Weekly Energy Market Updates by Region - Archive




Issue week: February 18th, 2021  (Wk 7)





WESTAlthough SoCal Gas is sitting on ample reserves, the region still depends on transport gas from the Permian Basin for daily balancing. Unfortunately, as the Hoth-like cold in Texas has sent gas prices for the weekend package through the roof not only there but also in neighboring regions, SoCal Border and SoCal Citygate have had to send a high enough price signal of their own to ensure flow from east to west and into California. Consequently, Day Ahead prices have averaged $218/MWh and $179/MWh in SP15 and NP15, respectively, since Monday.

ERCOT  To say that real-time price activity over the past few days has been extraordinary is an understatement. The combination of reduced supply from several key generation units and unseasonably high demand has elicited a continuous series of $9,000/MWh hourly settles. Only now is the grid showing signs of recovery from the rolling blackouts that ensued across the state, although the February real-time average has climbed to $1,763/MWh from a mere $31/MWh at this time last week. In the term market, prices beyond the balance of 2021 have actually not increased materially.

EAST Prices have risen across ISOs this week because of the impact of the winter storms on gas prices. Hardest hit has been MISO, where Real Time prices reached $703/MWh in Illinois. At Indiana Hub, Day Ahead is averaging $124/MWh while Real Time is averaging $79/MWh for the week. In PJM’s West Hub, both averages are in the low $60s/MWh. Prices have actually come down since last week in ISO-NE’s Mass Hub, where Day Ahead is averaging $84/MWh and Real Time is averaging $74/MWh.






This week’s freezing weather has devastated power prices throughout the U.S., but Texas has definitely borne the brunt. Although other states have endured their own outages, the scale and severity of the blackouts in Texas have been especially bad. Real-time prices in the Lone Star State actually reached the $9,000/MWh price cap set by ERCOT.

The current grid troubles in Texas call to mind the rolling blackouts in California last summer, similarly compounded by a convergence of unfortunate circumstances. For example, the instigating weather events may have been at opposite ends of the spectrum but directly hampered the ability of both states’ utilities to deliver electricity to consumers, albeit for different reasons. Whereas Pacific Gas and Electric deliberately shut down power lines out of caution to avoid wild-fires (which notoriously happened anyway), ERCOT had apparently gambled on warmer weather and lost as generators of all types failed to produce at expected levels because of the extreme cold (despite the capability to winterize these facilities to operate under such conditions). Frozen gas pipe-lines suspended output from natural gas units, which had the greatest loss, but renewable generation also failed as the sun was blocked and wind turbines froze. No one source of energy is entirely to blame, but failure to prepare all generation assets for such contingencies is clearly a big problem. In addition, whereas part of CAISO’s issues stemmed from its reliance on imported power from neighboring states, which had to keep their electrons at home to deal with the scorching heat themselves, ERCOT’s isolation from the rest of the national grid is ironically what worsened its predicament, for it could not turn to nearby states to pick up its shortfall.

Texas Governor Greg Abbott has called for an investigation to “ensure Texans never again experience power outages on the scale they have seen over the past several days,” echoing a similar pledge from California Governor Gavin Newsom when CAISO was forced to expand rolling blackouts. The catalysts vary, but the mandate is the same in both states and throughout the country. Another irony is that, although an emphasis on minimizing costs contributed to both situations, new regulations that may emerge in response to these crises could raise them over the long term.




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