banner_market_intelligence_1440x441

MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region

 

 

 


Issue week: May 5th, 2022  (Wk 18)

 

POWER MARKETS

Chart1_Energy_Market_Intelligence_Commercial

 

WEST  This week, Day Ahead prices have averaged around $85/MWh in Mid-C and $60 in SP15. Several circumstances in the Pacific Northwest are bolstering spot prices there. The weather has been stubbornly cold, a lack of runoff and fish spill policies has drastically reduced hydro generation, and three large natural gas facilities are offline for maintenance. Together, these factors have thinned the supply stack and rendered older, more inefficient natural gas facilities the marginal unit of supply in the Pacific Northwest.

ERCOT  Real-time prices have started May in strong position, 7x24 prices averaging between $55/MWh and $70/MWh this week. The Houston and West Load Zones are clearing the highest amid significant congestion. Record-high temperatures for this time of year are expected over the weekend and at least into next week, so both loads (which are expected to peak around 70 GW on Monday) and real-time prices should remain sturdy. In the day-ahead market, 7x24 prices for tomorrow cleared around $140/MWh as wind is forecasted to be weak tomorrow before picking back up. Finally, term prices continue their ascent in lockstep with natural gas prices. The prompt 12-month curve has risen by more than $10/MWh since last week as the 7x24 price now approaches $100/MWh.

EAST LMPs are up a bit more from last week, Day Ahead averaging $3.33/MWh higher and Real Time averaging $2.62/MWh more. DART spreads are minimal across the board. In ISO-NE’s Mass Hub, both Day Ahead and Real Time are averaging $71/MWh. The figures are similar in PJM’s West Hub, where Day Ahead is averaging $71/MWh while Real Time is averaging $68/MWh.


NATURAL GAS 

The EIA reported Thursday morning that, for the week ending April 29, U.S. inventories increased by 77 Bcf, just overshooting the expected addition of 75 Bcf. Total stockpiles now stand at 1,567 Bcf, down by 19.6% from a year ago and 16.3% below the five-year average for the same week.

The NYMEX Henry Hub prompt month of June finished today at $8.783/MMBtu, $0.368/MMBtu over yesterday’s close and a staggering $1.539/MMBtu higher than last Thursday’s final. The European Union’s embargo on imports from Russia appears to be the main culprit for the latest jump. As nationwide storage levels in the U.S. remain below normal and production appears to struggle to reach pre-pandemic levels, NYMEX prices keep breaking records.



Chart1

Map1

Map2




Map1_Energy_Market_Intelligence_Commercial

 

 

 

 

 

 

 

 

 

 


Fossil Fuel Divestment: Not an Easy Goodbye

Much recent pontification regarding climate change, whether in protests or in print, has advocated divesting from fossil fuels—removing funds in an investment portfolio from companies that profit from the accumulation or exploitation of carbon-based energy sources. Writing for Forbes in February 2021, David Carlin summarized the simple yet radical vision of environmentalist Bill McKibben: Defunding such enterprises would devalue their stock, ultimately depriving them and the entire energy sector of the economic resources needed to continue their harmful activities. However, despite having grown to $14.5 trillion and enlisted a multitude of diverse stakeholders, as Carlin noted, the movement to divest remains a complicated proposition fraught with competing interests.

However noble the goal, some fear that a stampede of divestment could accelerate bursting of the so-called “carbon bubble,” the large spread between the initial investment in fossil fuel assets and the presumably paltry value that they would have once stranded because of changing environmental policy and outright abandonment due to the movement. Financing for these assets assumes long-term output, a use-specific discount rate, subsidies, and other financial incentives, all of which could be wiped out in the aftermath of mass divestment. Indeed, Matt McGrath of BBC News, in June 2018, noted one study that projected global economic losses of $1 trillion to $4 trillion by 2035 due to dwindling demand for fossil fuels, which would harm the U.S. and Canada most.

Some states whose economies rely heavily on fossil fuels—such as West Virginia, Louisiana, Oklahoma, and Texas—have resorted to weaponizing their legislatures to try to stem the tide of divestment to protect their industries. For example, in an episode of the NPR legal podcast All Things Considered from March of this year, Jason Isaac of the Texas Public Policy Foundation touted a new law that officially suspends business between the Lone Star State and financial groups that affirmatively divest from fossil fuels. After asserting in his 2022 Letter to CEOs that “every company and every industry will be transformed by the transition to a net zero world,” BlackRock Chairman and CEO Larry Fink, perhaps in an attempt to temper his tone to appease lawmakers in Austin, also made a point of stating, “BlackRock does not pursue divestment from oil and gas companies as a policy,” demonstrating some measure of effectiveness to such drastic political maneuvers.

Other powerful institutions such as universities remain determined to divest from fossil fuels. Cornell University halted its investments in fossil fuels two years ago in favor of backing alternative and renewable energy, and the Massachusetts Institute of Technology is under pressure from students to follow suit. Clearly, the crusade of fossil fuel divestment has too much momentum, but, as long as money stays somewhere within the energy industry, the carbon contingent may have an opportunity to stay relevant. If real progress is made in technologies such as carbon capture and storage, the movement’s adherents may be persuaded not to eliminate those legacy assets and businesses from the energy landscape altogether.


 

 

 

Previous Weekly Market Reports: Archive

 

Disclaimer: This report is for informational purposes only and all actions and judgments taken in response to it are recipient’s sole responsibility. Champion Energy Services does not guaranty its accuracy. This reports is provided ‘as is’. Champion Energy Services makes no expressed or implied representations or warranties of any kind. Except as otherwise indicated in this report, this report shall remain the sole and exclusive property of Champion Energy Services and shall be free from any claim or right, license, title or interest. Champion Energy Services shall not be liable for any direct, indirect, incidental, consequential, special or exemplary damages or lost profit resulting from this report.