3 min read

FERC Battles with States in the Energy Transition

By 5 on February 26, 2024

2024 will be a busy year for the Federal Energy Regulatory Commission (FERC). FERC is typically run by five commissioners, appointed by the President of the United States and confirmed by the Senate.1 With Commissioner Glick stepping down at the end of 2022 and Commissioner Danly stepping down at the end of 2023, FERC is down to three commissioners, Democrat Willie Phillips (appointed Chairman by President Biden in February 2024), Republican Mark Christie, and Democrat Allison Clements. Commissioner Clements’ term expires on June 30, but she is expected to remain at FERC until the end of the year. With the election in full swing, we do not expect President Biden to seek confirmation for additional Commissioners (FERC rules mandate that no more than three members are from one political party).

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Topics: Markets Regulatory
4 min read

The Impact of the LNG Export Pause

By 5 on February 22, 2024

In late January, the Biden Administration paused all LNG export facility applications, so that the Department of Energy (DOE) can assess whether any additional LNG export capacity is in the public interest. There seems to be a little confusion in the general public as to what exactly this pause does to short-term and long-term LNG export capacity and therefore natural gas supply and price. We thought it would be helpful to illustrate what this suspension means in terms of actual natural gas supply and demand.

We will skip the politics of the decision for now and jump straight to the facts of the matter.

First, this suspension only impacts pending applications requesting to export to countries without a Free Trade Agreement in place with the US 1. That’s the first carve out. Second, there is already 14.28 Bcf/day of export capacity in operation in North America (not affected by this order), and another 12 Bcf/day under construction (also not affected by this order). Finally, there is also another 22 Bcf/day of approved capacity not yet under construction (also not impacted by this order), most of which is still working toward a Final Investment Decision (FID), meaning the developers of the sites are still trying to gather enough long-term contracts to move forward with the construction phase of the project.

All in all, by the end of 2026, North America will have a total daily output capacity of almost 25 billion cubic as shown in Figure 1. To put that into perspective, the total global LNG demand in 2023 was about 400 million tons, which is the equivalent of about 53 Bcf/day. The entire market demand is currently 53 Bcf/day, the US, Canada, and Mexico have 14 Bcf of active export capacity online and another 34 Bcf of capacity under construction, or approved (bringing the total to 48 Bcf). Given that the US is not the only game in town (Russia and Qatar also have another 27 Bcf/day in development), it seems as though our future LNG export capacity might exceed global demand, even with forecasted demand growth 2.

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Topics: Markets Natural Gas
2 min read

The Texas Supreme Court and Winter Storm Uri

By 5 on February 22, 2024

On January 30, 2024, the Texas Supreme Court heard oral arguments in a ground-breaking case related to Winter Storm Uri. At the heart of the case is the question of whether the Texas PUC had the authority to manually set the ERCOT rates paid by electricity suppliers to $9,000 per MWh during the four days of Winter Storm Uri. Attorneys representing the PUC (supported by attorneys representing numerous energy companies, including NRG, Calpine, and Talen Energy) stated that this action was necessary to avoid a weeks-long blackout for much of the state.  In response, attorneys for numerous energy companies suffering losses as a result (including Luminant and Pattern Energy) argue that the PUC acted outside of the authority granted by the Texas legislature in taking such action.  The Texas Third Circuit Court of Appeals in Austin previously ruled against the PUC in March, and the PUC appealed to the Texas Supreme Court. 

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Topics: Markets ERCOT
1 min read

Webinar Recording: Earning Energy Revenue to Fund Efficiency & Compliance Projects in New York Feb 2024

By 5 on February 2, 2024

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Topics: Markets NYISO Videos Education
3 min read

Informe Eléctrico Mayorista Enero 2024

By 5 (Mexico) on January 23, 2024

ACTUALIZACIONES DEL MERCADO

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Topics: Markets Mexico
1 min read

Webinar Recording: ERCOT'S Growing Pains, December 2023

By 5 on December 11, 2023

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Topics: Markets ERCOT Videos Education
2 min read

NY's Peaking Plant Problem

By 5 on November 28, 2023

In 2019, the New York State Department of Environmental Conservation (DEC) adopted a regulation to limit nitrogen oxide (NOx) emissions from simple-cycle combustion turbines. Combustion turbines known as “peakers” typically operate to maintain bulk power system reliability during the most stressful operating conditions, such as periods of peak electricity demand. Pursuant to the Peaker Rule, 1,500 MW of peakers were to shut down by 2025 to comply with the emissions requirements. Around 1,000 MWs of peakers retired by May 2023 and another 590 MWs were scheduled for retirement by May 2025. 

On November 21, 2023, the NYISO determined that the peaker retirements scheduled for 2025 had to be postponed. The NYISO concluded that retirement of the peaker plants could cause a shortfall in generation for New York City on a 95˚ day in 2024 and 2025. Figure 1 shows that in those years, the Reserve Margin (the difference between the forecasted amounts of supply and demand) is especially tight. The NYISO’s solution is to keep four barge-mounted peakers running until the later of May 2027 or the date on which the Champlain Hudson Power Express (CHPE) line is completed. CHPE, a 1,250 MW transmission line being developed by an affiliate of Blackstone, will bring power from Canada into New York City. The CHPE line is scheduled for completion in the spring of 2026. 

From a market perspective, one might assume the addition of 508 MW of capacity from these barge generators added to summer reserves would lower forward capacity prices for the summer of 2025, but that does not appear to be the case. It is likely that the market was assuming the NYISO would take these steps to account for a possible capacity shortfall. That and the additional market risk still present in the demand curve reset and capacity accreditation changes that are planned for roll-out in May 2025 means the market has not really seen any material change in forward capacity or energy prices for the summer of 2025. 

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Topics: Markets NYISO
4 min read

PJM's Capacity Market Dilemma

By 5 on November 28, 2023

By most accounts, the winter of 2022/2023 was relatively mild. Only 2.3 inches of snow fell in New York City all winter, which is the lowest snowfall total in the 150 years that the National Oceanic and Atmospheric Administration (NOAA) has been tracking this data. Additionally, the price of natural gas fell 25% from the beginning of December through February on moderate temperatures and lower demand for natural gas used for heating throughout the winter. Despite the mild weather, one winter storm nearly brought PJM’s electricity grid to its knees. Winter Storm Elliott, which occurred between December 22 and December 26 last year, drastically affected power markets across the 13 states that make up the PJM Interconnection. The aftermath of Winter Storm Elliott has added a tremendous amount of uncertainty to PJM’s capacity markets and any new fixed-price retail electricity contracts that go beyond May 2025.    

Winter Storm Elliott may not have been an anomaly. This storm was the fifth event in the last eleven years where cold weather-related generation outages jeopardized the reliability of the electricity grid. In February 2021, ERCOT’s electric grid came within four minutes of a complete blackout across Texas from Winter Storm Uri. And while there were no rolling blackouts during Winter Storm Elliott, many describe last year’s storm as a “close call” with disaster. As reported in 5’s February Market Letter, more than 23% of PJM’s entire generation fleet was offline during last year’s storm. Figure 1 shows the extent of the outages in PJM during Winter Storm Elliott. 

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Topics: Markets PJM
3 min read

Mild Temperatures and Lower Gas Prices

By 5 on November 28, 2023

While it has become common over the last few years for the bears of the natural gas market in the US to rule the month of December and drive down the coming winter’s (January and February) contract, this fall it seems like December came early. For almost the entire month of November, warmer-than-normal weather forecasts, both weekly and monthly, have been relentless for any traders holding on to long positions.  Since Halloween, the Dec. ’23 – Feb. ’24 strip has dropped about 75¢, from $3.65 down to $2.90 per MMBtu as shown in the blue line in Figure 1. This chart also shows that prices have fallen for the April 2024 to November 2024 strip (black line) over the last several weeks. 

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Topics: Markets Natural Gas
1 min read

Webinar Recording: Eastern Region - Winter Energy Prep, November 2023

By 5 on November 1, 2023

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Topics: Markets PJM Videos Education