Weekly Energy Market Updates by Region

Issue week: November 4th, 2021  (Wk 44)

 

POWER MARKETS

 

WEST  The beginning of November has not meant the end of above-average Day Ahead prices, which have averaged around $64/MWh and $56/MWh in SP15 and Mid-C, respectively, this week. In the forward market, CY2022 has trended slightly lower, thanks to a fall in forward natural gas prices. In related news, market participants are closely watching the results of today’s vote by the California Public Utilities Commission on the issue of raising the capacity of the Alison Canyon storage facility from 34 Bcf to either 41 Bcf or 68.8 Bcf.

ERCOT  Averaging over $80/MWh despite typical autumn loads, real-time 7x24 prices have been especially strong in the first few days of November. Indeed, they are 300% higher than at the same time last year, when they averaged $20/MWh. Extended outages, disappointing renewable generation, higher spot natural gas prices, and the prospect of greater ancillary service procurements appear to have contributed to the recent increase. Conversely, forward prices have decreased considerably from last week on lower forward gas prices. Strips for CY22, CY23, and CY24 have dropped by $3/MWh, $2/MWh, and $2/MWh, respectively. As outer-year term strips trade in the mid-$30s/MWh, these years represent significant bargains relative to current real-time prices.

EAST Whereas LMPs in ISO-NE and NYISO are similar to last week’s, prices in the main hubs in MISO and PJM are higher, especially in the last few days, because of planned outages, unexpectedly high load, and underperforming wind generation. In MISO’s Indy Hub, Day Ahead prices are up by almost $9/MWh while Real Time is $14/MWh greater. Similarly, Day Ahead in PJM’s West Hub is $8/MWh above last week while Real Time has risen by $12/MWh.

 

 

NATURE: THE MOST SUSTAINABLE CLIMATE CHANGE SOLUTION

Bioenergy to carbon capture and sequestration (BECCS) technology, the trendy solution to the pesky carbon problem that leverages human ingenuity to remove carbon dioxide from the atmosphere artificially and store it in soil underground, is truly a wonder of geoengineering. The World Resources Institute (WRI) reports that, despite its geological limitations, a combined 26 power plants and industrial facilities (half of which are in the U.S.) used this technology to capture 40 million metric tons of carbon dioxide in 2020 alone. In addition, more than 30 new BECCS projects have been announced in the U.S. since Congress revamped a federal tax credit. This technology has definitely enabled “dirtier” industries that cannot fundamentally change (e.g., fossil fuel companies) to begin to redress some of the collateral damage due to their operations.

Unfortunately, high capital costs keep industrial-scale BECCS projects a challenge to deploy, but, as Heather Luedke of the Environmental and Energy Study Institute explained two years ago, “nature-based solutions can help the United States meet the infrastructure investment gap in a cost-effective manner, while producing substantial…environmental co-benefits.” Carbon sequestration is one of those environmental co-benefits, for plants remove carbon dioxide from the atmosphere by their very, well, nature. Initiatives to restore environments such as forests, wetlands, and salt marshes are examples of nature-based solutions that complement geoengineering innovations such as BECCS in carbon removal.

The WRI observes that the U.S. will have to sequester at least 1 billion metric tons of carbon dioxide every year to achieve its goal of net-zero emissions by 2050. Widespread implementation of BECCS is increasingly accepted as a significant means of accomplishing that. However, as long as that technology remains as costly as it is, nature-based solutions are the truly sustainable way to rid the atmosphere of carbon.