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In This Issue

Many Americans Paying Higher Energy Prices Due To Cancelled Fossil Fuel Projects

Energy Efficiency Lowers Costs in Recent PJM Capacity Auction

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.


Market Overviews

Many Americans Paying Higher Energy Prices Due To Cancelled Fossil Fuel Projects

Yahoo Finance | June 2, 2016

Abandoned and rejected U.S. fossil fuel pipelines and other projects may be partially responsible for your high energy bill. According to the Wall Street Journal, the combination of public backlash against fossil fuels and poor economics due to lower commodity prices has resulted in more than $33 billion worth of project cancellations and rejections since 2012.

The highest-profile project to get rejected was the Keystone XL Pipeline, which President Obama himself blocked last year. Environmental activists and Native America tribes banded together to oppose the project.

Coal projects face the largest push-back from environmentalists, but ISO New England president Gordon van Welie says that natural gas projects are facing public opposition as well. As recently as April, Kinder Morgan Inc abandoned the $3 billion Northeast Energy Direct project to bring lower-cost natural gas to the Boston area after local activists protected the project.

Unfortunately, New England residents are currently paying up to 41 percent more than the national average for natural gas, and van Welie says that without new projects to bring in more economical gas “certain areas will need to rely on higher-cost sources.”

From 2009 to 2014, U.S. companies added more than 14,000 miles of crude oil pipelines across the country.

So far this year the United States Natural Gas Fund, LP is down 17.3 percent, the Market Vectors-Coal ETF is up 29.1 percent and the United States Oil Fund LP is up 6.3 percent.

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Energy Efficiency Lowers Costs in Recent PJM Capacity Auction

The Energy Collective | June 2, 2016

Energy efficiency provides many benefits to the electric utility system. One of these benefits is reducing the market price for electric generation. PJM Interconnection, the operator of the largest electric grid in the United States serving approximately 61 million people, wrapped up its most recent generation capacity auction last week. This auction determines the price paid to power plants three years in the future. The clearing price in last week’s auction was far below expectations and nearly 40% below last year’s clearing price. This is in large part due to new natural gas power plants and energy efficiency.

Approximately 1,515 MW of energy efficiency cleared the auction, the largest amount ever. In terms of total clean energy alternative resources to clear the auction, energy efficiency had the highest amount of capacity, substantially more than solar (335 MW) and wind (969 MW). The complete results can be found here.

The results of this capacity auction are great news for two reasons. First, the result highlights how system planners are utilizing energy efficiency as resource able to provide sustained and predictable energy and reserves. The fact that energy efficiency cleared a substantial amount of megawatts under new requirements called “capacity performance” underscores the confidence of system planners in energy efficiency to reliably meet system load.

Second, energy efficiency reduces costs for the entire PJM footprint. If efficiency had not participated in this auction, the clearing price would have been higher. While the economic value would have varied by resource zone (PJM is broken up into several geographical zones), many zones would have faced higher prices from other forms of generation. While the specific offer prices in the auction are confidential, Exelon (the largest utility company in the country) has publically stated two of its largest nuclear plants did not clear, meaning they are not economically competitive in the PJM marketplace. Given that energy efficiency savings are at the margin, these resources have provided substantial economic savings to millions of customers in the PJM footprint.

Capacity performance and why it’s important

The resources cleared as capacity performance included: approximately 139,000 MW or 89% of traditional generation (including solar and wind), 614 MW or 6% of demand response, and 1058 MW or 70% of energy efficiency. Capacity performance is a new resource designation in the PJM footprint. It is a much more stringent requirement than in previous auctions. Essentially, it requires a resource to be “capable of sustained, predictable operation, and is expected to be available and capable of providing energy and reserves when needed throughout the entire delivery year.” The majority of efficiency resources met this requirement demonstrating efficiency can serve as a reliable system resource in the same way as nuclear, natural gas, or solar generation.

Energy efficiency in prior PJM auctions

Energy efficiency has been participating as a resource in the PJM capacity market since 2009. The chart below shows the total amount of energy efficiency that cleared the last eight auctions. The delivery year is three years from the year of the auction. From delivery year 2012/2013 to 2019/2020, the level of energy efficiency resources clearing the auction has nearly tripled increasing from 568 MW to 1515 MW. These also only include efficiency that has not been reflected in the peak load forecast for the year in question, meaning there are additional savings not included.

Energy efficiency in future capacity markets

The level of energy efficiency to clear the PJM capacity market has increased nearly every year since 2009. This week's auction emphasizes the critical role energy efficiency will play in the region as natural gas prices continue to reshape the national electric generation fleet. We expect the level of efficiency to clear this market to continue to grow in future auctions further suppressing the market prices for generating capacity in the region. This in turn will reduce system costs for customers for years to come.

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Natural Gas and Oil Market Update


Natural Gas Prices Rise to Their Highest Since January

Wall Street Journal | June 2, 2016

Natural gas prices rose on Thursday to their highest since January, as U.S. inventory data showed an increase in stockpiles that was smaller than expected.

Natural gas inventories rose by 82 billion cubic feet last week, the Energy Information Administration said, less than the 86-bcf injection that analysts surveyed by The Wall Street Journal had expected.

The natural-gas market is oversupplied due to high production and sluggish demand this winter. But another closely watched measure indicated a shrinking surplus.

Inventories as of May 27 stood 35% above the five-year average for this time of year, down from 37% above five-year average levels the prior week.


US Oil Rises as Crude Drawdown Offsets Opec Outcome

Reuters | June 2, 2016

U.S. oil prices rose on Thursday after data showing a weekly drawdown in U.S. crude stockpiles helped crude markets recover from OPEC’s decision not to set a ceiling for its production.

U.S. crude stockpiles fell 1.4 million barrels in the last week, the Energy Information Administration said. Although lower than a 2.5 million barrels forecast by analysts, the draw still helped crude futures erase early losses.

WTI for September delivery dropped 40 cents, or 0.4 percent, to $97.19 a barrel on the New York Mercantile Exchange. Volumes were 23 percent lower than the 100-day average. The U.S. benchmark crude traded at a $6.38 discount to Brent, down from $6.69 yesterday.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Working gas in storage was 2,907 Bcf as of Friday, May 27, 2016, according to EIA estimates. This represents a net increase of 82 Bcf from the previous week. Stocks were 712 Bcf higher than last year at this time and 753 Bcf above the five-year average of 2,154 Bcf. At 2,907 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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