3 min read

SARA Smiles

By 5 on April 29, 2021

Late last month, ERCOT released their preliminary Seasonal Assessment of Resource Adequacy (SARA) report. This is the seasonal report that identifies the output from all current, new, and planned generating resources and compares that amount to the forecasted peak load. Reserve margin is the difference between the forecasted peak load and the total amount of generation available to meet that demand. Recently, the reserve margin has climbed from a low of 8.6% in 2019 up to 12.6% in 2020.

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Topics: Markets ERCOT
5 min read

Commodity Oddities

By 5 on April 29, 2021

To say that commodity markets have been volatile during the last 12 months is an understatement, especially for natural gas. This volatility had many drivers including one of the most active hurricane seasons in over a decade, big drops in LNG demand over the summer followed by a rebound in the fall, one of the warmest Novembers on record, and the frigid temperatures at the beginning of the new year. These factors all contributed to significant price swings in spot natural gas prices.

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Topics: Markets Natural Gas
3 min read

Is there a DR in the house?

By 5 on April 29, 2021

In the PJM power market, June 1 officially marks the beginning of the 2021/2022 delivery year. This is an important date for clients that will participate in PJM’s various demand response (DR) programs and those who are actively managing capacity tags through peak shaving. DR participation and capacity tag management allow clients to realize an additional revenue stream for their business while reducing their electricity expenses at the same time.

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Topics: Markets PJM
3 min read

Falling Capacity Creates a Good Buy for NYC

By 5 on April 29, 2021

Wholesale electricity prices in New York City have been rising for the last several months. Figure 1 shows how forward prices for calendar years 2022 through 2025 have been trading over the last five years. Note that wholesale prices were at a low at the start of the pandemic in March 2020. Despite a correction in the late fall when the market dropped, the overall trend has been bullish for nearly a year. Additionally, this is a classic example of a contango market, where prices get more expensive with each subsequent time period in the forwards. Figure 1 also shows that the least expensive calendar year is 2022 and that 2025 is the most expensive.

One interesting observation is that the outer years (2024 and 2025) are rising at a similar and faster rate compared to calendar years 2022 and 2023 which seem to have consolidated. We reported on this consolidation in February and suggested that this created good near-term buying opportunities and now 2022 and 2023 are both trading at a $7/MWh (0.7¢/kWh) discount to 2024 and 2025. While the overall market trend in NYC has been bullish, 2022 and 2023 are within $6/MWh (0.6 ¢/kWh) of the 5-year low, which was set immediately before the pandemic. This, coupled with falling capacity prices in NYC, has produced good purchasing opportunities for NYC electricity buyers.

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Topics: Markets NYISO
2 min read

Informe Del Mercado Eléctrico: México Primavera 2021

By 5 (Mexico) on April 28, 2021

ACTUALIZACIONES DEL MERCADO

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Topics: Markets Mexico
10 min read

April 2021 - Quarterly Market Letter

By Jon Moore on April 21, 2021

On behalf of the team at 5, I am pleased to forward our market letter for the first quarter of 2021. This letter focuses on the latest Black Swan event, Uri, the winter storm that hit Texas in mid-February. The storm caused a catastrophic loss of generation and triggered an extended period of extremely high energy prices. This letter provides: (i) a summary and chronology of the legal and regulatory proceedings that Uri has spawned; (ii) a snapshot of how the storm has impacted a variety of market participants including municipal utilities, wind farms, renewable purchasers, commercial and industrial buyers, and the natural gas market; and (iii) an overview of legislative efforts to address electric reliability in ERCOT.

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Topics: Markets Natural Gas ERCOT Newsletters Education Resiliency
3 min read

A Return to Normalcy (Sort of)

By 5 on March 30, 2021

Throughout last month’s Winter Storm Uri, NYMEX Henry Hub natural gas prices increased in volatility. Multi-year highs for the prompt month contract (April) along with daily trading ranges almost as high as earlier this winter were experienced. By late February, the winter storm bulls had left the market, and the bears took over. By the middle of March, April’s contract had sold off from the closing price of $3.032/Dth on February 17th to a closing price of $2.483/Dth on March 15th.

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Topics: Markets Natural Gas
2 min read

A Texas-Sized Band-Aid for Uri

By 5 on March 30, 2021

So far, it appears as if no one is ready to make price adjustments to customer bills in the aftermath of Winter Storm Uri. Neither the Texas executive branch, the legislative branch, nor the Public Utility Commission of Texas (PUCT) are very eager to be the one that steps up to order the re-pricing of wholesale Real-Time Index or Ancillary Service prices that have been in question over the past month. Instead, it seems like everyone is resigned to allowing the lawyers to argue their cases and leave the outcome up to the courts.

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Topics: Markets ERCOT
3 min read

New Efficiency Standards for New York

By 5 on March 30, 2021

On Tuesday, March 16, 2021, the New York State Energy Research and Development Authority (NYSERDA) released a status report on “Regulations Establishing Energy Efficiency Standards.” In addition to reporting on the status of energy efficiency regulations, this report includes recommended amendments to New York law that would add new categories to the state’s energy efficiency performance standards. These recommendations have been crafted into a “Program Bill” – legislation written by the Governor’s administration – which is being shopped around in the State Legislature for a sponsor.

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Topics: Markets NYISO Resiliency
3 min read

A Rare Item Up For Auction: PJM Capacity

By 5 on March 30, 2021

It has been three years since PJM held its last capacity auction. That last auction, which was held in May 2018, established capacity prices for the May 2021 to May 2022 delivery year. Over the last couple of years, there has been a great deal of uncertainty in how capacity prices would be valued beyond May 2022. Before getting into details of the upcoming capacity auction, we should review what capacity is and why it matters.

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Topics: Markets PJM