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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: October 10th, 2019  (Wk 41)

 

POWER MARKETS

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WEST In the index market, Mid-C prices have cleared around $10/MWh above NP15 and SP15 during on-peak hours over the last few days as a result of anemic wind and hydro generation, cold weather, and strong residential and commercial gas demand in the Pacific Northwest. Next week may be particularly volatile in California as two important transmission lines that bring power from the Pacific Northwest to the Golden State will be derated at the same time. In concert with the deration, con-tinuing maintenance on important transmission lines and the planned outage of large nuclear units and other generators are expected to drive prices up in Califor-nia, for comparatively inefficient units will need to be dispatched to compensate for the loss of imported and nuclear power.

NATURAL GAS 

The EIA reported Thursday morning that, for the week ending October 4, U.S. inventories increased by 89 bcf, again in the middle of analysts’ predictions of 80-105 bcf. Total stock-piles now stand at 3,415 bcf, up by 16% from a year ago but 0.3% below the five-year average for the same week.

In the term market, prices are slightly down across all terms and re-gions as expectations of bearish winter power-generation demand and the improving storage levels appear to be dragging prices down.

ERCOT  Real-time prices for October MTD are averaging just over $50/MWh, de-pending on the zone. Operating Reserve Demand Curve (ORDC) for each of Sep-tember and October is incredibly high at more than $11/MWh.

EAST  Over the last two days, the price of Algonquin gas has been under pressure as confusion around the maintenance schedule has settled down. News that the pipe-line will be back to normal capacity flow by November 14 and fully operational for winter was enough to send gas basis for November back to $1.10/MMBtu with the possibility that there may still be room to give. This retreat affected not only Novem-ber gas basis and the winter gas package that runs from November to March but also the winter power package for Mass Hub, which has dropped by more than $5/MWh and returned to levels seen in early September.

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WEATHER 

In the 1-to-5-day forecast peri-od, the weather will be cool to downright frigid in the western half of the country but warm in the eastern states.

The southern half of the U.S. will be warm over the 6-to-10-day forecast period; Texas will be particularly hot. In contrast, the rest of the country should enjoy seasonable weather.

The 11-to-15-day forecast period will feature above-average temperatures east of the Mississippi and a cold front over the Dakotas and Great Plains.


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NEW YORK ISO RELEASES FINAL CARBON-PRICING REPORT, IMPLEMENTATION DECISION NOW RESTS WITH STATE GOVERNMENT

 

Last week, the New York ISO (NYISO) released the anticipated final report on its carbon-pricing proposal originally announced in spring of 2018. With this final report concluded, the ISO now looks to the state government for a firm “go forward” directive.

The report, conducted by outside consultant Analysis Group, concludes NYISO’s proposed emission surcharge is an efficient mechanism for imple-menting New York state’s recently codified climate goals. The Climate Lead-ership and Community Protection Act (CLCPA) – signed by government NY governor Andrew Cuomo in July 2019 – mandates 100% carbon free elec-tricity by 2040 without prescribing an explicit path to do so. By putting a price on carbon emissions, the ISO proposal would favor non-emitting gener-ators (renewables, hydro, etc.) over fossil fuel sources and let market forces play out in the logistical details. Aside from leading to materially increased renewable generation, the report found carbon-pricing to be cost efficient when compared to alternatives – for instance if the state were to directly pro-cure renewable generation. Against such alternatives the report quantified savings to energy consumers in the range of $280-850 million (1 – 3% of total CLCPA implementation cost).

An earlier report by outside consultant The Brattle Group projected the car-bon-pricing mechanism would increase wholesale electricity prices by $16-$20/MWh. Forward trading markets jumped when the proposal was original-ly formalized in spring 2018 and still reflect a carbon premium for 2022 and beyond (as shown in the chart below). Although wholesale energy prices will go up under the proposal, emission surcharge revenue would be credited directly back to energy consumers. After accounting for these offsetting credits, reduced RPS costs, and changes in generation supply, the bottom-line increase in end users’ energy bills is expected to be only $1-2/MWh.

With the NYISO’s analysis mostly complete, final approval of the plan is in the hands of state regulators. Any implementation is not likely to occur until 2022 or later. For more information on the proposal and its implications please contact your Calpine Energy Solutions sales representative.

 

 

 

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