Electricity and gas provider National Grid is mulling construction of liquefaction facilities in New England to help meet supply requirements on peak demand days.

National Grid sources the bulk of its natural gas supplies for its New England-based customers from the two major pipelines serving the area – Tennessee and Algonquin. “Both of those pipelines are at or near capacity,” said Director of Gas Contracting and Compliance John Allocca at the Advanced Energy Conference in New York on Tuesday.

Allocca noted that because of pipeline capacity constraints, prices at certain locations on the two lines surged earlier this year. “On February 11 this year, while Henry Hub was trading at $3.25, and gas in New York selling at about $4, we see some of the constrained locations on Tennessee and Algonquin – Tennessee Zone 6 trading at $26, and Algonquin Citygate trading above $30,” he said.

At times, the company also takes gas from GDF Suez’s LNG import terminal in Everett, Massachusetts. From Everett, National Grid trucks LNG to regional storage facilities, where it is regasified and fed into the distribution system when required.

But competing with LNG buyers in Europe and Asia, where prices also exceed US domestic prices by wide margins, is not an attractive prospect. “We are not anxious to compete with the rest of the world on imported LNG,” Alloca said.

To help resolve the issue, National Grid is in discussions with pipeline expansion project developers at both Tennessee and Algonquin to secure additional capacity. The company is also considering building its own liquefaction facilities that will enable it to turn low-priced domestic gas into LNG for storage and regasification on peak demand days.

“We rely on LNG to meet 40% of our peak day requirement,” said Allocca. “On an annual basis, we use relatively little, it’s only those few very cold days that we need it. If you try to replace that with pipeline capacity, you have to build that pipe and pay for it year-round.”

In the event that the company needed just enough gas to satisfy peaking requirements on a given day – perhaps as little as 100,000 dekatherms – “we could pay a very high price for the liquid commodity and still be better off than paying year-round demand charges on 100,000 dekatherms of pipeline capacity”, Allocca said.

Building liquefaction capacity is costly, but “once you’ve got it you can liquefy less expensive domestic supply stored in the same facilities and vaporize it when you need it”, Allocca said. Though the company has yet to determine potential volumes, he estimated that if National Grid moves forward with building an LNG plant, capacity will be enough to produce several billion cubic feet of gas per year.

Unlike other companies seeking to develop liquefaction capacity in the US, National Grid has no interest in exporting LNG. “I’m not even sure that we would build enough liquefaction to satisfy our own requirements, we certainly wouldn’t build it with the intent of exporting it,” he said.