Smartest Insight | Issue 143

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.

November 16, 2023


Market Update:

The EIA will delay its November 9th report release until November 15th at the same time as the November 15th report. The EIA is working through a planned system upgrade and enhancements. There has been high volatility over the past week where prompt natural gas is up $0.19/MMBtu since November 10th.

Contributing to the volatility was the loss of power at the Freeport LNG terminal in Texas over the weekend. Production at Freeport dropped to 54% but was outpaced its 30-day moving average of 1.84 bcf/day by Sunday. With this behind us, the focus continues to be on winter weather. All models continue to point to a non-existent weather for the season. In the past three weeks we've seen the winter premium peeled away from the Dec 2023 contract. The market is not quite ready to let it go for Jan and Feb just yet. This is the case even though we are heading into an El Nino period. With the scars from winter storm Elliott still fresh, we can expect pricing to increase with any hint of colder temperatures.

The natural gas storage expectations for week ending November 10th is for an injection of +43 BCF which is bullish compared to an injection of +66 BCF from the same week last year.


Regulatory Report:

PJM’s capacity overhaul faces challenges

PJM Interconnection's proposed overhaul of the capacity market faced over a dozen protests at the Federal Energy Regulatory Commission (FERC). Critics argue that the changes could raise consumer costs and compromise grid reliability in the Mid-Atlantic region. PJM initiated the proposal after narrowly avoiding rotating blackouts for its 65 million customers during a severe December 2022 winter storm, which led to significant penalties. The reforms aim to enhance price signals in capacity auctions but drew objections from power generators, state regulators, and consumer advocates. Among the contentious points are concerns about allowing performance risks in market offers, altering bonus payment eligibility, and calculating stop-loss limits. Critics emphasize potential consumer cost increases, while some support the changes to address discrepancies in penalty charges.

The Fifth National Climate Assessment

The Fifth National Climate Assessment, a congressionally mandated report, reveals that the US has managed to reduce greenhouse gas emissions amid climate change but falls short of the necessary levels. Despite increased efforts since 2018 in all regions to cut emissions and build resilience, the report emphasizes the ongoing challenges posed by climate impacts. President Biden announced $3.9 billion for power grid enhancement and $2 billion in EPA grants for clean energy and weather preparedness. However, the report warns that the US must accelerate emissions cuts to meet Paris Agreement pledges, with a stark call for a 6% annual reduction to achieve net-zero by 2050. Current efforts, averaging less than 1% annual reduction, are insufficient to address the climate crisis, leading to higher future costs from weather-related disasters.

Reliability worries drive Texas voters

Texas voters approved a constitutional amendment on November 7, allowing up to $10 billion in state loans and grants for developers constructing new dispatchable power plants by the end of the decade. The amendment, known as Proposition 7, responds to demands for increased reliability following recent power grid instabilities. Voters agreed to allocate taxpayer funds and deviate from the free-market principles of the Electric Reliability Council of Texas (ERCOT). The funds will support the construction and operation of electric generating facilities, with loans featuring a 3% interest rate and grants for plants connected to ERCOT. Critics argue it shifts the energy market towards capacity-style design, conflicting with ERCOT's original principles. The move aims to incentivize fossil fuel generation in the ERCOT grid for increased reliability.

Illinois expected to lift nuclear moratorium

On November 8, and November 9 respectively Illinois Senate and House lawmakers approved House Bill 2473, a measure seeking to lift a 1980s-era ban on new nuclear generation and establish new oversight. State Sen. Sue Rezin, who introduced similar legislation previously vetoed by Governor J.B. Pritzker, explained that HB 2473 addresses the concerns outlined in the governor's veto. The Governor is now expected to sign the bill. The bill aims to update nuclear regulations and permit smaller reactors (under 300 MW) from January 1, 2026. It tasks the Illinois Emergency Management Agency with developing rules for decommissioning, environmental monitoring, and emergency preparedness. Rezin emphasized the need to leverage advancements in new nuclear technology and achieve clean energy goals.