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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: July 15th, 2021  (Wk 28)

 

POWER MARKETS

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WEST  The AC and DC transmission lines that provide California much needed flexible power from the Pacific Northwest during the nightly ramp have been de-rated by a cumula-tive 5,600 MW because of the Bootleg Fire raging in Oregon. Consequently, CAISO last Friday declared a Stage 2 Emergency to indicate that it could no longer satisfy expected energy requirements. With the loss of imports, the ATC Day Ahead LMP has spiked during the nightly ramp, averaging around $80/MWh in SP15 and NP15 since Friday.

ERCOT  As afternoon showers along the Gulf Coast and across central Texas have kept peak loads well below normal, 7x24 real-time prices have remained relatively low again this week, averaging around $25/MWh. Moreover, a cool front expected to cross the state early next week should limit price volatility then as well. However, for the last week of July, currently trading at $90/MWh for on-peak, volatility in real-time prices could rise as temperatures and loads return to levels more normal for this time of year. In the term mar-ket, August peak prices are also staying firm around $120/MWh, $10/MWh above last week. Further down the curve, CY strips through 2023 are relatively flat from last week, but strips for 2024 and beyond are up by approximately $0.50/MWh on stronger natural gas prices further out the curve.

EAST As the weather has stayed warm this week, prices have not moved far from last week’s averages. In NYISO, volatility in index prices has settled down. In NYC, this week’s Day Ahead and Real Time averages are $41/MWh and $40/MWh, respectively, whereas both Day Ahead and Real Time are averaging in the mid-$30s/MWh in all of the other main hubs.

NATURAL GAS 

The EIA reported Thursday morning that, for the week ending July 9, U.S. invento-ries increased by 55 Bcf, more than 50% above the market expectations of 36 Bcf. Total stockpiles now stand at 2,638 Bcf, down by 17.1% from a year ago and 6.7% below the five-year average for the same week.

The prompt month of August fell by $0.039/MMBtu from yesterday’s close with a pre-liminary settlement of $3.621/MMBtu today. All actively traded contracts through 2022 were also down as forecasts of cooler weather have put a dent in the recently strong NYMEX prices. Wildfires in the West are keeping prices there stronger than in the rest of the country as a spike in de-mand and worries about power deration continue to pose problems.

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WEATHER 

After today’s heat in the East, temperatures will fall in the 1-to-5-day forecast period. Meanwhile, thun-derstorms will cross the Southwest.

As the Midwest should slowly heat up over the 6-to-10-day forecast period, the Great Lakes should be especially humid.

During the 11-to-15-day forecast period, the South and East should expect seasonable temperatures.

 

SUMMER SWAP

Energy-wise, summer tends to bring all re-sources out to bear to cope with the hot weather, and the effects of this summer’s mobilization have definitely started to materialize. However, although energy-market volatility is growing as expected, the most historically volatile resources are not currently at the root of this season’s in-crease.

The usual dependability of natural gas has been under siege from major price spikes for that com-modity. In addition, although hydroelectric gener-ators have long been the most reliable of the re-newable class because suppliers can actually control the time of their deployment, scorching heatwaves and growing drought conditions have left hydropower contributing only 6.5% of total generation in 2021, its lowest proportion since 2015. The West, which relies on hydropower more heavily than do most regions and is endur-ing a particularly intense drought, has been es-pecially hampered. CAISO has already issued alerts asking consumers to conserve power to handle the summer demand peaks.

Ironically, the current situation has left intermit-tent wind and solar generation to pick up more slack than usual. In fact, solar output continues to grow and is projected to be the largest renew-able energy source in 2022. Unfortunately, that development would only exacerbate the prob-lematic duck curve. Renewables may be holding down the proverbial fort for now, but the mount-ing volatility could yield alarming electricity prices not only out west but also throughout the entire U.S.

 

 

 

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