Weekly Energy Market Updates by Region - Archive

Issue week: March 11th, 2021  (Wk 10)

 

POWER MARKETS

 

WEST Throughout March, Day Ahead prices have cleared around $32/MWh in CAISO and $29/MWh in Mid-C. They have been slightly higher over the past few days because of colder weather throughout the region and increased cloud cover, which has decreased solar generation in the middle of the day. Summer water levels are projected to be 93% of normal in the Pacific Northwest, but the dry winter has left snowpack at only 59% of normal in California. The prospect of less unregulated water available to flow through hydroelectric turbines during the summer has had a bullish effect on forward prices for Q3.

ERCOT  As the market recovers from the infamous events of February, term winter prices have risen from last week, but term prices for summer are down a bit. Real-time prices have been clearing in the mid-$10s/MWh this month, and basis has been relatively uneventful, except a few high-priced days in the South Load Zone. The ORDC adder has also been minimal. The moderately dry conditions throughout the state portend a rise in demand over the summer.

EAST Whereas prices remain cooled off in the mid-$20s/MWh in MISO and PJM, they have risen marginally from last week over in ISONE and NYISO. The Day Ahead average in Mass Hub this week is around $50/MWh, $12/MWh higher than last week and $7/MWh higher than Real Time. Meanwhile, Day Ahead prices in NYISO’s Hudson Valley are averaging approximately $39/MWh, $10/MWh more than last week and $1/MWh above Real Time.

 

 

FILLING THE POWER VACUUM

Recent figures from the U.S. Energy Information Administration (EIA) reveal that the chilly start to 2021 has definitely heated up national demand for electricity. Despite rolling blackouts and an economy still not fully open, usage is already ahead of the prepandemic pace at this time last year by 10%. Not surprisingly, this surge is coming largely from residential consumption, which has skyrocket-ed by 10% from a year ago—when far fewer people worked from home—as people have needed more electricity to cope with the cold. Of course, this turnaround is not without its down-side. After a major drop-off in 2020, fossil fuels are poised to realize a long predicted comeback of sorts this year. The EIA projects that U.S. coal generation should rise by 16% in 2021 (although this fortunately would still mean a net drop since 2019).

In addition, both electricity and natural gas prices have been especially strong throughout the country. Prices have recently calmed down for the most part, but concerns could grow again soon amid the announcement by OPEC of continuing cuts in oil production through April 4, which should lift natural gas prices. Hopefully, domestic oil producers will be able to boost their output to compensate, in-creasing production of natural gas in the process and minimizing price swings for both commodities.

The recent volatility should increase vigilance throughout the energy sector for the rest of 2021. However, with the warmer months on the way should come an increase not only in reliability of generation but also in flexibility of resources to mitigate any extreme price movements beyond the normal seasonal fluctuations.