Energy Market Update

By The Numbers:

• NG '23 prompt-month NYMEX settled at $2.40/MMbtu, down $0.19/MMbtu on Monday, May 22. 
• WTI '23 prompt-month crude oil closed at $72.05/bbl., up $.44/bbl on Monday, May 22.

• The Energy Information Administration (EIA) reported an injection of 99 Bcf into underground storage for the week ending May 12. Inventories are 2,240 Bcf; gas inventories are 18% greater than the five-year average and 30% greater than the same time last year. For the week ending May 9, Baker Hughes reports 141 natural gas rigs in operation, down 16 from the prior week. Crude oil rigs were reported at 586, down 2 for the same period.

Weekly Power Report:

Great Lakes Electric Summary

• The Great Lakes Region forward power prices were relatively unchanged across the entire price curve with some price support in the near-term and some softness in the longer-term.  Before retracing down on Monday, natural gas prices had reached a two-week high last week as producers starting to take some gas rigs down to temper the rate of production.  PJM and MISO continue to grapple with the transition of its generation landscape and ensuring that there is adequate supply in its future capacity auctions.  The GLR forward electricity prices were unchanged, on average, over the past week for all calendar years from 2024-2028, but 2024 saw a +3% increase while 2026-2028 saw a -1% decrease.  Compared to the all-time high prices for those terms, the current average price is -10% lower than those highs, with the 2024 term -19% lower while the 2028 term is only -8% lower than the highs.  Index prices remain soft with low seasonal demand and low spot gas prices.  In COMED, the average monthly settlement price for May thus far is $24.87/MWh or +33% higher than April’s close last month, but still -63% lower than May of 2022, while the m-t-d settlement average price in AdHub is $31.49/MWh or +4% higher m-o-m but -59% lower than in May of 2022.  In Michigan, the m-t-d settlement price is $30.17/MWh or +2% higher than April’s price but -61% lower than last year in May, while the settlement average in Ameren is $29.77/MWh so far or +19% higher m-o-m but -62% lower than May of 2022.
• The results of the 2023/24 Planning Resource Auction (PRA) for MISO capacity were posted last week on 5.19.22.   MISO is projected to have adequate capacity to meet resource adequacy requirements for PY 2023-24 at the regional, sub-regional & zonal levels due to lower reserve requirements and load forecast on the demand side and additional MW on the supply side from various resources.  MISO went to a seasonal construct for this year’s auction to more accurately reflect the supply/demand at that particular time of the year..  In all zones, with the exception of zone 9 in the South, the prices cleared at $10/MW-Day for the Summer, $15/MW-Day for the Fall, $2/MW-Day for the Winter and $10/MW-Day for the Spring. The North-Central region went from a 1.2 GW shortfall in last year’s 2022/23 auction to 4.7 GW of excess capacity as a result of the additional supply.  That supply was provided in the form of 4.5 GW from delayed coal retirements, 1.2 GW’s from the Covert gas-fired generator in MI that will switch from the PJM interconnection to the MISO interconnection on June 1^st, other new gas units, greater import capability and new accreditation practices which all helped to alleviate a tighter projected situation. MISO states that many of these factors aren’t necessarily “repeatable” and that risks remain in the future as the generation landscape continues to transition.  Source: MISO, MW Daily.

Northeast Energy Summary

• On May 16, ISO New England presented the first preliminary results from its on-going analysis of extreme weather events and changes in supply and demand.  The analysis, conducted in partnership with EPRI, is the result of an 18 month-long engagement to assess and address potential resource shortfalls across the region.  This set of results is limited to the 2027 Winter – information for Summer 2027 and Summer/Winter 2032 will be discussed at future meetings.  For 2027, the ISO is concluding that, even under the most extreme of weather cases, the risk of significant energy shortfalls (load shed) is very low or “manageable”.  This conclusion persists whether or not Everett Marine Terminal is retained and New England Clean Energy Connect is built. 
• Last week, New York Governor Kathy Hochul announced the new six-mile, 300 megawatt Con Edison Rainey to Corona transmission line has been energized.  The new line will support continued grid reliability following the May 1 closure of an Astoria fossil fuel-fired power plant owned by NRG Energy.  The closure of the plant will reduce carbon emissions and co-pollutants and move the state closer to meeting the goals in the Climate Leadership and Community Protection Act.  The line, one of three of the of the Reliable Clean City projects that Con Edison began building in 2021 to support the retirement of fossil-fuel power plants in the city with all on track to be completed in 2025. The projects will bring 900 megawatts of transmission capacity and are needed for reliability in 2023 and 2025 to address deficiencies and retirements related to the New York State Department of Environmental Conservation (DEC) adopted regulations.  The regulations, often referred to as the peaker rule, require peakers to comply with regulations limiting allowable nitrogen oxide (NOx) during the ozone season or retire. The NRG Energy plant closed May 1 to comply with the adopted regulations.

ERCOT Energy Summary

• After days of record setting temperatures across the PNW last week, the pattern has returned to seasonal levels with warmth persisting across the interior West. The overall big picture forecast shows temperatures holding warmer than normal levels across the northern tier heading towards the end of the month and into early June. California and the DSW continue to lean seasonal to below normal (mostly across California) throughout the next couple of weeks. But for the long weekend ahead, there’s not much to get excited about this week as the degree day counts, either heating or cooling, drop to near zero along with the glide into the holiday weekend will potentially produce the lowest demand weeks of the year for the CAISO. Feeble power loads and the ongoing maintenance at Aliso Canyon will keep the risk of high inventory conditions on the SoCalGas grid in the high probability category for the final week of the month. SoCalGas only managed to inject 0.9 Bcf during the last week because the Aliso field is currently off limits. The facility should return to normal operation by the first of June. Despite some reduction in gas flows from Canada stemming from the wildfires in Alberta, PG&E continues to put molecules away for next winter having added 7 Bcf over the last week bringing their tanks up to nearly 85 Bcf. Capacity on the Redwood path capacity is expected to climb from 1.85 to 2 Bcf after the 24^th and then up to 2.05 Bcf on the 28^th as maintenance wraps up.
• In-state hydro generation is plentiful as the spring weather and sunshine is melting the snow and keeping the hydro generation system fully charged. The next couple of weeks are likely to be peak snowmelt in the Sierra. Following the extended period of heat in the PNW flows from the melt will slow in the coming weeks as the limited snowpack coming out of winter has been largely depleted, this will strip inflows from both June and July to a point that the massive PNW hydro system is going to be tighter when it comes to flexible hydro generation this summer. This will push the Mid-C trading hub to price above both the CAISO and DSW hubs to keep megawatts at home and put the burden of balancing on the California supply stack. Little has changed across the western interconnect in terms of resource availability since last summer. In high temperature situations reserve margins will thin out and setup a battle of the trading hubs as the PNW, CAISO, and DSW control areas all compete for resources imported from their neighbors to round out their own supply stacks. The North American Electric Reliability Corp released their Summer Reliability Assessment last week if you feel like ripping into that before your Memorial Day picnic.
• Significant rainfall and higher elevation snow this winter have helped replenish Colorado River reservoirs and maintain river flows this spring. Inflows into two of the river’s biggest reservoirs, Lake Mead and Lake Powell, have allowed for hydro generation activity closer to historical norms to return. Power from these plants is used throughout the Western Interconnect benefitting large population centers in California and the DSW. The Wall Street Journal reported yesterday that California, Arizona and Nevada would accept cuts proposed last summer by the Interior Department, and voluntarily cut their use of water from Colorado by at least 3 million acre-feet by 2026, including 1.5 MAF next year. An acre-foot is the amount a typical family of four uses in one year. The deal appears to resolve an impasse that had created friction between California and the other states, particularly Arizona, which already has lost more than a fifth of its Colorado River supply under previous mandated cuts. The cuts were triggered last year after the nation’s largest reservoir, Lake Mead, fell below a federal threshold. Lake Mead and Lake Powell have shrunk dramatically over a more than two-decade drought in the Southwest.

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