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June 09, 2023
The 8-14 day weather forecast was revised over this past weekend to warmer than normal for about 55% of the country. The heat will primarily be concentrated in Texas and Louisiana but flaring out to the northern Midwest and as far east as New York. We saw an increase in natural gas prices of about 15% from last week. This translates into roughly $3-$4/MWh increases in power prices focused primarily in the fronts. The market is looking for any reason to run and took this news as an opportunity. This may be short lived as the NG storage projection for week ending 6/2/23 is +115 BCF. This is the fourth straight week of +100 BCF injections demolishing last year and the five-year average. The actual storage build is +118 BCF which is 28% above last year's build and 16% above the five year average. The initial market reaction resulted in a 1.5% decrease in prices across the short term 12-month period.
Nearly 851 MW of Power Generation Begins Commercial Operations in Texas Market
In May, the Electric Reliability Council of Texas (ERCOT) approved 850.7 MW of new renewable generation capacity for commercial operation, along with an additional 2 GW nearing commercial operation. The approved capacity includes solar, wind, and gas-fired units. These new additions are expected to decrease wholesale power prices during the summer. The report also highlights the specific locations of the approved projects, such as Houston, Snyder, and Paris. One project, the 524-MW Frontera Generation plant, was approved for energization in May and is projected to achieve full commercial operation on June 16. Solar capacity has seen the largest commercial operation additions, followed by wind, battery storage, and gas-fired capacity. In 2022, wind led in nameplate capacity, followed closely by solar and storage, and then gas-fired capacity.
According to the National Weather Service, there is a higher chance of above-normal temperatures (40% to 60%) in the ERCOT region during June, July, and August. Developers often complete their major construction projects during the summer, and significant additions of renewable energy capacity tend to be finished in December to meet tax incentive deadlines. In the period from June to September 2022, ERCOT approved 857.7 MW of wind capacity, 525.5 MW of battery storage, 486 MW of gas-fired capacity, and 279 MW of solar capacity for commercial operation. On the other hand, ERCOT categorized projects totaling over 434 MW as "inactive" because they did not meet certain completion milestones, mostly involving solar and battery storage. Solar projects had the highest capacity of canceled interconnection requests, with over 1 GW, followed by more than 497 MW of battery storage.
US Senate Approves Debt Ceiling Bill, Paving the Path for Mountain Valley Pipeline
The US Senate has approved a bill to raise the US debt ceiling, which is expected to allow the Mountain Valley Pipeline project to proceed. The bill, called the Fiscal Responsibility Act of 2023, raises the debt ceiling until early 2025 and sets limits on federal spending. It includes a provision declaring permits for the Mountain Valley Pipeline as approved and calls for a water crossing permit to be issued within 21 days, while restricting judicial review of the pipeline's permits. The bill now awaits President Joe Biden's signature, and if enacted, the pipeline company expects to complete construction by the end of 2023. The project has faced delays due to legal challenges from environmental groups. Despite opposition, the bill passed without an amendment to remove the Mountain Valley provision. The pipeline aims to connect shale gas in West Virginia and Virginia to downstream markets, benefiting areas in need of gas resources. The legislation also includes provisions to streamline energy infrastructure permitting.
IEA Forecasts One-Third Increase in Global Renewable Power Capacity This Year
According to the International Energy Agency (IEA), global additions of renewable power capacity are expected to increase by one-third this year due to stronger policy support and higher fossil fuel prices. The IEA's Renewable Energy Market Update report states that global additions will reach 440 GW in 2023, a rise of 107 GW compared to the previous year. The report also projects continued growth in 2024, with the world's total renewable electricity capacity reaching 4,500 GW, equivalent to the combined power output of China and the United States. China is leading in renewable capacity additions, accounting for 55% of the global forecast for 2023 and 2024. Solar power will contribute two-thirds of this year's increase, driven by higher power prices and faster growth in rooftop solar PV. The report predicts that solar PV manufacturing capacity will double to 1,000 GW by 2024. Wind power additions are expected to rebound by almost 70% in 2023 after experiencing difficulties due to the pandemic and supply chain issues. However, the report highlights that wind turbine supply chains are not growing fast enough to meet accelerating demand. Global renewable production is forecasted to rise by 12% in 2024 and continue increasing under an April 2023 reference scenario.