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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region


Issue week: March 26th, 2020  (Wk 13)

 

POWER MARKETS

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WEST Day Ahead prices have traded higher than Real Time prices as CAISO has overestimated demand, which keeps decreasing in the commercial and industrial sector amid the coronavirus. Consequently, the spread between Day Ahead and Real Time has been around $5.00/MWh since Monday. Rela-tively low spot prices are expected over the next few weeks as solar and hy-dro generation starts to increase and apply downward pressure on natural gas spot prices.

ERCOT  This week, term prices were up by $1.00-$1.50/MWh out the curve because of increases in both term natural gas prices and heat rates. Real-time prices are averaging in the mid-to-upper $20s/MWh for the month, spurred by some early-season cooling load during seasonal generation maintenance; several hours recorded triple-digit prices. The ORDC adder for March has increased to $1.25/MWh, more than double the level from March 2019.

EAST Real Time and Day Ahead prices remain low and mostly stable across the main trading hubs. LMPs are starting to trend weaker in RT than in DA, but some DART spreads have been higher, specifically in PJM West Hub, where, on Tuesday, the DART spread averaged $12/MWh after a midday price spike due to congestion on the Seward - Tower 51 115 kV line.

 

NATURAL GAS 

The EIA reported Thursday morning that, for the week ending March 20, U.S. in-ventories decreased by 29 Bcf, right in the sweet spot of the predicted range of 14-36 Bcf. Total stockpiles now stand at 2,005 Bcf, up by 79.5% from a year ago and 17% above the five-year av-erage for the same week.

Prices for NYMEX monthly contracts were lower across the board today. The April front-month contract traded as low as $1.614/MMBtu, down by $0.045/MMBtu from Wednesday’s close. May, set to become the prompt month, was at $1.690/MMBtu, $0.024/MMBtu be-low yesterday’s final, as of 1:00 p.m. PDT. In California, basis prices 60 months out were off slightly at PG&E Citygate and SoCal Border. March cash prices at PG&E Citygate were higher than yesterday.

 

 

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COVID-19 SAPS U.S. ENERGY DEMAND

As the coronavirus continues to force temporary shop closures and mass telecommuting across the country, grid operators have generally seen energy usage fall across the board. However, the magnitudes of those drop-offs have varied considerably by region.

As recounted by UtilityDive’s Robert Walton on March 23, PJM expects that “[e]lectricity use will more closely resemble weekend days.” Indeed, the chart below from PJM Inside Lines on March 23 shows that evening-peak usage in PJM was 5% lower than expected on March 17. Walton also noted a decrease of 3-5% in demand reported on March 20 in ISO New England, whose operator had observed slower ramping levels in the morning. At the more extreme end of this spectrum, peaks in MISO for the month to date are down by 13% from the March average since 2014; MISO representative Allison Bermudez attributes the change not only to milder weather but also to “the pandemic-related closures and adjusted operating hours of non-critical businesses.” On the other hand, Walton reports that neither the Southwest Power Pool nor NYISO has witnessed a noticeable drop in its respective load, although both have observed shifts in usage patterns.

As long as coronavirus policy remains fragmented on a statewide and even citywide basis, the extent of these load drops remains to be seen. If entire regions or the whole country institutes a more significant shut-down, electricity curtailment could resemble that of countries such as Italy, whose peak demand plunged by approximately 20% a week after its lockdown went into effect.

President Trump has been adamant about his hope to return the U.S. economy to normal by Easter, so a federally mandated shutdown is not so likely. Then again, unlike China, the U.S. is still in the early stages of this ordeal. Official policy could still go through many changes.

 

 

 

 

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