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In This Issue

As Coal Plants Retire, Natural Gas Fills The Void, Pushing Down Power Prices

Securing Pipeline Infrastructure for Gas-Fired Generation in New England

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

As Coal Plants Retire, Natural Gas Fills The Void, Pushing Down Power Prices

Utility Dive | July 7, 2016

Critics warned years ago of blackouts and spikes in electricity prices if coal is phased out.

But now a flood of cheap natural gas has kept power prices low, even as new environmental regulations have forced 346 coal-fired plants offline in the last five years, according to Bloomberg. 

“You’ve seen the coal come out of the market and then you’ve seen a response from industry to capitalize on that hole in the supply mix,” PA Consulting Group's Ethan Paterno told the news outlet . “The low gas prices are a big, big deal.”

Bloomberg also noted the U.S. Environmental Protection Agency’s emissions rules are expected to cost almost $10 billion annually to implement, but could result in health benefits valued at up to nine times that amount, between $37 billion and $90 billion.

The United States share of electricity generation from coal hit a high point in the 1980s, when it almost reached 60% of the power supplied. Now, gas is poised to generate about a third of the country's mix, compared with roughly 10% about three decades ago.

Before April 2015, natural gas generation had never topped coal power. But stricter environmental rules, including the Mercury and Air Toxics Standard and the planned Clean Power Plan, have forced coal plants offline and now gas is expected to produce the lion's share of U.S. generation.

"The recent decline in the generation share of coal, and the concurrent rise in the share of natural gas, was mainly a market-driven response to lower natural gas prices," according to the EIA in its 2016 prediction forecast.

But price is only one factor, as cleaner energy sources are quickly being added to the U.S. energy mix. 

"Unlike the growth of natural gas-fired generation, which has largely been market-driven, increased use of nonhydro renewables has largely been driven by a combination of state and federal policies," EIA said. "The use of renewable energy sources such as wind and solar has also grown rapidly in recent years so that generation from these types of renewables is now surpassing generation from hydropower."

Non-hydro renewables are expected to supply 8% of power this year, with hydropower's share at 6%.

Key Points

  • Amid a flood of closing coal plants — almost 350 in total, according to Bloomberg — electricity prices have declined by about 40% in the PJM market as cheap natural gas and new capacity have cut costs.
  • And about 20,000 MW of gas-fired power is expected online in the Mid-Atlantic by 2019, buoyed by some of the cheapest gas in the country. 
  • While coal has historically dominated the market, federal officials say this year natural gas plants will produce more electricity. Gas is expected to capture 33% of the market in 2016, with coal declining to 32%.

Read More:
http://www.utilitydive.com/news/as-coal-plants-retire-natural-gas-fills-the-void-pushing-down-power-price/421938/

Securing Pipeline Infrastructure for Gas-Fired Generation in New England

POWER Magazine | July 7, 2016

Increased reliance on natural gas as a fuel for electric generation has prompted regulatory reforms by the Federal Energy Regulatory Commission (FERC) to improve coordination between the two industries. Many in the power industry believe critical constraints in gas pipeline infrastructure serving New England pose a significant threat to electric reliability and prices during periods of peak load in this area. To address this perceived threat, electric distribution companies (EDCs) in the region have teamed up with Algonquin Gas Transmission on its Access Northeast pipeline project, which would carry up to 1 billion cubic feet (Bcf) per day of Marcellus gas to the Northeast. The project depends on an innovative but highly controversial effort to secure regulatory approvals and financing by relying on the EDCs’ balance sheets and subsidization by electric ratepayers.

Approximately 16,000 MW of gas-fired generation are currently connected to the New England market. Yet few generators have entered into long-term firm pipeline transportation contracts to ensure reliable supplies of gas. This means many of them may be unable to obtain needed gas supplies on peak days or may have to pay an exorbitant premium to get it, threatening electric reliability in the region and stable prices for ratepayers due to limited electric transmission import capability.

Regional grid operator ISO New England has sought to ensure the reliability of its electric capacity resources on peak days by adopting strict capacity performance requirements and penalties for non-performance. This has spurred increased dual-fuel capability by new generators but not long-term firm pipeline transportation agreements. Without such contracts, pipeline projects cannot be financed and built.

Stepping Up to the Plate

Into this void have stepped Algonquin and EDCs owned by National Grid and Eversource Energy. Despite being pure electric distribution companies, these EDCs have taken the novel step of signing long-term pipeline precedent agreements for capacity on Access Northeast and requesting that their state regulators approve those contracts as benefitting the EDCs’ ratepayers. Algonquin, in turn, has petitioned FERC to allow EDCs who subscribe for pipeline capacity on its system to resell that capacity, on a preferential basis, to electric generators through state-regulated electric reliability programs—assuming states ultimately adopt these programs. Any contract costs not recovered through such resales would be passed through to the EDC’s electric ratepayers.

Not surprisingly, these regulatory efforts face broad opposition on a variety of grounds at both FERC and the state level. The Electric Power Supply Association, New England Power Generators Association, Natural Gas Supply Association, the Massachusetts Attorney General, and a number of large electric utilities, generators, gas marketers, and gas producers oppose the proposed measures, arguing, among other things, that:

  • Preferential releases would be unduly discriminatory and would harm competitive markets

  • Access Northeast would get built regardless

  • New England generators do not want special treatment and can secure reliable fuel supplies without it

  • The EDC contracts are legally infirm under state law

  • There is more than adequate gas delivery infrastructure in the region

  • There is a conflict of interest because Eversource and National Grid propose to own 60% of Access Northeast

  • The FERC petition is premature because the states have not yet acted

Assuming the EDC contracts and electric reliability programs are approved by at least some of the New England states, the Algonquin petition would appear to present FERC with a choice between two of its highest priorities: ensuring electric reliability and adequate pipeline infrastructure on the one hand, and safeguarding competitive markets, policing undue discrimination, and promoting transparency on the other. Faced with this conundrum, FERC will likely chart a middle course.

Splitting the Difference?

One such path forward would be to grant Algonquin’s petition subject to conditions. FERC might require that Algonquin revise its proposal, narrowly tailoring it to do no more than necessary to promote electric reliability and ensuring that all of the terms under which preferential releases to generators would be conducted are fully fleshed out in the pipeline’s tariff. FERC also might require that before any EDC releases its capacity to a generator for longer than 31 days, the EDC post the capacity on Algonquin’s electronic bulletin board for bidding by other generators.

This would preserve transparency and at least some measure of competition in the capacity release market, while allowing the EDC-supported capacity to be re-sold first to generators, as it is on behalf of them that the EDCs are contracting. While such a result may seem a fair compromise to some, a solution that satisfies all will almost certainly prove elusive. FERC held a technical conference in early May on Algonquin’s petition and may take its time reaching a decision in light of these issues, the pending state proceedings, and the fact that Algonquin is targeting fourth quarter 2018 for service commencement.

Read More:
http://www.powermag.com/securing-pipeline-infrastructure-gas-fired-generation-new-england/?pagenum=2

Natural Gas and Oil Market Update

Arrow

Natural Gas Rebounds from One-Week Low

The Wall Street Journal | July 7, 2016

Natural gas prices inched up Wednesday, rebounding from losses just after prices dipped to a one-week low.

Natural gas for August delivery settled up 2.2 cents, or 0.8%, at $2.786 a million British thermal units on the New York Mercantile Exchange. It rebounded from losses of 7.5% on Tuesday, which had been the biggest one-day decline since October.

That made gas relatively cheap for this time of year, said John Woods, president of JJ Woods Associates and a Nymex trader. Demand often rises in the summer to fuel power plants as people turn up their air conditioners during hot weather. And forecasts for the rest of the summer still show above-normal temperatures.

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Oil Tumbles 5 Percent After U.S. Crude Draw Disappoints Market Bulls

Reuters | July 7, 2016

Oil prices fell 5 percent to two-month lows on Thursday after the U.S. government reported a weekly crude draw within analysts’ forecasts, disappointing market bulls who had expected larger declines.

Brent crude futures were down $2.36, or 4.8 percent, at $46.44 per barrel by 1:10 p.m. EDT (1710 GMT). The session low was $46.27, the lowest for Brent since May 11.

U.S. crude futures were down $2.23, or 4.7 percent, to $47.20. It earlier hit a two-month low at $44.87.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Summary
Working gas in storage was 3,179 Bcf as of Friday, July 1, 2016, according to EIA estimates. This represents a net increase of 39 Bcf from the previous week. Stocks were 538 Bcf higher than last year at this time and 599 Bcf above the five-year average of 2,580 Bcf. At 3,179 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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