for the utilities in six-month intervals. Often what you’ll have is people sign a contract with the supplier, and then they’ll always compare it to the interval that they’re in but don’t recognize that, three months later or six months later, one of the next contract comes and they may not be in the money. Their number may not look as good as it did three months prior. So those are some of the challenges facing the consumer in New Hampshire and throughout the region.

Q. Say a community wanted to look at their options. What do they have to do?

A. I think it depends on many circumstances. There are buying groups that you can join, where communities can talk together. And to do that, you can go to a supplier. One of the things that people, and small businesses, might want to think about, to the extent that they can aggregate, is going to a supplier and saying, ‘What (energy) load do I need? What load looks best to get the best price right?’ If you could marry people using power from 9 a.m. to 5 p.m. for a business or one that runs a third shift, you’d have a consistent and even load that would be easier and produce a better rate.

 Q. What energy infrastructure challenges are we facing in the state?

A. Some of the larger challenges is: we have a regional power system that has been supplied with the same five gas pipelines since the early ‘90s, but demand for natural gas has improved significantly. But we’re still being served by the same pipes. So, what you’ll have is a situation where a lot of people are demanding a finite amount of gas, which causes prices to elevate. And then if you had more pipe into the region and more supply, the region could potentially see lower natural gas prices — seeing as 50% of the power in the region is supplied from natural gas and natural gas power plants. It only makes sense then that if you can increase the supply, lower costs, that you would then see similar savings, likely in your electricity bills as well.

There are obviously siting challenges. What we’re seeing for some of the development is particularly with respect to offshore wind; you’re seeing supply constraints and interest rate challenges, which are forcing some of these companies to renegotiate the contracts that they signed up for already.

We’re seeing supply chain legal challenges. If you look to the East, you’ll see a large power line that was proposed as early as 2016 and then started moving forward in 2018. And that saw a citizen ballot initiative — it saw a state Supreme Court proceeding. Only now is it really starting to look like it’s getting closer to development. But that’s still multiple years past when it was expected to be in service.

Even if you have infrastructure, IT infrastructure development out there, it could be lengthy and could be challenging to site and it could take a long time.

Q. What do you think policymakers should be doing for a long-term energy strategy that works for the whole state?

A. You have to look at things in the long term here. There are so many different factors at play.

We just went over how long it takes to get something built. So, however long you think it’s going to take to be built, add additional time to that. Quadruple whatever the number is.

From a policymaker perspective, in the Northeast, there are moves to electrify everything. We have moves to get to 100% EV by 2035. And in most of the states in the Northeast, absent New Hampshire, you also have moves to become all electric in the building sector. Over the next handful of years, to make sure that new construction is only built with electric heat pumps and electric stoves. So, if policies are to push everything to electric, you need to keep in mind that you have a grid that’s limited and aging. And you’re going to need to make advancements, both on the distribution as well as the transmission system. Obviously those things take a long time. You’re going to need more power for the system. And if you’re going to add more power to the system in the form of solar and wind — which are what the states are contracting for and investing in — you’re going to need something to back that up.

There are batteries coming online and getting better, but you need something that can respond in real time. Natural gas is the best alternative for that, because the natural gas plants are able to ramp up and ramp down in real time. They’re very flexible. They provide regulation and reserve capabilities for the power system, which are really important and help keep the reliability in check.

Be mindful of your policies and take the long view, and recognize that you can’t retire things until there are other things firmly in place.

Q. We have solar, wind and natural gas. Do you think a combination of all energy sources would work best for residents?

A. A financial planner tells you to diversify your portfolio. That’s one of the things we (API) call for: an all-of-the-above approach. You need to unleash energy access to all; you need to bolster infrastructure to allow all of it; and you need to be cognizant of an all-of-the-above approach, because if you rely on all one source, you’ll find yourself in trouble.

There was an ironic situation that happened in Maine in December: The Board of Environmental Protection was going to vote on what they referred to as the Advanced Clean Cars rules, which would set in place electric EV requirements starting in 2027 through 2035. And the power system had trouble. A storm came into Maine, which it frequently does, and they called off the meeting because of power outages and challenges. They had to delay the vote for electric vehicles because of electric power outages.

The only reason I mentioned this is because you obviously want more than one alternative. You shouldn’t rely just on electric. You need to rely on multiple sources.

We have a power system that relies on oil and coal. There’s still a coal plant at Merrimack Station in Bow. There’s hydro, there’s imports, there’s natural gas, there’s biomass — there’s a whole host of things. The more diversified your portfolio, the better prepared you are.

People who live in the Northeast, we all envy that person that has multiple heating sources, right? The generator and whatever else they have. So, policymakers need to apply that same logic of not limiting fuel sources.

Within the past two years, New Hampshire passed legislation that requires the ability to have multiple fuels in a home and to give consumers fuel choice. That was a really good policy that the state passed a couple of years ago. It’s a strategy that I think works well in different sectors.

Q. Do you see any comparisons at all between, say, the New Jersey, New York, Pennsylvania region compared to the Northeast? Is it completely different? Are there things that we could learn from them that they’re doing correctly, and vice versa?

A. New York, New Jersey and the Mid-Atlantic states are closer to the Marcellus Shale deposits in Pennsylvania, so they don’t have the same constraints that we have getting gas to their locations. There is a uniqueness there. Their (gas is) right next door, but we have five interstate gas pipelines serving the entire Northeast. They have more. You could visualize it as a funnel, and they’re in the larger part of the funnel. And when it reaches the New York border, it gets to a much smaller funnel. That’s not to say that New York doesn’t have natural gas constraints as well, but their constraints aren’t nearly the same as what we experience here in the Northeast. They pay a premium, but we pay a premium plus their premium. So, it’s a significant challenge. I think a lot of the states in the Northeast have very similar environmental objectives and mandates, so they’re pushing pretty hard on wind and solar. We see that they’re contracting for large swatches of offshore wind, and I think New Hampshire is in the process of studying and analyzing that, and is prudently learning from everyone else’s experience. So, I think the state is in a good position there.

I wouldn’t close the door on anything in particular. I would encourage everyone to be as open-minded with respect to resources. Allow resources to compete. Have the ones that are economic stay and have the ones that are uneconomic leave the market — we have a regional market for that very reason. We’ve made it so that utilities don’t own generation, so that the customers aren’t on the hook for power plants that are no longer economic for plants that go bankrupt. Those costs that are assumed by the shareholders of power, developers and people that build power plants, that was a prudent decision. That’s a good thing, and I think we’re reaping some of the benefits of that.

The American Petroleum Institute is proud of the fact that we saw significant production increases in 2023. While OPEC was slashing production, we increased oil production by 5.4% in 2023. We also saw natural gas increased by 4.5% over that same time period. These are really important facts that provide benefits not just domestically but globally. LNG (liquified natural gas) exports in 2023 reached historic levels for the U.S. We are the No. 1 producer of LNG, and that’s a pivotal fuel that is helping our allies, particularly in the wake of the energy challenges resulting from the Russia invasion of the Ukraine.

The American producers of fuels have filled that void and have provided a really good benefit that’s gone through globally to our allies.

We’ve also seen natural gas produce environmental benefits here within the power sector. We’ve seen Sox, NOx and CO2 reductions go down significantly over the past two decades. So, there’s a lot to be proud about from our industry. Our companies are doing great things, and we want to make sure people are aware of that and providing great benefits.

This interview was adapted from an episode of NH Business Review’s Down to Business podcast.