Smartest Insight | Issue 160

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.

March 21, 2024


Market Update:

This week natural gas prompt month prices have ranged from $1.60 to $1.75/MMBtu and unable to find a direction.  For week ending March 8, 2024 the EIA reported a natural gas withdrawal of -9 Bcf.  This has contributed to our build in storage to 2,325 Bcf, 17% increase from last year and 37% increase from the 5-yr average.  This also continues to expand the upper limit of the 5-yr range.

Contributing factors include the new that PA will be pulling out of the Regional Greenhouse Gas Initiative (RGGI) to start its own cap and trade program announced on Thursday.  RGGI is cooperative effort by eleven states that create a monetary incentive to reduce emissions from power plants in their footprint.  On Friday, the White House announced its plans to accelerate the implementation of clean coal technologies from its agreed 2040 deadline.  Weather is also having its say with cold temperatures hitting the mid-Atlantic and northeast for the next 6-10 days.  Rig counts are also up by 1.1% week over week, but still down by 16.5% compared to last year.

For week ending March 15, the natural gas storage expectation is for a draw in the mid 30's.

As we celebrate the beginning of Spring this week the big question is if we are hitting the bottom in prices. Temperatures will begin to moderate before we hit summer temperatures but we recognize that there is greater risk in prices going up rather than going down any further on the gas and power side.


Regulatory Report:

Orsted Celebrates First US Offshore Wind Project Amid Industry Challenges

Orsted A/S, after canceling a large offshore wind project in New Jersey, celebrates the operational success of South Fork Wind off Long Island, New York. The 12-turbine, 130-MW project, marked by Gov. Kathy Hochul and US Interior Secretary Deb Haaland, signals the US's first commercial-scale offshore wind venture. Despite industry challenges, Hochul sees it as a pivotal moment, highlighting future collaborations for a cleaner energy grid. South Fork Wind aligns with New York's Climate Leadership and Community Protection Act goal of achieving 9 GW of offshore wind by 2035. Orsted's CEO considers it a significant achievement, preceding the construction of the 704-MW Revolution Wind off Rhode Island. The Bureau of Ocean Energy Management granted permits for Revolution Wind's construction, contributing to President Biden's target of deploying 30 GW of offshore wind across US coastlines by 2030.

ISO New England Investigates Reliability Benefits Amidst Shift to Clean Energy

ISO New England is investigating the reliability advantages of interconnecting with neighboring power markets amidst the Northeast's shift to low-emission power sources. They struggle to quantify the diversity in power demand and resources due to evolving supply-demand dynamics. The New England Power Pool requested a thorough reliability assessment of tie benefits from Q4 2023 to Q4 2024. This analysis differs from the ISO's Resource Capacity Accreditation proposal, aiming to consider seasonality in tie benefits for the Forward Capacity Market. ISO-NE reviewed the reliability contributions of inter-regional connections, finding that six of eight regions incorporate external assistance, with varying percentages. Tie benefits studies since Forward Capacity Auction 1 have shown stable values, averaging 1,850 MW. Despite historical events triggering capacity deficiencies, such as forced outages and unexpected generator reductions, tie benefits remained consistent. ISO-NE acknowledges the challenge of quantifying diversity amidst the transition to cleaner energy and economy electrification. They plan to collaborate with neighboring regions to gather data uniformly throughout 2024, aiming to enhance modeling approaches and data reconciliation.

PJM Interconnection Sees Record Drop in Power Prices Amidst Market Challenges

In 2023, PJM Interconnection saw a substantial decrease in power prices, dropping by 61.2% from the previous year, marking the largest annual decline since its inception in 1999. The decrease, amounting to $49.06/MWh, was mainly attributed to lower fuel and emissions costs. Coal and natural gas prices were lower in 2023, while generation from coal-fired units decreased significantly, and that from gas-fired and solar units increased. The report by PJM's independent market monitor emphasized the need for competitive market design amidst challenges like potential thermal power plant retirements. It highlighted the necessity of accurately matching supply and demand for energy and capacity to maintain reliability. The report also addressed concerns about the impact of regulatory policies on market dynamics. Recommendations included better planning for retirements and adjustments to ensure market signals incentivize new capacity. Additionally, there were calls for PJM to assess gas availability and consider dual fuel options for reliability. The report criticized reliance on reliability-must-run contracts as evidence of market design shortcomings.