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April 28, 2023
Prompt gas futures are relatively flat over the last week, while Calendar 24 + are up $0.05 to $0.10 depending on the strip. The May contract settle at $2.11 on 4/24/2023. This has been a continuation of the recent trend of rolling bearishness in the front while Calendar 24 + remains strong on bullish fundamentals (coal retirements and increased LNG export capacity). For the week ending 4/21/2023, the EIA reported an injection of 79 Bcf compared consensus estimates of 72 Bcf outpacing both the year-ago levels and five-year-average, 42 Bcf and 43 Bcf respectively. Inventories are forecasted to top 2 Tcf which would widen the surplus to the five-year-average to over 360 Bcf. Early Friday morning there was an explosion on Columbia Gulf Transmission gas pipeline due to an apparent lightening strike. The pipeline anticipates initial impacts to firm service to be a reduction of 400,000 Dth.
3 year view of the calendar strip price
NYISO warns that limits on peaker plants may pose issues for NYC
New York City could face a transmission shortfall in just two years due to limits on emissions from fossil fuel-fired peaking plants, warns the New York Independent System Operator (NYISO). This comes after a 2019 rule from the state Department of Environmental Conservation (DEC) that limits the amount of nitrogen oxides that fossil fuel-fired peaking generation plants can emit during the summer. Compliance plans submitted by generation owners to DEC indicate that some 1.6 GW of generation capacity would be retired by 2025 as a result of the regulation. NYISO’s Short-Term Assessment of Reliability (STAR) report found that the city would have a “very narrow” transmission security margin of about 50 MW in 2025. NYISO has said that it is studying possible solutions to avoid disruptions to the city’s power grid and may seek to keep open at least some of the peaker plants that are scheduled for closure. However, even with the planned addition of the Champlain Hudson Power Express (CHPE) transmission line from Quebec, steady increases in power demand in the city would likely erode the added security margin over the next decade. By 2032, the margin within New York City reduces to just over 100 MW.
US Capacity Market May Undergo Reforms
The US capacity market may undergo reforms, with one proposal being to divide capacity market products into "base capacity" and "emergency capacity" and another proposal aiming to provide sufficient energy coverage while covering avoidable costs. The East Kentucky Power Cooperative proposed a market design based on a reliability target to meet the expected unserved energy using base and emergency capacity products. Base capacity would be set to meet target energy using normal weather conditions, resource availability, and production profiles, while emergency capacity would be set for extreme weather conditions and other outlier events. The capacity resources should be paid the daily price of capacity only to the extent that they are available to produce energy or provide reserves as required by PJM on a daily/hourly basis, based on the full Installed Capacity value of their cleared capacity. The next PJM CIFP Resource Adequacy meeting is set to take place on April 26.
York approves shift to load-share approach for Tier 1 RECSs"
The New York Department of Public Services (NY DPS) has approved changes to the Clean Energy Standard, including a shift of Tier 1 RECs obligation calculation to a load-share approach. This will replace the pre-determined percentage of load that Load-Serving Entities (LSEs) currently serve, and instead follow a "pay-as-you-go" model. This means LSEs will be charged a uniform cost per megawatt hour for their monthly obligation payments, removing the need for Alternative Compliance Payments (ACPs). NYSERDA will also be able to sell Tier 1 RECs to the in-state voluntary market. The load-share approach will be implemented from 2025.