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In This Issue

Most Power-Capacity Prices Fall in PJM Auction

Understanding the Shift in US Power Generation Fuel Mix

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

Tables

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

 

Market Overviews

Most Power-Capacity Prices Fall in PJM Auction

The Wall Street Journal | May 26, 2016

Power-capacity prices fell sharply in an auction for the country’s largest grid, signaling cheaper electric bills for millions of consumers from Newark to Chicago starting in 2019.

PJM Interconnection LLC, which runs the electricity grid serving a fifth of all U.S. residents, set prices at $100/megawatt-day for the vast majority of its 13-state territory to start in 2019. That is down from the $164.77 rate set duringlast year’s auction.

It is a surprise to many investors and analysts, falling at the bottom of expectations that were already bearish compared to last year. A UBS survey of investors, industry executives and consultants last week forecast a baseline result of $122/megawatt-day. About a third of respondents expected prices between $100 and $110, the lowest option in the survey.

“The (demand) forecast is lower, and there was a large amount of new gas-fired combined-cycle generation clearing for the first time in the auction,” Stu Bresler, a PJM senior vice president said in a news release explaining the results.

PJM pays this money to power plants in exchange for a guarantee they will be able to run when demand peaks. The grid operators have compared it to an insurance premium that pays for reliability. The price trickles down into consumer electricity bills and also provides a baseline revenue for many power companies that own generation plants in the region.

PJM had tried to increase what it pays to those companies in recent years to ensure they build more generation and run more reliably when demand peaks, especially during extreme weather. But for this auction PJM changed its forecast methodology to more accurately account for energy efficiency and solar-power production, which lowered expectations for demand, according to Morningstar.

The region including New Jersey, the Philadelphia area and the Delmarva Peninsula into Virginia will see even larger declines. Prices there will be $119.77/megawatt-day, down from $225.42 approved last year.

PJM’s region in Northern Illinois will be $202.77/ megawatt-day, close to the $215 from last year’s award. The baseline price of 100/ megawatt-day will apply to nearly all the rest of the territory, stretching from southeastern Michigan through Pennsylvania, and south into Kentucky, Virginia and North Carolina.

PJM holds this auction every year to set payments for power plants to operate and for businesses to conserve in order to ensure reliable electricity for 61 million people in its territory. It creates a baseline for all power prices and a guaranteed revenue stream for operations three years in advance, with this auction applying to 2019/20.

Read More:
http://www.wsj.com/articles/most-power-capacity-prices-fall-in-pjm-auction-1464126046

Understanding the Shift in US Power Generation Fuel Mix

Market Realist | May 26, 2016

Coal to renewables

A few decades ago, coal was the favorite primary energy source for power generators, given its high capacity factor and attractive price. But the fuel mix has moved away from coal to meet the changing dynamics of the US power industry (VPU). A combination of factors such as lower natural gas (UNG) prices, slower electricity demand growth, and policies encouraging renewables have accounted for the transition of fuel mix in the recent past.



According to the EIA (US Energy Information Administration), on a net basis, the US (SPY) added an average of 18.3 gigawatts of additional capacity each year between 1950 and 2015. Two time periods of above-average additions occurred during the oil price crisis of the 1970s and the natural-gas-fired capacity buildout of the early 2000s.

In the past few decades, additions to new generation capacity served growing electricity demand, and plant operators relied on electricity sales to rise as demand for electricity-consuming appliances and equipment grew. For this reason, new capacity added during that time had only a limited effect on the utilization rates of existing generation capacity.

Capacity factors

The fuel mix transition has also had a significant influence on capacity factors of energy sources. Capacity factor is the ratio of actual output to potential output over a given time. Nuclear, for example, has the largest capacity factor among the other primary sources, while solar (TAN) and wind have the lowest.

However, the renewables’ zero fuel cost and substantially declined installation costs over the past few years have made them more attractive than nonrenewables. Notably, Dominion Resources (D), Exelon Corporation (EXC), and PG&E Corporation (PCG) are utilities that prominently use nuclear energy for power generation.

Read More:
http://marketrealist.com/2016/05/understanding-shift-us-power-generation-fuel-mix/

Natural Gas and Oil Market Update

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Oil Prices Slip After Hitting $50 a Barrel

The Wall Street Journal | May 26, 2016

Oil prices ended slightly lower Thursday after briefly rising above $50 a barrel in intraday trading, as investors considered whether higher prices could unlock more output in an already oversupplied market.

U.S. crude for July delivery fell 8 cents, or 0.2%, to $49.48 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, slipped 15 cents, or 0.3%, to $49.59 a barrel on ICE Futures Europe.

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Natural Gas Prices Rebound After Fall to One-Month Low

Economic Calendar | May 26, 2016

Natural gas futures closed higher on Wednesday, rebounding after they hit a one-month low in the prior session as forecasts for mild weather hit demand expectations for the commodity. Natural gas futures saw a bounce in early spring amid cooler weather, now these gains are being erased due to an extended, mild spring.

Demand for natural gas spikes in the winter, while summer can also be a high-demand season. Natural gas is used by utilities to generate electricity, and is also used directly in the heating of some homes.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Summary
Working gas in storage was 2,825 Bcf as of Friday, May 20, 2016, according to EIA estimates. This represents a net increase of 71 Bcf from the previous week. Stocks were 756 Bcf higher than last year at this time and 769 Bcf above the five-year average of 2,056 Bcf. At 2,825 Bcf, total working gas is above the five-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 ($ per mmBtu)

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

Disclaimer: The information contained in these reports is gathered from public and/or internal sources and is presented solely for the convenience of our customers and Newsletter Subscribers. Patriot Energy Group makes no representation or warranty, express or implied as to the accuracy or completeness of the information set forth in this newsletter, and Patriot Energy shall not have any liability to any person or entity resulting from use of this information in any way.
 
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