Energy Market Update 090142022

Energy Market Update 090142022
Music Artist: Nirvana
Song Title: Polly

NYMEX NG:~8.787/mmbtu
WTI:~$88.55/bbl
PJM RT LMP: ~$57.53/mWh energy
ERCOT RT LMP: ~$52.08/mWh
Long Island Zone K: ~86.97/mWh
MISO: ~$55.61/mwh
Bitcoin: 20234

Weather

Officially into the shoulder and seeing the lows in temperature surpass the 60F mark into the high 50’s in some parts of the country. The temperature forecast throughout the next 14 days seems to be well above average with some dark red colors all over the map. All the hype of hurricanes (or at least some hype) and the national hurricance center only noted on the radar a great that 60 percent chance that something could happen, wow thats a loaded statement but it is what it is. Seasonal outlook still showing an above normal winter and we need that with here natural gas storage is heading into the injection season beginning Oct 1.

Market Intel

So we have McDonalds buying VPPA’s, BP purchasing EDF energy services (which is interesting), the IRA boosting the tax credits almost up to 70%, the governor of CA saying that Diabolo Canyon needed to have be on to present ~9% base load (#TURNUPTHEBASS)and much more. Lets not forget that the white house is trying to bring all the lettered agencies (DOE, FERC and NERC) together to bring regulation around bitcoin mining in the US. BIG YAWN here. The fact that these agencies work together is one thing not to mention them trying to understand mining bitcoin. The would be better deploying human capital to pick up trash around the country imho. More with the IRA in that Bank of America is saying that the IRA could bring rising costs on ‘clean energy’. So we literally have banks talking one way and then the large energy companies (like NextEra) saying that there all for it. Maybe BoA doesnt have that relationship on lock. NextERA does have the largest planned solar installations currently (2022-2026). I would assume more mergers and acquisitions will continue. Within 12 mths we saw Talen bankrupt their reatail energy arm, NRG complete purchase of Direct Energy and now BP purchasing EDF. Also the BP purchase is big, still not uncommon for this industry.

Electricity update

Sitting in the shoulder months we are seeing some off peak day ahead and real time locational marginal pricing come down in the low $40/mWh. Although I would not consider that the base line, its good to see those numbers for offtakers. The news is the same regarding around the clock blocks of energy in all markets just consistenly high across all zones. Demand response is obviously becoming a hot topic as I have mentioned. Until legislation gets into the mix regarding allowing participants to provide anciallary values back to the ISO, it wont move the needle where the grid operators need it to me. Across the pond is still in really rough shape as France looks to now restore nuclear reactors for winter, keep an eye on that. Until Europe trades NG in rubels along with sanctions bing lifted then they wont see NordStream 1 come back and Germany will need to continue to rely on 33% coal for electricity. Bring on the bass load because thats what works.

Natural Gas

At the time of the writing NG is on a tear to $8.812/mmbtu up ~6.37%. I assume traders are getting antsy now with weather report coming in warmer than expected for the rest of Sept. Demand for LNG is still extremely high along however no news yet on anything related to Freeport coming back other than mid to late November. Power burn demand for NG is falling along with production ramping up well over 96BCF/day. Current supply is around 101 BCF/day and demand is ~90 BCF/day. Rig counts are up and especially international rig counts up 11% year over year. Winter will be interesting as storage is predict a lower than average build in comparission to the 5 year average. Brace yourself for the FUD.

Charts/references

https://ir.eia.gov/ngs/ngs.html

https://www.weather.gov

https://www.nhc.noaa.gov/?atlc

https://www.eei.org/delivering-the-future/Articles/duke-energy-plans-to-convert-transmission-towers-into-eagle-nesting-platforms

https://www.utilitydive.com/news/ira-inflation-reduction-tax-credits-nextera-aes-report/631709/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202022-09-13%20Utility%20Dive%20Newsletter%20%5Bissue:44479%5D&utm_term=Utility%20Dive

https://www.utilitydive.com/news/white-house-crypto-mining-report/631587/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202022-09-12%20Utility%20Dive%20Newsletter%20%5Bissue:44448%5D&utm_term=Utility%20Dive

Conclusion

I found it interesting that Duke Energy in Indiana is taking down some old transmission lines and repurposing them to nest eagles. Sometimes i shake my head in disbelief but there insant much that suprises me anymore when it comes to energy conglomerates getting fancy with marketing. See the article for your own opinoin. Listen to good music, hug your family and lets continue to build in this bear of a market. PEACE

This article has been written by @TURNUPTHEBASS