Weekly Energy Market Updates by Region

Issue week: October 21st, 2021  (Wk 42)

 

POWER MARKETS

 

WEST  Various transmission constraints in CAISO, such as the deration of the Palo Verde line by more than 2 GW, should increase upward pressure on cash prices during the ramp hours as flexible imported power is lost. To compensate for the Palo Verde deration and other losses, CAISO will have to rely on instate generation during the ramp hours.

ERCOT  Real-time prices for the week have been mixed as abnormally warm October weather, outages of thermal units for seasonal maintenance, and weak wind generation have continued to boost prices during super-peak hours. MTD spot prices are averaging in the low $50s/MWh, much higher than in Octobers past. In contrast, a pause in the rally in natural gas has softened both winter prices and term prices further out the curve. The term market is heavily backwardated; outer years are $10-$15/MWh below CY2022.

EAST A reduction in generator outages and a cycle of “Goldilocks” temperatures have pulled index prices in NYISO, ISO-NE, and PJM down by $10-$30/MWh from a brief spike at the end of last week. In MISO, index prices remain largely unchanged this week at $57-$61/MWh. Winter forecasts are being monitored closely, for any strong cold front will exacerbate the natural gas shortage and raise fuel costs for generators.

 

 

WARY OF A WINTER WONDERLAND FOR ENERGY PRICES?

Although, on average, index electricity prices continue their steady climb from a year ago, the trend is slowing as forecasts showing a relatively mild winter throughout most of the U.S. have essentially decoupled Henry Hub natural gas prices from those of Title Transfer Facility, the main European gas hub. However, the U.S. is not without risk.

The graph below from the U.S. Energy Information Administration shows that the U.S. remains a net LNG exporter for 2021, meaning that, on balance, more natural gas is being sent abroad than kept stateside. As long as predictions of a relatively warm winter prove accurate, that deficit will not be a problem, but natural gas prices—not to mention energy prices in general—will surely spike again if this winter turns out to be a frigid one and not enough gas is on hand to cope.

While circumstances still look promising, companies should take advantage of the current tameness in gas and electricity prices to assess their portfolios and find out how Calpine Energy Solutions can help minimize the downside of a potential downturn in the winter outlook..