Natural gas prices did give back gains realized last week coming out of the long holiday weekend. It will be difficult for prices to move higher due to the continued run of above normal temperatures in majority of northeast demand centers as we exit the winter season. Forward pricing will also be under continued pressure to breakout as record natural gas storage numbers already being forecasted for the 2020 injection season. NYISO had a few capacity market orders come out last week that will impact your clean energy development projects.
The March 2020 NYMEX Henry Hub had traded up to $1.955/MMBtu, a $0.11 (6%) increase from the previous Wednesday. The price of the 12-month strip averaging March 2020 through February 2021 futures contracts increased $0.04 (+3.1%) to $2.213/MMBtu.
For the week ending February 14, the EIA reported net withdrawals from storage of 151 Bcf, which is higher than last year’s net withdrawals of 101 Bcf for this week and lower than the 5-year (2015–19) average net withdrawals of 131 Bcf.
Working natural gas in storage totaled 2,343 Bcf, which is 613 Bcf (35.4%) higher than last year’s working gas totals of 1,730 Bcf at the same time and 200 Bcf (9.3%) higher than the 5-year (2015-2019) average of 2,143 Bcf. Total working gas is within the five-year historical range.
In general power prices gave back gains to start this week after moving higher coming out of the long holiday weekend. The major trading hubs in the northeast were lower across the board for most terms. Mass Hub and surrounding load zones followed similar pricing patterns last week with Mass Hub peak pricing for Calendar 2020 forward electricity strip down 5.2% week over week to basically give back all gains from early last week. Smaller pullbacks when you go further out on the curve, as Calendar 2021 peak strip as only down 1.0% week over week.
The story remains the same for market participants looking to hedge northeast exposure in ISONE and NYISO as good value remains for Calendar 2020 strip and 24 month forward contracts as year over year pricing is still 30% lower and do expect to stay at these levels in the short term with some upside as people turn their attention to the summer 2020 forecasts. Contact TrueLight to stay on top of value in current forward curve pricing and learn more about our portfolio management execution expertise.
Energy customer savings against utility rates or “Headroom” in the marketplace still available for some of the shorter term contracts inside of 12 months in the New England markets. In the WMECO territory headroom in the shorter term contracts, 3 and 6 month terms, from current winter rates but does compress for the longer terms based on where we see rates being reset with our forward headroom analysis. Headroom is in the range of $0.00613/kWh up to $0.01139/kWh for the shorter term contracts, respectively. Let TrueLight help you stay on top of current rates and subscribe to our PTC tracking and headroom reporting or use our price verification service to ensure you stay on top of all utility rate changes.
Clean energy projects will continue to face obstacles when trying to compete and participate in the NYISO’s capacity auction. Four new orders, released last week by the Federal Energy Regulatory Commission, will make it harder for clean energy projects to bid into the capacity market and provide another crucial revenue stream for financial success with energy storage and offshore wind. Last summer, New York passed an ambitious decarbonization and renewable energy investment program, requiring 100% clean energy from the utility sector by 2040. State regulators, state energy groups and the NYISO are also looking at ways to implement the statute along with ambitious offshore wind and energy storage goals. Contact us for advice and valuation modeling on all your clean energy generation development projects.
American Electric Power is still expecting to hit target of 5% to 7% earnings growth through 2024, but did discuss that it was due in large part to the shift in capital investment for new renewable projects. The discussion focused on renewable projects even with one of the larger projects in their portfolio, the 1,485 MW North Central Wind project in Oklahoma still facing regulatory hurdles. The remaining portion of the project’s capacity still awaiting approval in Louisiana and Texas. AEP has been one of the largest coal fired plant companies in the U.S. Historically but is joining the growing number of utilities that will need to build new renewable power facilities in states where they own utilities in order to meet growing clean energy demand and sustain future earnings growth. Contact TrueLight for strategic energy market Support and analysis of the most up-to-date energy market news or use our price verification service to ensure the most recent market shifts are reflected in your forward price assumptions.
In the 8-14 day window the Western Continental U.S., including California and Nevada, are expected to have near to below normal temperatures. Areas from the Ohio Valley to the Atlantic Coast, specifically North Carolina to New Hampshire, will continue to see above normal temperatures. A developing trough moves west and is predicted to bring above average precipitation for Alaska and the Continental U.S.