energy market intelligence; what's happening today
DESCRIPTION
Join us for a quick look at the current energy market, insight into market drivers impacting prices today, and updates on the regulatory environment. This is a must see for anyone responsible for managing a corporate energy budget or energy procurement strategy. Date: Thursday, June 20th Time: 10:00 AM PDT / 1:00 PM EDT Duration: 30 minutes Hosts: Jonathan Lee, Senior Energy Procurement & Advanced Analytics Manager and Denny Pearson, Senior Director, Supply Solutions with Ecova.TRANSCRIPT
Energy Supply Market UpdateJune 20, 2013
Presenters: Jonathan Lee, Senior Energy Procurement & Advanced Analytics Manager, and Denny Pearson, Senior Director, Supply Solutions with Ecova
ENERGY MARKET INTELLIGENCEHere is What We are Going to Tell You:
• Natural gas and electricity prices are becoming more correlated due to the increasing reliance on gas-fired generation.
• Wholesale gas and electric prices have risen significantly off 10-year lows experienced in 2012. Expect to see an impact to new supply contracts and regulated rates when compared to 2012.
• Many Bulls & Neutrals, Few Bears Among the Drivers.
• Economy: Bullish market sentiment creep – Don’t expect rational market behavior. However, there are still underlying concerns.
• Natural Gas Production, Demand, Storage: Production at an all-time high. Demand continues to grow. Storage around 5-year average, but filling fast with some power burn shifting back to coal due to recent uptick in prices.
• Weather and Water Forecast: Demand-driven market and weather will continue to be one of the major drivers. Below-average reservoirs in the West, resulting in lower hydro output.
• Some Detail on Electric Prices: Technical charts show strong uptrend across all major regions and forward indices when compared to 2012.
• NERC Summer Electric Capacity Assessment: North America has enough power to meet summer demand. However, Texas and the Western U.S. may have some problems. Expect volatility.
• Other news: Two LNG export terminals approved, operational in 2016-2017 timeframe. San Onofre nuclear power plant permanently retired. Wave of coal plant retirements hits in 2015.
MARKET FUNDAMENTALS – FEW BEARS13 June 2013
Near Term Next 60 Days
Short Term 2 to 6 Months
Medium Term 6 to 12 Months
Long Term 1 to 5 Years
Storage
Production
Demand
Electric Power Sector
Weather
Tropical Storms
LNG
Economy
ENERGY PRICES ARE UP ACROSS THE BOARD
• After several years flat to declining prices owing to a nearly “Perfect Storm” of global recession, increases in building efficiency investment AND simultaneous dramatic increases in shale gas production . . .
• Retail electric rates are on the rise again• EIA outlook is for national average increases of 2-4% ($.003 to .004/kWh) from 2012 to 2013
and again to 2014.
• But beyond the gross average, some sites may see as much as $.01 to $.015/kWh 2012 to 2013 annual impact where capacity prices, grid congestion, high use of natural gas for electric generation, deregulated contracts, or increasingly prevalent regulated fuel cost pass-throughs allow retail prices to move more abruptly.
• Natural gas is up, too• EIA outlook is for overall national average increases of 5-10% from 2012 to 2013 and again
to 2014.
• BUT, some sites will see as high as $1 to $1.25 per Dth where regulations or contracting allow for quick pass-through of commodity costs.
PRICES ARE RISING OFF OF 10 YEAR LOWS YR/YR
12 month retailcontracts aregenerally backto 2011 levels
CA electricityis higher dueto San Onofre retirement.
About $1 per Dth change from April 2012 in most deregulatednatural gassupply offers
Analysis from6/13/2013
NATURAL GAS STORAGE
Short-Term Trend: With more power burn coming from coal compared to last year, (natural gas power sector demand down about 3 Bcf/d vs last year) gas storage injections have been healthy the last several weeks.
GAS POWER BURNS – NORMALIZING A BIT
U.S. – OIL WELLS OFFERING BETTER RETURNSBaker Hughes Active Oil/Gas Drilling Rigs
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
Rig
Cou
nts
Oil Natural Gas
United States Oil/Natural Gas Drilling Rigs
Drilling Rigs Current Last Week Year Ago
6/14/2013 6/7/2013 Change 6/15/2012 % ChangeOil 1,413 1,406 7 1,405 0.6%
Natural Gas 353 354 (1) 562 -37.2%
Total 1,766 1,760 6 1,967 -10.2%
SUMMER TEMPERATURE OUTLOOK - MIXEDNOAA/NWS, EIA; 16 May 2013
EIA projections are showing that Cooling Degree Days will be below last year, at average levels, however NOAA projections are showing the likelihood of warmer-than-normal conditions in some regions
June - Aug
LONG RANGE DROUGHT OUTLOOK – DRY WESTNOAA/CPC - 3 month outlooks; 11 June 2013
Pacific Northwest is continuing to have drier than normal conditions which are leading to some drought developments Oregon and Idaho areas.
All of California is now considered in drought. Snowpack is listed at 15% of average. For reservoirs, currently the northern half shows slight below normal (~92%) and the southern half is still holding below normal (~83%) for reservoir levels against the YTD historic average.
HURRICANE OUTLOOK ~ AVG YR, LOWER IMPACT FROM GULFNHC/NOAA; 11 June 2013
Atlantic Hurricane Outlook
June 01 - Nov 30
Average Values
(1981-2010)
Record Values
2013 Projected Values
Hurricane Induced Shut-In Production as a Percentage
of Normal Monthly Production (1995-2011)
Mild (Named Tropical Storms)
12 27 (2005)18 (CSU); 13-20 (NOAA
70% confidence)0.82% ± 1.15%
Moderate (Hurricane Categories 1-2)
6 15 (2005) 9 (CSU); 7-11 (NOAA) 2.00% ± 2.98%
Intense (Hurricane Categories 3-5)
38 (1950); 7 in (2005)
4 (CSU); 3-6 (NOAA) 25.00% ± 35.64%
Janu
ary
Febru
ary
Mar
chApr
ilM
ayJu
ne July
Augus
t
Septe
mbe
r
Octob
er
Novem
ber
Decem
ber
0
1
2
3
4
5
6
7
8
9
Historic Maximum Storm Count by Month~2.5 Of 10 Bcf
Gulf Production. =
around 4% of US consumption
LNG – FROM IMPORT TO EXPORT
LNG export capacity is expected to ramp up from 0 to 9.5 Bcf/Day export capacity from 2016 through 2020 from 5-10 terminals (~10% of US consumption).
2 terminals are conditionally approved with 4-5 year build schedules.
NORTHEAST PIPELINES – ON THEIR WAY
2012 was the lowest year in a decade for overall US pipeline expansions, but the second highest year in the Northeast. The industry added 3.2 Bcf/d, representing two-thirds of total capacity additions.
2013 is another huge push as gas from Marcellus tries to find ways into hungry NY City, CT, Massachussets Markets.
NATURAL GAS FORWARD CURVE(NYMEX) – 11 June 2013
Jul-1
3
Aug
-13
Sep
-13
Oct
-13
Nov
-13
Dec
-13
Jan-
14
Feb
-14
Mar
-14
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep
-14
Oct
-14
Nov
-14
Dec
-14
Jan-
15
Feb
-15
Mar
-15
Apr
-15
May
-15
Jun-
15
Jul-1
5
Aug
-15
Sep
-15
Oct
-15
Nov
-15
Dec
-15
$3.00
$3.20
$3.40
$3.60
$3.80
$4.00
$4.20
$4.40
$4.60
$4.80
$5.00
30-Apr
14-May
28-May
11-Jun
$/M
MB
tu
NATURAL GAS $MMBtu (12-Month Strip) – 12 June 2013 – Short Term Trading Channel
ELECTRIC WHOLESALE PRICESEcova 7 June 2013
Retail Impacts
1 cent
2 cents1 cent
.8 Cents
1.5 Cents
1.3 Cents
Texas
New York
Middle Atlantic
Northeast
California
ERCOT – 12-MONTH STRIPEcova 7 June 2013
NY ISO ZONE J – 12-MONTH STRIPEcova 7 June 2013
PJM – 12-MONTH STRIPEcova 7 June 2013
NEPOOL – 12-MONTH STRIPEcova 7 June 2013
CALIFORNIA NP15/SP15 – 12-MONTH STRIP Ecova 7 June 2013
NERC SUMMER ASSESSMENT16 May 2013
North America has enough electricity for summer air conditioning season, but Texas and Western U.S. may have some problems.
Texas has seen continued growth in demand and only small increases in power resources. Anticipated reserve margin is at 12.88% for the summer, which is below NERC’s 13.75% target for this area.
California (mainly San Diego and L.A.) may see some operational challenges due to the continued shutdown of SONGS. Especially if there is a prolonged heat wave.
– Update: Fed indefinitely delayed a decision on restarting SONGS.
COAL PLANT RETIREMENTS
Total Capacity of U.S. Coal Plants Already Shut: 15,677 MW
Total Capacity of U.S. Coal Plants Scheduled to be Shut: 34,306 MW
41,857
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2011 2012 2013 2014 2015 2016 2017
MW
MW
Coal Retirements (MW) Planned Coal Retirements (MW) Cumulative Retirements (MW)
Upcoming Webinar On Budgeting
Regulated rate impacts of recent market movement
Join us for “5 Tips to Alleviate the Pains of Budget Planning and Management” educational webinar on July 18th, where we will address how to:
– Identify and understand market drivers
– Start 2014 outlook communications early
– Establish a solid baseline
– Project planned portfolio changes
– Document assumptions and gain stakeholder buy-in
Upcoming Ecova Webinars
INSIDE ENERGY & SUSTAINABILITY Discovering Exceptional Value with Rebate Management
Solutions – June 27th
5 Tips to Alleviate the Pains of Budget Planning & Management – July 18th
Big Data Energy Trends Educational Webinar – July 25th
Telecom Strategic Sourcing Secrets - September 25th
DIAL IN THE SAVINGS SERIES
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Q&A Session
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