Smartest Insight | Issue 118

Our weekly company round-up covers the key market and industry news in one place, so you don’t have to look any further to stay ahead.

May 5, 2023


Market Update:

Lack of demand has played a big role in the moderate prices we are seeing this week.  As we head into May, the winter natural gas draw season has come to an end.  Since temperatures, this winter, were warmer than normal we saw low to moderate spot prices and a build of natural gas storage.  More than half of the lower 48 states recorded a warmer than normal winter with Massachusetts recording their warmest winter since temperatures began being recorded.  The U.S recorded temps that were 2.7 degrees Fahrenheit above average to 34.9 degrees according to the National Oceanic and Atmospheric Administration.   Typically, the shoulder months are a time of low to moderate demand, building of inventory in anticipation of the hotter summer season.  We got a head start on our storage build by withdrawing at a slower pace than last year.  Gas storage is now at 2,009 BCF, which is 35% more than this time last year and at the top of the five-year range just shy of the max by 7.8%.

In April, the average PJM West On Peak DA LMP averaged 54% less than April of 2022 due to the low demand.  This trend continues to be reflected in forwards as we see a 54% decrease in the balance of the year and 28% decrease in prompt year prices from this time last year. The backs have come off by $1-$2/MWh as temps continue to moderate.  For the week, natural gas trended down from the 2.50/MMBTU range to the low $2.30’s and is down approximately $4.00/MMBTU from last year.   This is relaxing prices for the short term, but have continued to see strength in the outer years of the curve raising some concern as the generation mix for energy continues to evolve and important to keep a keen eye on.

Natural gas expectation for the release date of May 4th was for a build in the mid-50's BCF.  The actual reported number was a build of 54 BCF and in line with consensus estimates.  NG continues to trade down on the front in line with bearish sentiment.

Lastly, it’s National Hurricane Preparedness Week, which runs April 30 through May 6.  Do your part now to prepare yourself in the unlikely event of a hurricane, flood, tornado, or any other natural disaster to keep you and your family safe!  Hurricane season is right around the corner and is designated as June 1 through November 30 of each year.

Regulatory Report:

New Jersey Installs Record 455 MW of Solar Power Capacity in 2022

The New Jersey Board of Public Utilities announced that in 2022, 455 MW of solar generating capacity was added through 18,000 new installations, breaking the previous record of 453 MW installed in 2019. The state's increased pace in installing solar panels shows that people recognize the benefits of using clean energy, said the NJBPU president. More than 800 new commercial installations with 267 MW of aggregate capacity contributed to the record-breaking 455 MW which came online last year. Solar power is crucial to the state's adoption of renewable energy, which is targeted to supply 34% of the goal for 100% clean electricity by 2050 as per the 2019 Energy Master Plan. Governor Phil Murphy accelerated the clean energy goal for the state to 100% by 2035, with investments in solar, energy efficiency, and offshore wind expected to provide the foundation for achieving the state's clean energy goals. New Jersey has a goal of obtaining 11 GW of offshore wind power capacity by 2040, and the Solar Act of 2021 established an annual goal of 750 MW to be generated from various solar projects.

US House Democrats propose bill to alleviate challenges around transmission projects

Two US House Democrats, Sean Casten and Mike Levin, have proposed a draft bill aimed at addressing cost allocation and planning bottlenecks in the permitting process for major transmission projects. The proposal, called the Clean Electricity and Transmission Acceleration Act, aims to reform the transmission permitting and siting processes to meet climate goals. The proposal would provide the Federal Energy Regulatory Commission (FERC) with exclusive siting authority for “national interest” transmission lines exceeding 1,000 MW in capacity and crossing two or more states. The bill would also direct FERC to allocate costs for grid upgrades and large transmission facilities to all beneficiaries, establish minimum levels of transfer capabilities between regions, and require transmission planning regions to coordinate on potential interregional lines. The bill seeks to facilitate clean energy deployment from federal areas and improve environmental justice considerations. The proposal has drawn endorsements from several past FERC commissioners. The lawmakers will gather feedback on the discussion draft before formally introducing it in the House. Permitting reform has been identified as a priority this Congress.

New Jersey and PJM to seek more grid projects for 11 GW offshore wind goal

New Jersey is partnering with the PJM Interconnection to launch a second competitive transmission solicitation aimed at supporting the state's updated goal of installing 11 GW of offshore wind generation by 2040. This will result in proposals to inject an additional 3.5 GW at the state’s 500 kV Deans substation in South Brunswick, NJ, between 2032 and 2040. Developers can also propose alternative solutions, including projects that would connect multiple offshore substations and lease areas. The initiative will not affect offshore wind projects that have already been awarded. The effort aims to create additional pathways for wind energy to be brought onshore and into the PJM grid to support Governor Phil Murphy's target. The NJBPU and PJM previously partnered on a competitive solicitation, which produced 80 different proposals, and PJM plans to initiate a second competitive solicitation with a window tentatively set to open in 2024.