Weekly Energy Market Updates by Region- Archive




Issue week: February 7th, 2020  (Wk 6)





WEST Over the last two weeks of January, prices softened considerably as above-average temperatures dried up demand and the need to pull gas from storage. However, although a recent cold front has restored demand and the utilization of Southern California storage caverns to begin February, Day Ahead prices have still avoided a spike amid strong gas and water supply levels that have the grid in a healthy position. In the term market, ongoing bearish sentiment has driven the for-ward curve further down.

ERCOT   Changes in term gas prices and heat rates have had little effect on the forward markets; the curve is still deeply backwardated as summer comes into focus. Because of congestion during the evening-ramp hours, real-time prices av-eraged $76/MWh over the first four days of the month in the West Load Zone, but they continue to settle in the high $10s/MWh and low $20s/MWh in the other zones. ORDC impact remains negligible for now.

EAST New England’s capacity auction for the 2023/2024 planning year cleared at $24,000/MW-year, a record low representing a 47% decline from the clearing price for the 2022/2023 planning year. The plunge can be attributed largely to a new demand forecast methodology, which projected a 1,260 MW drop in demand (also known as the Installed Capacity Requirement) from that calculated for the 2022/2023 capacity auction. Additionally, units previously expected to be retired actually cleared, adding incremental supply to this latest auction.










Last week, the U.S. Energy Information Administration published its Annual Energy Outlook, which makes long-term, modeled forecasts for all key U.S. energy supply and demand segments under a range of assumptions. This year’s Outlook is especially sunny: Under the base case, growth in domestic energy supply will strongly outpace growth in demand through 2050, making the U.S. an increasingly important energy exporter to world markets. In-deed, the charts below illustrate how the oil and gas boom in the U.S. over the last decade started to reverse the country’s status from energy importer in the mid-2000s and should solidify its status as a major energy exporter by 2025.

Although any 30-year forecast must be taken with the proverbial grain of salt, the implications of such robust U.S. energy exports would be significant for major national-security issues such as infrastructure, regulatory policy, and trade. For example, the growth in U.S. energy production would not have been possible without corresponding growth in energy infrastructure. The massive buildout of oil and gas pipelines that started three years ago is ebbing, but export infrastructure continues to grow. As the U.S. continues to satisfy growing energy demand around the world with its excess supply, additional facilities will need to be constructed.
However, that infrastructure will not be realized without proper regulatory support at the federal and state levels. A key reason for the U.S. shale boom in the first place was a friendly regulatory framework. Such an atmos-phere will need to be maintained longer-term to support ongoing export growth.

With a stable foundation of dependable infrastructure and regulatory cer-tainty, the prospects for the U.S. in international trade could improve im-mensely. The shale boom has already busted the dam on U.S. natural gas exports, first in pipeline exports to Mexico and eastern Canada and then in liquefied natural gas (LNG) shipments to Asia, Latin America, and Europe. For U.S. allies, that record of success reinforces the standing of the U.S. as an additional supply source likely more stable, secure, and reliable than certain strategic competitors, such as Russia and Iran. Consequently, the U.S. could ultimately dilute the geopolitical influence of such adversaries.
Energy has clearly become a key asset for the U.S. If Washington can navi-gate its dynamics shrewdly over the next 30 years, the country’s global in-fluence may be stronger than it has ever been.





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