Summary of Energy News Headlines

Energy news from The Megawatt Hour today focuses on:

• natural gas markets (and their impact on forward energy prices);
• more data and analytics on capacity markets, including a video explanation of capacity markets from The Megawatt Hour’s Bob Bright;
• an article about concerns raised in Illinois about the State’s renewable energy portfolio standard;
• an article that originated in The Motley Fool earlier this week about policy approaches to encouraging energy independence, and the protectionist/free trade impact on energy prices, and, finally;
• a little bit of fun this Friday– research on why bee hives are constructed using perfect hexagonal shapes.

Natural Gas Markets

The reason we care about natural gas markets is because in New York and the Northeast, natural gas prices drive electricity prices. Forward electricity pricing closely tracks gas markets. All the commentary from gas traders and gas experts suggest that we should be experiencing a decline in forward prices based on inventories, weather, and general technical and fundamental indicators. Nevertheless, markets have not broken through a consistent band– downward pressure has met resistance. Check your Megawatt Hour dashboard for the latest wholesale forward price curve. In general, we have not seen the “Spring Dip” that we usually see at this time of year. We see no fundamental or technical rationale for this persistence. The buying opportunity, as our clients know, was in January. Notwithstanding this information, markets are still relatively low, as you can see from a review of this recent post.

More on Capacity Markets

In addition to the information that we have provided here over the last several months, which provides you with details about what’s driving capacity cost increases, the NY Independent System Operator (ISO) came out with a report this week that describes a restatement of capacity clearing prices that occurred on May 4 for the May 2013 ICAP spot auction results. The ISO has revised the auction prices (upward) and has also revised the demand curve. There is a fair amount of detail to this information. For background information on capacity, take a look at this video from The Megawatt Hour’s Bob Bright.

The key question for you is: Will my supplier revise my contract based on these changes to pricing? If you have just signed a contract– prior to this revision– and your supplier has to buy capacity at a higher price than they expected– you may find yourself on the receiving end of a price adjustment. Contact us for more information about how this will impact your existing contracts and costs.

How is the Illinois Renewable Portfolio Standard working these days?

The Chicago Tribune reported this week that there are some flaws in the design of the Illinois RPS. Take a look at the article, here, and let us know what you think. Every state seems to have developed a different approach to encouraging investment in renewable energy. Some policies seem to work better than others.

What is the most effective way to promote US energy independence?

A recent article by Doug Ehrman (originally appeared in The Motley Fool and then was picked up by Daily Finance) discusses the pros and cons of US trade policy with respect to LNG and natural gas.

Ehrman explains:

The debate that’s raging in Washington over the export of liquefied natural gas, or LNG, has two very distinct sides, and it appears that President Obama is coming down clearly on one of them. On one side is a lobby of American corporations, called America’s Energy Advantage, that supports the restriction of LNG export as a way of protecting American business. On the other side of the argument is the belief that restricting free trade is not only negative for the geopolitical landscape, but it also limits the ability of the United States to bring good-faith complaints against other nations that restrict the export of natural resources.

He goes on to explore the challenge of being consistent about matters of free trade, while ensuring that the US, US energy industry, and US businesses’ best interests remain a top priority. Ehrman makes an interesting final point:

Ultimately, this issue is critical to the future of American business and the global economy. Monitoring how things play out can give you a good look at where energy prices may head in the future. There is more to American energy independence than LNG, but it shouldn’t be overlooked.

Fun Friday

Two articles that are interesting… depending on whether you are interested in symmetry in the natural world, or different ways to meet new people. Take a look and let us know what you think.

Here’s an article about why bees construct their hives using perfect, symmetrical hexagons. And here’s one on the city of Prague’s effort to reserve some transit cars for single people.

Bottomline for businesses: Take a look at both short (near-term gas market volatility and resistance) and longer term (trade policy re: LNG) markets and policies when you evaluate your electricity costs. New York and New England are seeing more volatility than in recent years. Let us know if we can help. Also, those of you who are located in Illinois– renewable portfolio standards may not be working for you. Finally, don’t forget to have fun this weekend!