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In This Issue

Polar Vortex - Nuclear Saves The Day

Natural Gas Prices, Coal Use, And Carbon Pollution Jumped In 2013

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


Polar Vortex - Nuclear Saves The Day

Forbes | January 16, 2014

It's all about diversity. Whether in biology, in culture, in training, or in technology, when conditions change a system survives if there is sufficient diversity to adapt. Otherwise it dies. And things always change.

This is no less true for electricity production. Having a diverse energy mix is key to a society surviving changes in demographics, government, geologic processes and natural disasters, supply disruption during war, and extreme weather changes.

This concept was in full display last week during our run-in with a certain polar vortex. In which nuclear and wind stepped up to the plate to relieve natural gas and coal when they failed to deliver on demand.

Polar vortex, a new buzzword in the news, is really an old term. Just ask Al Roker! Polar vortex is a term for a high altitude low-pressure system that hovers over the Arctic in winter, spinning in place above the north pole like a bowl. The vortex determines how much cold air escapes from the Arctic and makes its way through Canada into the United States during the winter.

Last week, atmospheric effects, which used to occur more often, weakened the vortex and allowed huge volumes of cold air to slosh out of the bowl and flow farther south than usual, introducing cold Arctic air into the central and eastern United States. Atmospheric scientists are wondering if a warmer arctic ocean is influencing its behavior, making the vortex occur less frequently. Such vortices used to occur every several years on average. But the last one was almost 20 years ago.

The electrical grid was not immune to the effects of this massive cold snap. All generation systems suffered outages as vortex effects hammered half the U.S., but most of them involved fossil fuel systems. Coal stacks were frozen or diesel generators simply couldn't function in such low temperatures. Gas choked up – its pipelines couldn't keep up with demand – and prices skyrocketed.

The first problem with such widespread cold is a spike in electricity and gas-heating demand since everyone is turning up the heat and it takes a lot more energy to keep us at comfortable temperatures. And the area affected was also much larger than normal. Louisiana doesn't usually have to turn up the heat that often.

In New England, natural gas electricity generation faltered so much that regional grid administrator ISO New England had to bring up dirtier coal and oil plants to try to make up the difference. Nuclear energy didn't have many problems at all and actually became the primary provider of electricity in New England, just edging out gas 29% to 27%. Oil generation made up 15% while coal accounted for 14%.

This last year, ISO had warned New England about increasing dependence on natural gas as both electricity generator and home heating fuel to the exclusion of all else. Not diverse enough. As demand for natural gas in home heating spiked, there was much less fuel for power plants.

But nuclear did quite well throughout the vortex period. The entire fleet operated at 95% capacity, a ridiculously high value. And not just that, but most individual nuclear plants actually produced more energy because of the cold weather. The energy output of any thermal power plant depends on the temperature difference between the steam and the outside/condenser temperature. So these really low temperatures actually increased the efficiency of the nuclear plants a bit.

A similar, but lesser, effect occurred for wind energy. Usually extreme cold is not accompanied by sufficient wind speeds to make wind useful in generation, but the vortex produced some very nice wind speeds, especially along its periphery. Together with the huge demand on gas that exceeded its supply and spiked gas prices, utilities that had significant wind capacity, like in Nebraska and Texas, were able to make up a lot of the difference lost from gas.

In Nebraska, natural gas prices were up more than 300% so the utilities brought wind onto the grid to provide 13% of demand and kept electricity prices down. Even as far south as Texas, the polar vortex still dropped temperatures significantly enough to increase energy demand and thwart demand predictions, setting a record peak of 57 GW. Bringing wind onto the grid kept prices more stable.

These necessary machinations by suppliers to deal with such extreme changes are not without cost. Electricity costs are directly proportional to how well the utilities can predict demand and usage. Because it's costly to ramp thermal power plants up and down, Duke Power, for example, annually loses about $10 million from weather prediction errors. In September of 1996, Hurricane Hugo alone cost Duke Power about $65 million. The polar vortex will probably end up costing the United States $500 million dollars because of its geographic size. But nuclear won't have added anything to that cost.

Without nuclear, we would have had blackouts, and real public danger at these temperatures. PJM Interconnection, the largest U.S. grid operator, was smack in the middle of the effect. Within 24 hours, PJM reached a new record winter peak use of 141,500 megawatts (MW). PJM issued a Maximum Emergency Generation Alert for Tuesday to warn power-plant operators that conditions required them to be available to meet this record demand. At about this time, about 20 percent of the generators in PJM's territory were down because of the frigid weather. On Wednesday morning, nearly 40,000 MW of PJM's 190,000 MW installed capacity were offline. Losing that much capacity demonstrated how close we are to the edge.

Therefore, a diverse energy mix is really, really important. We should not throw out any source, and we need to research and develop how to increase the efficiency and flexibility of all sources. Whether it's massive liquid-gel batteries that would maximize renewable capacity, small modular nuclear reactors, better pipeline technlogy and monitoring, whatever we can do, we should. As to the mix, a third fossil, a third nuclear and a third renewable would make a diverse mix that could be sustained and be implemented by about 2040. The knowledge gained in doing so would dramatically improve our technological understanding of the entire energy field. It would also drop fuel costs and cut emissions by about half that of the baseline mix we have now.

How we implement our energy future will make the difference between survival and decline for the United States, if not the world. The polar vortex just shined a cold light on it.



Natural Gas Prices, Coal Use, And Carbon Pollution Jumped In 2013

Think Progress | January 16, 2014

Emissions of carbon dioxide from energy activities in the United States jumped by 2 percent in 2013 from the year before, according to an early estimate from the Energy Information Administration (EIA).

2013's emissions estimate is 10 percent lower than emissions levels in 2005, but any number that is not a negative one means that the Obama Administration's goal of a 17 percent emissions cut from that 2005 level by the end of the decade gets that much harder. The drop in CO2 emissions from 2005 to 2012 was 12 percent, so 10 percent is a step back.

The reason that the United States emitted more carbon pollution in 2013 than in 2012 is mostly due to the fact that the electric power sector burned more coal to power American homes and businesses and less natural gas. The coal industryhit a low in April of last year, but has had an uptick since then.

The first thing this means is that if there is a "War on Coal,” the coal industry made some tactical advances in 2013. Congresswoman Shelley Moore Capito (R-WV) described on Thursday how the Obama Administration's proposed limits on carbon pollution from new power plants represent "the drumbeat of the war on coal and the absolute different attacks the (Obama) Administration has put forward to shut down an all of the above energy program.” The day she said this, Freedom Industries was leaking a coal chemical into a river upstream of a water treatment facility in her state that has left 300,000 residents without water for more four days.

Still, regulations like the cross-state air pollution rule and the mercury and air toxic standards rule could lead to the retirement of 60 gigawatts of coal-fired power plants by 2020, so coal's current rebound could be short-lived. Since burning coal is more carbon-intensive and dirtier than burning natural gas, that would be a good thing for the climate and for people who breathe air.

Natural gas, however, has been getting more expensive following extremely low prices in 2012 caused largely by the fracking boom. In 2013, the average wholesale price for natural gas, taken at Henry Hub in Erath, Louisiana, jumped 35 percent to $3.73 million British Thermal Units (MMBtu). This increase reflected large increases in the price of natural gas throughout the United States, focused largely in New England and New York, which were paying $6.90/MMBtu at the end of 2013 due to pipeline constraints and cold-weather demand. But every region in the country saw a substantial price increase from the year before.

If the price of natural gas increases much more, the gas producers and transporters may have more of a financial incentive to fix methane leaks.

Wholesale electricity prices also increased from 2012 to 2013 in most regions of the country, due to demand spikes, more expensive natural gas, and drier-than-normal conditions in the normally hydroelectrically-flush Pacific Northwest.

Still, the prospect of more expensive natural gas threatens the logic of natural gas being the cheap bridge to a sustainable energy future. As the price of renewable energy steadily drops, the clear need to expand renewables instead of natural gas, with its volatile price changes, becomes clearer.

Both the EIA estimate and the 17 percent goal by 2020 only account for carbon dioxide, which is the most prevalent greenhouse gas, but other more powerful heat-trapping gases are certainly a part of the mix. The Obama Administration has said that the only way to meet even that 17 percent goal is through capping emissions from power-plant emissions. Since the current proposed rules for new plants will mostly allow leading-edge natural gas plants to be built, the Administration's pathway to cutting emissions relies on natural gas. A volatile — and more expensive — gas price complicates that pathway.

One thing that can help reduce the price of electricity is not more cheap coal or gas, but more renewable energy. In Germany, the growth of solar energy has meant that there is more power supplied when demand spikes, which leads to lower wholesale electricity prices. According to NPD Solarbuzz, U.S. solar installations hit a record of 4.2 gigawatts in 2013.

The EIA outlined several other reasons for lower post-2005 emissions: were dampened growth in energy demand during the economic recovery, improved energy efficiency, and higher energy prices.

One bright spot in U.S. carbon pollution trends was announced Monday. The states in the Regional Greenhouse Gas Initiative (RGGI), which have reacted to the regime's steadily-declining cap on carbon pollution by lowering CO2 emissions from power plants, will hold an auction in March under a cap 45 percent lower than the cap was in 2009. By 2020, carbon pollution from these sources will be half of 2005 emissions in these nine states. RGGI states include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.


Natural Gas and Oil Market Update

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Natural Gas Supplies Fall Less Than Expected

MarketWatch | January 16, 2014

Natural Gas futures on Thursday pared their gains after the U.S. Energy Information Administration reported that supplies of natural gas dropped by a record 287 billion cubic feet for the week ended Jan. 10. But the drop was less than expected as analysts surveyed by Platts forecast a decline of between 300 billion cubic feet and 304 billion cubic feet. Total stocks now stand at 2.530 trillion cubic feet, down 659 billion cubic feet from a year ago and 443 billion cubic feet below the five-year average, the government said. February natural gas was at $4.37 per million British thermal units, up 5 cents, or 1.1%. It was trading at $4.47 before the data.


arrow upWTI Crude Falls on Demand Forecast as U.S. Equities Drop

Bloomberg | January 16, 2014

West Texas Intermediate crude fell for the first time in three days as OPEC said demand for its crude will drop in 2014 and equities slid on corporate earnings.

WTI for February delivery declined 51 cents, or 0.5 percent, to $93.66 a barrel at 9:50 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 16 percent above the 100-day average, according to data compiled by Bloomberg. Prices settled yesterday at the highest level since Jan. 2.

Brent for February settlement, which expires today, fell 25 cents to $106.88 a barrel on the London-based ICE Futures Europe exchange. The more-active March contract dropped 39 cents to $105.88. The European benchmark crude was at a premium of $13.22 to WTI, compared with $12.96 yesterday.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 2,530 Bcf as of Friday, January 10, 2014, according to EIA estimates. This represents a net decline of 287 Bcf from the previous week. Stocks were 659 Bcf less than last year at this time and 443 Bcf below the 5-year average of 2,973 Bcf. In the East Region, stocks were 292 Bcf below the 5-year average following net withdrawals of 149 Bcf. Stocks in the Producing Region were 104 Bcf below the 5-year average of 1,016 Bcf after a net withdrawal of 107 Bcf. Stocks in the West Region were 46 Bcf below the 5-year average after a net drawdown of 31 Bcf. At 2,530 Bcf, total working gas is below the 5-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot
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