Offshore wind up to 1GW installed by 2024. PJM excess capacity cost and new participant credit rules

Natural gas prices slid last week, as power prices were broadly flat. Navigant Research projects the US will have installed 1GW of offshore wind generation by 2024. PJM endorses more stringent credit and market rules for its markets, including FTR auctions. Over forecasting in PJM has led to excess capacity above the reserve margin, equating up to $4.4 Billion in unnecessary consumer expense. The California and Texas are forecast to see above average temperatures into the middle of April. Meanwhile the Midwest is forecast to see much below temperatures.


Natural Gas

  • The May 2020 NYMEX Henry Hub traded down to $1.587/MMBtu, a $0.13 (-7.6%) decrease from the previous Wednesday. The price of the 12-month strip averaging May 2020 through April 2021 futures contracts declined $0.02 (-0.9%) to $2.214/MMBtu.

  • For the week ending March 27, 2020, the EIA reported net withdrawals from storage of 19 Bcf, which is lower than last year’s net injection of 6 Bcf for this week and is the same as the 5-year (2015–19) average net withdrawals of 19 Bcf.

  • Working natural gas in storage totaled 1,986 Bcf, which is 863 Bcf (77%) higher than last year’s working gas totals of 1,123 Bcf at the same time and 292 Bcf (17%) higher than the 5-year (2015-


Power

  • Power pricing continued to trade in a tight range with most terms up slightly week over week. Prices moved higher in all the northeast summer hubs and load zones and the 12 and 24 month strips. Even with the slight movement up Summer pricing is still below $30 in all the markets across, PJM, NYISO and ISONE. The 24 month term pricing moved higher, around 3%, in most markets and was up close to a $1.00 week over week. Still good value in these terms as prices still 40%+ lower year over year. ERCOT summer pricing was the lone outlier week over week as summer pricing was off slightly, down 2% or $1.77, week over week with rest of the ERCOT terms basically flat.

  • Power prices did move higher week over week but is a bounce off low prices set the past few weeks. Expect prices to continue to trade in a tight range until summer weather forecasts and ISO energy demand expectations start to firm up later this month. Trading volumes are down, as expected in this work from home environment, so you may see slightly higher execution pricing over the next few weeks and should look to increase your hedge costs or price hold premiums to account for this risk. Expect to see very low hourly clearing prices as the ISOs continue to over forecast demand day ahead this month and adjust daily positions and schedules accordingly. Contact TrueLight to stay on top of value in current forward curve pricing with expert hedge strategy recommendations and learn more about our portfolio management execution expertise.


Utility Highlight

  • Headroom in the AECO - RS territory of Atlantic City Electric in New Jersey is now available in the shorter periods for contracts with 3 and 6 month terms. Headroom of $0.00027/kWh and $0.00300/kWh is likely for these periods, respectively.

  • A new report highlighted the recurring issue that consumers in the PJM electricity grid are being charged up to $4.4 Billion in excess capacity generation costs due to PJM over-forecasting forward energy demand. A new report published by Sierra Club and Natural Resources Defense Council highlights how overestimating the peak load has cost consumers for more than a decade. This over forecasting has resulted in capacity commitments that are 10% in excess of needed reserve margins, which resulted in 15GW of excess energy capacity. This figure is in line with the PJM market monitor, Monitoring Analytics, which estimates PJM has 14GW of excess reserves above the required margin. The Market Monitor goes on to say that overcasting led to inflated capacity market prices in the last auction. Contact TrueLight Energy to learn about forward capacity market pricing and generation optimization. Let TrueLight help you stay on top of all utility and market 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 and market rate changes.


Clean Energy

  • A report released by Navigant Research projects the US will have 1GW of offshore wind by 2024 and expects additional 1GW of offshore wind to be added annually through 2027. They stated there are already state and federal leases for offshore wind generation that equate to a possibility of 17GW of generation production. In order to hit this level of generation, the Department of the Interior’s Bureau of Ocean Energy Management (BOEM) will need to approve projects. Seven Projects planned in Maryland, New Jersey, New York and Massachusetts are awaiting approval. One project in Virginia by Dominion Energy has been approved for a 12MW pilot, which could be expanded to 2.6GW. Contact us for advice and valuation modeling on all your clean energy generation development projects.

Market Intelligence

  • In response to the large default PJM market participant GreenHat energy, PJM has been working on enhanced, more restrictive credit and risk rules. The changes are intended to protect the energy market from defaults by strengthening risk processes and increasing credit limits as well as monitoring. Also included in the changes are measures with the intent to know your customer and eliminate bad actors as participants in current PJM default were part of a market manipulation cast within the CAISO. The other ISO markets are looking at or have implemented similar rules. For a full evaluation of required risk procedures and reporting, 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.

Weather

  • Strong below average temperatures are forecast for the Midwestern States in the current 8-14 day window starting April 11th. The highest probability for relative extreme cool anomalies are along the Great Lakes regions. Conversely, California and Florida are expected to see above average temperatures, with the highest chances for warmth in Florida.

© 2019 by TRUELight Energy LLC

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