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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: November 21st, 2019  (Wk 47)

 

POWER MARKETS

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WEST This week’s cold weather in California has lifted residential and commercial demand for natural gas and consequently driven SoCal Citygate spot and term pric-es high enough to keep natural gas-fired generators offline despite their status as the marginal unit of supply. The uptick in gas prices has substantially increased the implied heat rate and raised prices considerably in SP15, NP15, and Mid-C.

NATURAL GAS 

The EIA reported Thursday morning that, for the week end-ing November 15, U.S. invento-ries decreased by 94 Bcf, which lined up with the predict-ed withdrawal of 77-101 Bcf. Total stockpiles now stand at 3,638 Bcf, up by 16.2% from a year ago but 1.6% below the five-year average for the same week.

Prices skyrocketed today. At one point, prompt-month fixed prices in SoCal Citygate traded over $6.90/MMBtu. Prices are mostly up through the winter, although the increase out the curve in the medium term is only $0.10-$0.20/MMBtu from yesterday. The combination of high demand and storage lev-els lower than hoped by this point in the season has the market chasing the last mole-cule and elevating prices sub-stantially to get it. The critical low and high Operational Flow Orders called by SoCal Gas every day this week have also produced significant volatility in SoCal Citygate prices.
 

ERCOT   This week, 7x24 real-time prices have averaged in the low $20s/MWh across most zones. Plant outages for maintenance are still averaging over 20,000 MW, but, because of strong output from renewables and moderate temperatures keeping average peak loads under 50,000 MW, reserve margins are ample. The exception is the West Load Zone, where congestion remains significant (predominantly during off-peak hours) and average 7x24 real-time prices are $35/MWh higher than prices in the West Trading Hub for the week. Term prices down the curve are lower than last week by $0.25-$0.50/MWh because of a dip in natural gas prices, but heat rates are relatively consistent.

EAST  As weather forecasts for December have normalized since earlier forecast runs but January is still expected to be unusually cold, term prices for the next three months have fluctuated but generally evened out over the past week. On the other hand, Real Time prices in Mass Hub spiked at $425/MWh in HE6 this morning be-cause of congestion in exports leaving Connecticut; one unit may also have had issues when ramping up. Overall, Real Time prices in Mass Hub for the week have averaged $42/MWh, about $1/MWh over the Day Ahead average.

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WEATHER 

In the 1-to-5-day forecast period, temperatures will be above average across the Great Plains while more seasonable weather will prevail in most of the rest of the country. Thunderstorms and warm conditions will hit Texas but should let up over the weekend.

The Pacific Northwest will be cold over the 6-to-10-day forecast period while temperatures will be generally above average east of the Rockies.

The cold weather will spread east from the Pacific Northwest through the Midwest during the 11-to-15-day forecast period, but temperatures should track seasonal averages for early December in the rest of the U.S.

 

 

 

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Electric Cars, InEVitable?

This week Ford unveiled its Mustang Mach-E electric crossover in what may be considered the automaker’s first serious foray into electrification - the rollout goes far beyond simply satisfying electric vehicle mandates that now exist in several states. California, the nation’s largest automobile market, has required major automakers to account for a certain percentage of sales with electric vehicles since 2009 but many automakers have heretofore converted existing models into electric “compliance cars” (see Ford’s now discontinued electric Focus) or bought offsetting compliance credits. Ford’s new Mach-E however is a new level of commitment by the major automaker that may be a response to the growing revenues of Tesla. While Ford’s revenue currently dwarfs Tesla’s, Palo Alto based Tesla’s revenue has been growing 75% annually since 2015. In fact investors seem to value growth over stability, Tesla currently has a market cap exceeding both Ford and General Motors.

 

 

Despite the growing success of Tesla, electric vehicle sales comprise just 2% of total vehicle sales according to Roland Irle at EV-Volumes.com. Sales at these levels are not having a material impact on the electric grid but continued growth could, rough calculations indicate converting 50% of all light vehicles to electric would raise national electricity demand by approximately 8%. With their regulated role in grid maintenance, utilities have an opportunity not only to increase volumetric sales but also to provide infrastructure upgrades that accommodate EV charging. For example California has authorized its regulated utilities to spend $197 million on charging equipment, Maryland utilities have been authorized to install 5,000 charging stations, and Massachusetts utilities have approval for $70 million in EV infrastructure programs. Additionally there is research into how electric vehicles’ storage capacity might be used stabilize grids by absorbing excess renewable supply and even sell power back to the grid during supply deficits. Electric vehicles are undoubtedly gaining momentum but still have along way to go before they represent a large portion of motor vehicle sales or have a major impact on the electric grid. Nonetheless utilities are seizing the opportunity to provide new charging infrastructure and likely will one day incorporate EVs as a dynamic resource into their grid operations.

 

 

 

Previous Weekly Market Reports: Archive

 

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