Weekly Energy Market Updates by Region - Archive

Issue week: April 30th, 2020  (Wk 18)

POWER MARKETS

WEST Over the course of April, the index market was soft because of light demand and strong renewable generation. The average Day Ahead price for the month was $18.53/MWh and $18.28/MWh in SP15 and Mid-C, respectively. In the term market, a boost in the projected summer water supply in the Pacific Northwest from 95% to 98% of normal has driven prices for Q3 2020 down in CAISO and Mid-C. However, forward prices for 2021 and 2022 have risen on the significant decrease in oil and gas production, reflected in the 51% drop in the Baker Hughes Rig Count in Canada and the U.S. since mid-March.

ERCOT  Surging term natural gas prices, with support from term heat rates, have lifted power prices by $0.20-$0.60/MWh out the curve this week. Real-time prices have generally stayed in the high $10s/MWh to mid-$20s/MWh, save a few hours of triple-digit prices on Monday. With the new calculation methodology, the ORDC adder for this month has settled just under $3.00/MWh, considerably higher than the $0.09/MWh and $0.65/MWh recorded in April 2018 and April 2019, respec-tively.

EAST Index prices in NYISO have continued to clear in the mid-to-upper $10s/MWh but appear to have found their floor as some of the restrictions due to COVID-19 have been eased across the state. Amid high auction demand, low energy prices, and the retirement of the Indian Point nuclear plant, NYISO’s spot capacity auction for May fetched unusually high prices, particularly in Zone J (NYC).

BLACKJACK: COAL UP IN ‘21

Coal is expected to have a slight resurgence next year. Amid the fallout from the coronavirus over the last couple of months, the U.S. Energy Information Administration (EIA), in the charts below from its Short-Term Energy Outlook for April, forecasts a rise in coal-fired generation in 2021, which would be the first in exactly 10 years.

As the general public has soured on fossil fuels, nearly half of the states in the U.S. have committed to decreasing their carbon emissions significantly over the next couple of decades. Aided by the proliferation of renewable energy sources over the last sever-al years, this movement has made inroads as coal’s share of the nation’s fuel mix has steadily declined since 2011. Therefore, green energy advocates might be understandably confused and dejected by the EIA’s new projection.

Fortunately, the seeming setback is more of a mirage. Both charts clearly show that, although coal is expected to contribute a larger percentage of U.S. electricity in 2021 than in 2020, the per-centage of electricity produced by renewables should also increase. Indeed, the entire “hill” comprising all non-carbon-based energy sources continues its upward slope.

Despite the projected incursion of coal, the EIA’s anticipation of continuing growth in green energy is a positive development in the short term. Nonetheless, disruptions in funding for new green infrastructure are a concern under current conditions. Taking a proactive stance on clean energy now could help companies avoid price spikes if its supply does end up shrinking.