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In This Issue

Renewable Power Push Threatens Last Two New England Reactors

Pipeline Firm Makes Case for More Natural Gas

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

Renewable Power Push Threatens Last Two New England Reactors

Bloomberg | July 14, 2016

A proposal by Massachusetts to boost the use of renewable energy may put New England’s last two nuclear reactors out of business and undermine the state’s efforts to cut carbon emissions, according to an industry group.

Legislation requiring utilities to use renewable power to meet nearly half the state’s energy needs would test reactors already grappling with cheap natural gas prices and falling demand, said Dan Dolan, president of the New England Power Generators Association Inc. The legislative session ends July 31. Governor Charlie Baker supports the measure.

While backers says the measure is needed to help the state meet a target to cut carbon emissions 25 percent below 1990 levels by 2020, Dolan said it could backfire. If Dominion Resources Inc.’s Millstone plant in Connecticut and NextEra Energy Inc.’s Seabrook plant in New Hampshire close as result of the renewable mandate, Massachusetts will lose a major source of zero-emitting electricity, he said.

“You could very well do all this contracting and knock out the nukes, and from an emissions standpoint you end up at the same place,” Dolan said in an interview July 8. The legislation “says the rest of the competitive generation industry isn’t allowed to compete for roughly 50 percent of the market.”

Reactor Closures

The proposal comes as states face a raft of reactor closures. Entergy Corp. shut its Vermont Yankee reactor in 2014 and announced it will close its Pilgrim reactor in Massachusetts in June 2019 as the shale gas boom sent prices for the fuel plummeting. New York said last week it could provide about $965 million in subsidies over two years to help support struggling nuclear plants as part of a plan to promote clean energy.

On Wednesday, Entergy said it’s in talks to sell its James A. FitzPatrick nuclear plant in New York to Exelon Corp. The deal depends “largely on the final terms and timeliness of the New York State Clean Energy Standard,” Bill Mohl, president of Entergy’s wholesale commodities unit, said in a statement.

Matt Mooren, a Denver-based energy markets analyst with PA Consulting Group, said historically low wholesale power prices are a bigger threat to nuclear generators than the renewable mandate.

The legislation won’t have “a major impact on nuclear relative to what natural gas prices are already doing,” Mooren said. “While it is a negative as it relates to base load nuclear economics, it’s not as big of a negative.”

Canadian Hydro

Dominion declined to comment in an e-mail. E-mails and calls seeking comment from NextEra weren’t returned.

“This legislation has the potential to not just forestall, but avoid the increase in carbon resources,” Greg Cunningham, director of clean energy and climate change for the Conservation Law Foundation, said in an interview. “It really could be transformational, not just for Massachusetts but for the region itself.”

Power generators, including Exelon and Calpine Corp. oppose the renewable mandate. It will mean lower sales for the region’s power suppliers and higher-cost hydropower from Canada, with the added expense passed on to consumers, the companies said in a September letter to lawmakers.

“It’s hugely disappointing that Massachusetts’ elected leadership are considering an out-of-market deal that is likely to undermine the economics of other, existing zero-carbon resources, such as existing nuclear plants,” Susan Tierney, a Denver-based senior adviser at the Analysis Group, a consulting company, said by e-mail July 11.

Spot wholesale power at New England’s benchmark Boston hub fell $12.73, or 32 percent, to average $26.83 a megawatt-hour during the hour ended at 3 p.m. on Thursday from the same time a day earlier, grid data compiled by Bloomberg showed.

Read More:

Pipeline Firm Makes Case for More Natural Gas
Promises savings, grid reliability, and help on renewables

CommonWealth | July 14, 2016

The company trying to expand a major natural gas pipeline coming into New England said on Friday that the growing opposition in the Legislature is failing to recognize that more gas is needed to bring down electricity prices, to avoid brownouts and blackouts, and to help develop renewable forms of energy.

Top officials from Access Northeast, a consortium of Spectra Energy, Eversource Energy, and National Grid, made the case for their pipeline expansion in an interview with CommonWealth. Their viewpoint, which was accepted as gospel two years ago when natural gas prices were sky high, is now coming under fire on Beacon Hill.

The politics of natural gas is scrambled, as growing numbers of Republicans and Democrats unite in opposition to new pipelines. The Senate last week voted 39-0 in favor of an amendment that would block Eversource and National Grid from tapping their electric customers to pay for pipeline expansion. A majority of representatives signaled in an April letter to House leaders that they feel the same way.

L.J. Olivier, executive vice president at Eversource Energy,  acknowledged the politics has changed but not the need for new pipeline capacity. “Somewhere along the way they forget to do the math,” he said of the project’s opponents. “For us, we really think it’s a no-brainer.”

During the harsh winter of 2013-2014, the region’s pipeline network couldn’t accommodate both the demand for gas needed to heat homes and gas needed to run power plants. The shortage prompted the price of electricity to skyrocket, which was reflected in customer bills the following winter.  A consensus quickly emerged that additional pipeline capacity was needed to avoid similar shortages in the future and the electricity price spikes that accompanied them during some winter months.

The problem was how to pay for new pipeline capacity. The companies that operate the region’s natural gas-fired power plants  refused to commit to long-term purchase contracts because there was no guarantee they could recoup their money if temperatures failed to plummet and gas supplies remained sufficient.

Policymakers hit on the novel idea of assessing the customers of electric utilities to finance natural gas pipeline expansion. The theory was that the arrangement would benefit electric customers by lowering their bills, increasing the reliability of the power grid, and helping – not hindering – efforts to reduce carbon emissions.

The Access Northeast project is multifaceted, but basically it seeks to replace an existing pipeline that is 26 inches in diameter with a pipe that is 42 inches in diameter. Officials say the project would cost about $3 billion and deliver just under 1 billion cubic feet of natural gas to the region.  The company also wants to build a liquefied natural gas storage facility in Acushnet, which would be filled when gas prices are cheap and tapped during winter months when gas is in high demand. Officials said none of the gas delivered by the pipeline expansion would go for export.

Access Northeast officials say the availability of gas in peak demand periods would prevent electricity prices from rising and save customers money. They estimate a customer using 700 kilowatt hours of electricity a month would pay $2.50 more a month for the purchase of natural gas pipeline capacity but save a total of $7.50 in electricity charges. The net savings would be $5 a month, or $60 a year.

The officials disputed the narrative of opponents that pipelines would lock the region into increased carbon emissions for years to come. “It’s just the opposite,” Olivier said, noting that additional gas is needed to avoid burning oil and coal during high-demand periods and to serve as a backstop for the grid when the sun doesn’t shine or the wind doesn’t blow.

John Flynn, senior vice president at National Grid, said new natural gas-fired power plants are needed to fill the void as existing nuclear and coal plants shut down over the next three to five years and renewables grow to fill the gap. “You need a bridge to the future,” he said.

The politics of natural gas has suddenly become very sticky. The Baker administration’s decision to tap electricity customers to pay for new natural gas pipeline capacity is being challenged at the Supreme Judicial Court, with a decision expected later this summer. The Senate voted to take the issue out of the court’s hands by approving an amendment to the branch’s energy bill that would bar electric utilities from tapping their customers for pipeline expansion. Attorney General Maura Healey has also weighed in, releasing a study suggesting no new pipeline capacity is needed for the smooth functioning of the power grid through 2030.

Olivier and Flynn said they will try to educate lawmakers over the next few weeks about the need for new pipeline capacity as House and Senate lawmakers hammer out a final energy bill. Olivier said brownouts and blackouts are possible if new pipeline capacity isn’t added. He also said the attorney general’s study missed the mark. “Every study that’s been done except for her’s said additional pipeline capacity is needed,” he said.

William Yardley, president of US transmission and storage at Spectra Energy, said the project wouldn’t be canceled if the court rules against the preferred financing mechanism or the Legislature bars it. “We’d have to find another mechanism to pay for it,” he said. Flynn agreed. “From a customer reliability standpoint, this has to get built,” he said.

Asked what other financing mechanism exists, Yardley declined to say. “We have ideas, but we probably wouldn’t publicize them at this point.”

Read More:

Natural Gas and Oil Market Update


Natural Gas Falls as Stockpiles Rise

The Wall Street Journal | July 14, 2016

Natural gas prices inched lower on Thursday, after government data showed U.S. stockpiles grew more than expected last week.

The U.S. Energy Information Administration said natural-gas inventories grew by 64 billion cubic feet last week, compared to the 56 bcf expected by forecasters surveyed by The Wall Street Journal. The report is a widely watched measure of supply and demand. A larger-than-expected addition to storage likely indicates more supply or smaller demand than expected.

Natural gas futures for August delivery settled down 1 cent, or 0.4%, to $2.727 a million British thermal units on the New York Mercantile Exchange. Trading stayed within a 6-cent range.


US Oil Settles Up 93 Cents, Or 2 Pct, After Wednesday’s Big Losses

Reuters | July 14, 2016

Oil prices rose as much as 2 percent on Thursday as traders covered short positions a day after crude futures were hammered by weak U.S. demand for fuel during the traditionally busy summer driving season.

Key crude benchmarks Brent and U.S. West Texas Intermediate (WTI) lost about 4 percent on Wednesday as a raft of bearish U.S. inventory data heightened concerns about a global glut.

Oil was also helped higher on Thursday as the dollar weakened on the pound’s rally after the Bank of England’s surprise decision not to cut rates.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Working gas in storage was 3,243 Bcf as of Friday, July 8, 2016, according to EIA estimates. This represents a net increase of 64 Bcf from the previous week. Stocks were 507 Bcf higher than last year at this time and 586 Bcf above the five-year average of 2,657 Bcf. At 3,243 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

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