ERCOT Vs ISONE -- Early Morning, January 16, 2024

Locator: 46559ISO.

We've talked about this before:

• ISONE: has a supply problem. Self-inflicted.
  
• ERCOT: has a demand problem. A good thing. A very good thing.
  

ISONE.

• earlier this morning, January 16, 2024, winter storm Gerri.

ISONE, in MW:

• Supply/demand:
• Demand : 18,000 
• Capacity: 23,000

• Cost: $300 / MW
  

• Mix:
• Nat gas: 49%
  
• Net imports: 21% -- buying electricity from other ISOs
  
• Nuclear: 12%
• Hydro: 8% -- from Canada
  
• Oil: 6% -- oil contributing more than "renewables"
  
• Renewables: 4%

• Renewables:
• Refuse: 43%
• Wow ood: 30%
• Wind: 22%
• Landfill gas: 4%
• Solar 2%

• Wind:
• 22% of 4% is …. 0.0088 or 0.88%.
• 0.0088 x 18,000 = 158.

******************
Compare With Texas

• Supply/Demand
• Demand: 75,000 
• Capacity: 85,000
• in round numbers, 4X that of ISONE
  

• Wind and solar both off the chart (as in high supply).

• Mix:
• Nat gas: 49%
• Solar: 19%
• Wind: 9% -- will increase significantly as day wears on
  
• Coal: 16%
• No oil.
• No imports -- Texas is an independent ISO.
  

Holy Mackerel! One Of The Worst "Reports" Ever -- February 25, 2023

Link here.

Updates

Later, 6:04 p.m. CT: it's slightly worse. Pricing is now up to $185; oil is at 8%; and, coal remains at 3%. Renewables, overall, 4% of resource mix, and wind 3% of the renewable mix; 0.03 and 0.04 = 0.12% of total resooource mix provided by wind.

Original Post

And not even using that much electricity in the big scheme of things.

Natural Gas Hits $15 For New England Consumers -- December 24, 2019

From oilprice:

For those who grew up in New England, single-digit temperatures, snow squalls, and icy roads are nothing outside the ordinary.

With at least six days last year averaging colder than today’s forecast, it seemed almost impossible that gas prices would break last season’s record.

Accompanying this week’s cold was a combination of factors amounting to conditions that were far from normal. As the risks began to present themselves on the morning of Wednesday, December 18, AGT-CG (Non-G), New England’s largest natural gas hub, sold for as much as $15.25/MMBtu, the highest price observed since January 30, 2018.

So, what really caused natural gas prices to spike when they were so weak for the last six months? 

Natural gas for the rest of us is trading at $2.20 (see oilprice banner).

*********************************

US Petroleum Consumption

A look back to EIA projections back in 2000 or thereabouts.

Since 2000, the population increased, income increased, yet demand for petroleum is lower than all projections.

**********************************

Nip And Tuck

It was close but my portfolio closed in the green on Christmas Eve.

More Moratoria On Natural Gas Hook-Ups Announced For NYC, New England -- February 7, 2019

Wow, before I even get started, I see renewable energy is down to a new low in New England, contributing only 7% to the grid. Natural gas is now supplying more than 51% of electricity for New England.

Anyway, back to the subject at hand. Before I get started, a huge "thank you" to the reader who alerted me to this. This particular reader does not write me often, but when he does it's always incredibly good information. Based on what he sends me, I doubt anyone knows more about the natural gas sector in the northeast United States than he does.

Years ago I worked in a NYC bedroom community, Westfield, NJ. It was important for me to "know" the jurisdictional boundaries of cities, counties, states.

Throw in the boroughs of NYC and it comes even more complicated.

The City of New York is made up of five boroughs. The State of New York is made up of counties. Each City borough is also State county.

• Manhattan - New York County
• Bronx - Bronx County
• Brooklyn - Kings County
• Queens - Queens County
• Staten Island - Richmond County

There are several counties in the area:

• Westchester County: includes Yonkers, New Rochelle, Mount Vernon, and White Plains
• On Long Island:
• Brooklyn County
• Nassau County
• Queens County
• Suffolk County

I do that for my benefit. I became more interested in the geography of the area after reading The Great Gatsby.

But the geography is important for me for other reasons.

A reader reminds me that two utilities in the NYC area have announced moratoria on new natural gas hook-ups (previously posted, but I can't keep track of all this).

From a reader:

Huge utility, Con Ed, rocked New York city area by declaring a moratorium on new gas hookups in Westchester starting in a few weeks (March 15). Developers are apoplectic as this means no new construction will occur sans economical natgas supply.

Second, large utility - National Grid - just followed up with another body blow to region by declaring a new gas hookup moratorium starting May 15 for Brooklyn, Queens, and Long Island.

The reader writes:

There is a short (24 mile long) gas pipeline Northeast Expansion Supply - that would alleviate most of this shortfall, but politics has been holding up construction.

The writer suggests that there are very "big" developers, business interests that won't "go belly up to Save the Planet."

The moratoria?

It's serious. See this this article over at lohud.

Con Ed could run out of natural gas before the moratorium is put into place. 

Natural Gas Could Well Be The Energy Story Of 2018-2019 -- September 29, 2018

Re-posting from earlier today, since "natural gas could well be the energy story of the year."

US natural gas:

• fill rate well below 5-year average and the gap is not closing
• New England could face natural gas shortage over next month or so
• natural gas being diverted from New England to Florida
• Florida: #1 electricity producer in US; #2, Texas
• Florida: converting from coal to natural gas

Natural gas: this might be the story of the year -- lots of buzz, lots of talk -- from SeekingAlpha yesterday --

• a severe cold spell could raise Henry Hub natural gas prices to a range of $12-$16/MMBtu, “similar to where marginal generation costs of fuel oil and diesel would be,” says Citi’s Anthony Yuen
• and if bitter cold weather hits both the U.S. and “either Europe or Asia at the same time... spot LNG [liquefied natural gas] prices could surge to $20/MMBtu at the extreme," Yuen writes; Nymex U.S. natural gas currently trades at ~$3.00/MMBtu
• Yuen thinks a spike in gas prices this winter could lift shares of gas-oriented companies such as Range Resources, Southwestern Energy, and Cabot Oil & Gas
• shares of many gas companies, while up from winter lows, are still lower YTD, reflecting concerns that there is too much new gas supply to sustain a rally in the gas market

It is being re-posted because a reader has sent me the following story:

Domestic natural gas production of about 82 billion cubic feet a day isn't nearly enough to provide for peak winter demand, which is why up to about 4 trillion cubic feet of gas is stored underground and nearly 3 trillion drawn upon during some heating seasons.

This year, though, the U.S. Energy Information Administration expects the starting amount at the end of next month to be around 3.3 trillion cubic feet--the lowest since 2005, when natural gas prices hit their all-time high.

A projected ending storage level much below 1 trillion cubic feet often spooks traders. A 2005-style hurricane-fueled squeeze is out of the question, but a big price spike isn't.

It was just four winters ago that a cold winter caused a 75% surge in futures prices to above $6 a million British thermal units. So far there is little sign of anxiety among traders, with both front-month and February futures below $3. Thursday's weekly inventory report and forecasts for continued builds in coming weeks were encouraging, yet storage is now 20% below year-ago levels and 18% below the five-year average. Possible tough sledding ahead.

This is not from The National Inquirer, or from some nut contributing to SeekingAlpha.

The natural gas concern is from The Wall Street Journal. 

Link here.  Or here if you have a subscription to the Journal. 

Note: natural gas out of the Permian is going for as little as 50 cents, it was reported not too long ago.

***********************************

Micro-Dosing

Re-posting: LSD. Story here. Silicon Valley (?) getting ready to do "formal"testing. We talked about this earlier this year.

Three-page essay in the current issue of The London Review of Books, by Mike Jay, in his review of two new books:

• How to Change Your Mind: The New Science of Psychedelics, Michael Pollan, May, 2018
• The Science and the Story of the Drugs That Changed Our Minds, Lauren Slater, February, 2018

My hunch: marijuana is soooo old news.

********************************

 Notes To The Granddaughters

I have journaled all my life. I have kept calendars. I make and keep lists. I am obsessive-compulsive about these sorts of things.

I wish I had done even more. I can think of many more things I wish I had done along this line.

But it looks like I paled in comparison to Kavanaugh's journals and calendars. Wow.

I think about that often. I thought of it again when reading the "Diary" essay -- a regular feature -- in The London Review of Books. 

Will I destroy my journals before I die? I was brutally honest in them. Often I wrote when I was most depressed.

Wow, it was so much easier back then.

Somebody to Love, Jefferson Airplane

Update On Natural Gas Pipelines To New England -- RBN Energy; Trump With 10-Point Lead Among Those Who Say They Have Definitely Decided -- November 3, 2016

Gotta love them Norwegians: nearly 15,000 Norwegians apply to hunt 47 wolves in controversial culling that will slash population by 70% - VRT -- from "Breaking News." #WolvesLivesMatter; and, the movie, "No Country For Old Wolves."

Poll: I've always wondered if Trump might actually go over 50%. When I saw the USC-Los Angeles Times poll yesterday, I thought it might be possible. I haven't followed the Rasmussen poll very closely so I don't know if this has happened before, but Rasmussen is reporting that Trump is polling 50%+ among those who say they have definitely decided. In the "overall" poll, Trump leads Hillary, 45% - 42%. But look at this:

Eighty-eight percent (88%) of voters say they are now certain how they will vote. Among these voters, Trump has a 10-point lead over Clinton – 53% to 43%. Johnson gets two percent (2%) and Stein one percent (1%). This is the first time any candidate has crossed the 50% mark. Among those who still could change their minds, it’s Clinton 36%, Trump 36%, Johnson 22% and Stein six percent.

Russia's Northern Fleet: it appears the fleet is loitering just east of Crete. Its position has not changed much in the past 24 hours -- again, just off-shore from Crete suggesting there may be some re-supply activity. 

ObamaCare: as if it's not bad enough, another insurer has said it will leave ObamaCare if results don't improve. Anthem says it may exit ObamaCare. 

Health insurer Anthem Inc., which has so far stuck with the Obamacare markets as rivals pulled back, said it may retreat in 2018 if its financial results under the program don’t improve next year.

Anthem’s comments up the stakes for the Obama administration as the enrollment season for 2017 Affordable Care Act plans begins, with consumers already facing fewer choices and higher premiums in many markets.

Earlier this year, in Forbes: Anthem Gains Obamacare Customers And Sees Profits, Expansion Ahead.

Anthem’s first quarter earnings were better than expected as the company welcomed 1 million new customers across its businesses since the end of last year, including 184,000 who signed up for coverage on public exchanges under the Affordable Care Act.

In contrast to UnitedHealth Group, which is scaling back to a handful of public exchanges to sell individual policies, Anthem ANTM sees the so-called Obamacare business as a growth opportunity. Anthem, which sells policies under the Blue Cross and Blue Shield brand in 14 states, expects to remain in those markets next year with the potential for expansion should its merger with Cigna be approved. [Earlier this year, BC/BS pulled out of Arizona, ground zero for ObamaCare.]

“I think a sustainable model can be built,” Anthem chairman Joe Swedish said of public exchanges in an hour-long conference call this morning with analysts. “This remains a dynamic marketplace. Over time, we do believe we are well positioned for sustained growth.”

So what happened between April, 2016, and November, 2016?

**********************************

Back to the Bakken

Active rigs:

	11/3/2016	11/03/2015	11/03/2014	11/03/2013	11/03/2012
Active Rigs	35	69	186	181	188

RBN Energy: New England keeps lid on new natural gas access.

Natural gas utilities and power generators in southern New England will have access to additional gas supplies this winter as Spectra Energy brings its 342-MMcf/d Algonquin Incremental Market (AIM) project into service. But Kinder Morgan’s planned 72-MMcf/d Connecticut Expansion has been set back a year (to November 2017) due to permitting delays and, more important, a multi-state effort to enable electric distribution utilities (EDUs) to contract for gas pipeline capacity for generators appears to have died, and with it prospects for at least one major project.

Is New England destined to remain gas-supply constrained for years to come?  Today we consider recent developments regarding gas supply in the northeastern corner of the U.S., and what they may mean for Marcellus/Utica producers.

Saudi Aramco: McDermott adds a new office, 300 additional workers, increasing its engineering capacity in Saudi Arabia. Data points:

• In-Kingdom Total Value Add (IKTVA) -- established by Saudi Aramco to support increased levels of localization inside the kingdom
• McDermott added three new projects for Saudi Aramco, 2Q16
• Saudi Aramco still on track for IPO in 2018

*****************************

The Trainwreck

First it was The Wall Street Journal, then The Washington Post, and now CBS: "customers" shocked by high ObamaCare 2017 premiums.

GOP needs to run, not walk, away from this debacle. By March, 2017, ObamaCare will be dead. Its only cheerleader will most likely be out of office.

Richard Kinder, KMI/CEO -- Forbes Interview -- August 2, 2015

A reader sent me this link a few days ago; I posted the link but didn't have time to write much more than that. Now I have a bit of time. From Forbes, an interview with Richard Kinder, who is stepping down as CEO of KMI after 18 years. It's a very interesting interview. I do these summaries to ensure that I really do read the articles, and don't simply skim through them.

Question/Answer: relevancy of the bust of Winston Churchill. [Comment: my hunch is reading these books helps put the CEO's challenges into perspective. It also provides insight on how to approach problems.]

Q/A: prolific reader. Best book on leadership: Doris Kearns Goodwin's Team of Rivals. [I think he would do well to read bios of Steve Jobs, Apple.]

Q/A: Kinder will remain active with the company, but will turn over day-to-day management to Steve Kean. Game plan: increase the dividend by 15% this year, and probably by 10% per year off that new base through 2020. Plenty of excess cash flow. Share appreciation will reflect growth in dividends and earnings, a 14.5% return. "Beats the hell out of anything I can think of." KMI has provided a 24% compound annual return over 18 years, "which is pretty good."

Q/A: by stepping away, Kinder can look at some huge projects; KMI has an $18-billion backlog right now on projects. Most frustrating: more opposition to new infrastructure than Kinder has seen in 35 years in the business [doesn't mention Obama, Steyer, Buffett, Nebraska, faux environmentalists]. Pipelines have become the choke point in America's oil and gas industry. "If you want, we can come back to the alternatives to fossil fuel later -- and the prospects for alternatives are not good -- at least not for the next 30 or 40 years." Environmentalists can't picket each and every oil well from Alberta to Texas, but they can shut down a single pipeline -- that's why pipelines are the choke point. [It may be easier to buy established pipelines; upgrade pumps, replace old pipe with new pipe, and while we're at it, larger-diameter pipe.]

Q/A: blocking pipelines is so short-sighted; the fossil fuel will be shipped by rail.

Q/A: mentions KMI's Northeast Direct, a $5 billion project to more additional natural gas into New England.

Q/A: New England has the highest cost of natural gas because of supply/demand imbalance. New England would rather go for intermittent energy projects. Put this in perspective. Today, intermittent energy provides 5% of New England energy. Wind? One would have to cover the entire state of Massachusetts with windmills and then a bit more with solar. It's not practical.

Q/A: can't even build a small wind farm off Cape Cod. "I can tell you what's going on, they're just nuts."

Q/A: by 2040, fossil fuels will still be 85% of the mix; intermittent energy will grow, but the percentage will remain the same. The irony in New England: those who want to defeat natural gas infrastructure are forcing the generators to burn oil and coal in the winter because they can't get enough natural gas. [KMI used the word "renewable"; I use the more appropriate word, "intermittent"]

Q/A: KMI is excited about the Trans-Mountain Pipeline (western Canada to the Pacific). Also excited about the Palmetto Pipeline. If you live in the Jacksonville-Savannah area, about the only way to get jet fuel and diesel is by truck.

Q/A: KMI has also just finished a project with Imperial Oil (Exxon in Canada), which may be the biggest rail terminal in North America -- can load about 250,000 tons / day, just went operationsl in April.

Q/A: that's the Kearl project in Edmonton. Pipeline is safer but KMI has invested close to a billion dollars in rail terminals. KMI has also bought "a bunch" of Jones Act tankers.

Q/A: rail offers flexibility and options, given the volatility between Brent and WTI. KMI thinks 10 - 20% of oil will continue to be moved by rail.

Q/A: KMI hates to think how badly the tepid recovery would have been without the oil and gas revolution.

Q/A: KMI mentions Russia's stranglehold on European natural gas; KMI said they could solve Europe's problem in ten years. [GE has the jump on this one, buying Alstom.]

Q/A: importance of maintaining access to energy -- softball question.

Q/A: the pipeline map of North America (excluding Mexico)

Q/A: KMI has 84,000 miles of pipeline (70,000 of that for natural gas). Currently, 75 bcf per day; pundits consistently say we're going from 75 to 110 bcf per day within ten years.

Q/A: huge natural gas production in the US due to fracking; long soliloquy.

Q/A: back to books.

Q/A: when KMI started, it had an enterprise value of $300 million; KMI laughed at when said they were going to strive for $1 billion enterprise value; today, $140 billion enterprise value. 175 employees when they started; now 11,000+ employees.

The big takeaway from the article: Currently, natural gas in the US, 75 bcf per day; pundits consistently say we're going from 75 to 110 bcf per day within ten years. 

**************************

Meanwhile, For The Deniers

From CNN:

The scientists say their findings could mean a deep freeze like the one Great Britain experienced around 1900, when the Thames River froze over.

CNN meteorologist Brandon Miller says the study looks intriguing, but it has not been peer reviewed, or subjected to the scrutiny of the larger scientific community.

"This isn't published research yet," he said. "Our ability to forecast the specifics of a solar cycle is incredibly poor. It's worse than forecasting in a hurricane season." [But we can tell you that the earth will be 0.1 degree hotter 100 years from now.]

Doug Biesecker, who works at the Space Weather Prediction Center at the National Oceanic and Atmospheric Administration in Boulder, Colorado, agrees with Miller.

He said the research shouldn't give anyone the idea that because the weather may cool, climate change is not something to be worried about. [Because the earth will be 0.1 degree hotter 100 years from now.]

"It's a very complicated issue," Biesecker, an expert in solar physics, told CNN. "Does the sun have a role in our variable climate? Yes. Is the dominant role? No. Even the concept of the sun being responsible for Europe's mini ice age -- it's not hard-and-fast true." [It's a very complicated issue, but we can tell you that the earth will be 0.1 degree hotter 100 years from now. And North Dakota farmers will be laughing all the way to the bank.]

It's complicated, I know. But we do know that the earth will be 0.1 degree hotter in 100 years due to global warming. I can't make this stuff up.

However, for those paying attention, there is a trend developing. As the end of Obama's tenure comes to an end, the number of stories questioning Algore global warming are increasing ... almost exponentially. And they will feed on themselves, with more research, and more studies.  

A Reminder That A Lot Of Young Journalists Are Clueless -- But Not All

I'm posting this story only for archival purposes. The comments are most interesting. I'm not exactly sure what point the reporter was trying to make. He sounds disillusioned. The AP is reporting this story.

This is not an investment site. Do not make any investment decisions based on what you read here for what you think you may have read here, but if investors had the same outlook at this reporter, they wouldn't be in investing very long.

America's plan to use more natural gas to run power plants, make chemicals, drive vehicles and heat homes may not go as smoothly as expected.

There's plenty of natural gas in the ground, everyone seems to agree. But the harsh weather this winter shows there are obstacles to producing it, and more pipelines have to be built.

The bitter temperatures boosted demand for natural gas to heat homes and businesses. But wells in some places literally froze, making it difficult for some drillers to keep gas flowing. And the high demand clogged pipelines, so even when there was enough production, the gas couldn't get where it needed to go.

I'm curious what energy source this reporter thinks would be better. Windmills? LOL.

In fact, the problem that gas couldn't get where it needed to go was self-inflicted in many (most?) cases.

******************************

An exception to the rule that many young journalists are clueless might be Kevin Chupka who wonders if President Obama might be the two-term version of President Obama. President Obama hasn't make his "malaise" speech but he is disillusioned, frustrated over the failure of ObamaCare (previously posted). I do think he should be given credit for staying cool with regard to the Ukraine. He let Putin take the Crimean, and turned a very, very risky "Cuban crisis" into a minor diplomatic row which will play out in the UN or in The New York Times. A "President Bush" would have us in another shooting war in the Ukraine, or at least the risk of doing so if Dick Cheney were running the show. So, fortunately, "no drama Obama" kept our noses out of where we don't belong and simply let Putin do what he wanted, not that Obama had many options. And so we get this Breakout story:

The ongoing crisis in Russia and Ukraine has, for some, highlighted deficiencies in President Obama’s foreign policy (or lack thereof). Breakout’s Jeff Macke likens it to the widely held belief that President Jimmy Carter was particularly weak when dealing with the Iran hostage crisis. “Apparently we stopped Putin by saying ‘you’re gonna lose all the good will you had with the Olympics,’” Macke contends. “It reminded me very much a Jimmy Carter-esque kind of scolding morality.”

Unfortunately, after that great headline and opening paragraph, the reporter sort of lost it, and made excuses for President Obama. Sad. The reporter got off to such a good start. 

Finally, Some Common Sense?

A huge "thank you" to a reader for sending me this story, and several stories regarding the energy situation in New England the propane-shortage story in the Midwest.

The Portland (Maine) Press Herald is reporting:

The six New England governors have set in motion a first-of-its-kind plan to increase the region’s natural-gas pipeline capacity by nearly 20 percent in three years and build at least one major electric transmission line to bring renewable energy from Canada.

No new wind farms? No solar farms?

Utility customers would be asked to help pay for the projects, which together could cost billions of dollars, through electricity rates. But the costs soon would be recovered by savings on energy bills as the projects increase supplies of lower-cost power, said Tom Welch, chairman of the Maine Public Utilities Commission and an architect of the plan.

It will be interesting how long it takes John Kerry and the president to act on that transmission line from Canada. Let's see, is 2014 an election year?

The plan, made public Thursday, requests that the operator of the region’s electricity grid, ISO-New England, seek permission from federal regulators to charge electricity customers for gas pipeline expansion.

“It’s an unprecedented and remarkable approach,” Welch said. “But it reflects the fact that the price of natural gas drives the price of electricity in New England.”

Natural gas now fuels more than half of all power-generating plants. A shortage of gas in the region on very cold days last year sent wholesale electricity prices up 57 percent over the 2012 average.

But the activist environmentalists won't give up:

Maine manufacturers that use a lot of energy say it wouldn’t bring enough gas into the region to erase the wide price difference between New England and other regions. Environmental activists who support a greater shift to wind, hydro and solar energy say it would make New England even more reliant on natural gas.

In case you missed it, the professionals say the plan is not "enough." New England will still be "short" the energy it needs.

Something tells me the activist environmentalists are quickly going to be marginalized. 

The 2014 New England Energy Debacle; PJM

If I remember, I will post updates at this post regarding the energy situation in New England, beginning in the winter of 2013 - 2014.  It looks like the story will not soon end.

The stories are all over the internet; the question is this: "why is this happening? Why are all these power plants closing?"

Updates

February 18, 2014: regular readers know what RBN Energy has to say about the New England energy debacle -- it will take up to six years to get the infrastructure in place to meet the energy needs of New England.

February 6, 2014: SeaCoastOnLine is reporting:

The retirement of several power plants in New England is reducing power supply and driving up prices, the region's electric grid operator warned Wednesday.

A regional auction to buy power for 2017 and 2018 in so-called capacity markets — comparable to an insurance policy that ensures power is available in the future — ended with a shortfall in megawatts for electricity used by businesses and homes, ISO-New England said.

In the auction that ended Monday, ISO secured a commitment of 33,700 megawatts, off from 33,855 megawatts of capacity required. One megawatt powers about 1,000 homes.

The deficit in megawatts available is a first for New England, which has had a surplus in megawatt capacity since the forward capacity market was established in 2006.

"The region abruptly went from a capacity surplus and low prices in previous auctions to a capacity shortfall and relatively high prices," said Gordon van Welie, ISO New England's president and chief executive officer.

February 5, 2014: Forbes provides background to just how screwed up things have become in New England under the Obama administration. Obviously this is not "directly" Obama's fault, but it is the kind of thinking that Obama fostered during his terms in office.

The wholesale price of electricity in New England is exploding.

In recent months, nearly 10% of existing power plants in New England have announced plans to retire over the next three years.

The result: capacity deficits and rising wholesale prices.

“The region abruptly went from a capacity surplus and low prices in previous auctions to a capacity shortfall and relatively high prices,” ...

On Monday, the ISO New England completed the eighth annual Future Capacity Market (FCM) auction for 2017 and 2018.

The total cost of capacity for New England rose to $3.05 billion at this year’s FCM. To put the scale of this increase in perspective, the total cost of capacity for the previous seven auctions ranged between $1.06 billion in 2013 and $1.77 billion in 2009.

The major power plants planning to retire in New England in the next three years “include Brayton Point, a 1,535-MW power plant located in southeastern Massachusetts; Vermont Yankee, a 600-MW power plant located in southern Vermont; Salem Harbor, a 750-MW generator in northeastern Massachusetts; and Norwalk Harbor, a 350-MW power plant located in southwestern Connecticut.

The FCM sets the price of capacity, one of the major components of wholesale power prices, for new and existing resources. It is held three years in advance to provide time for new resources, which include both traditional power generation or demand-side resources, to be developed.

Capacity payments provide economic incentives to attract investment in new and existing supply-side and demand-side capacity resources to ensure that sufficient capacity is available for reliable operation of the bulk power grid.

The first seven auctions ended with a significant surplus of regional capacity. By contrast, Monday’s FCM auction concluded with a deficit of 155 megawatts of capacity required for the 2017 and 2018 commitment period.

“The slim capacity margin and the resulting auction prices are a clear signal to the marketplace that the region needs more power generation and demand reduction capacity."

In deregulated electricity markets, there are two main products: electricity; and capacity.

Capacity is effectively a call option on electricity where a resource is paid to be on standby in case it is needed to meet demand.

In regions with accentuated peak loads, capacity markets are crucial to keeping the lights on during spikes in demand. Other than Texas, which relies on an energy only market structure, most regional grid operators have some type of capacity market.

The article does not say it, but I would assume that there is a certain cost in keeping generators on standby, in case such power sources as wind or solar are not available.

Original Post

This has to do with the recent energy debacle in New England.

For background:

• President's war on coal vs Mother Nature
• Introduction to PJM, Platts
• The president keeps his promise to kill the coal industry
• RBN Energy: part 2 of the 2014 New England energy debacle

SeekingAlpha has a great update and much background.

How did this effect spot pricing for electricity [in New England]? As with most supply and demand equations, when demand picks up and supply is curtailed, spot prices move higher. According to the Reuters articles, the 5-year average January next-day delivery electricity price in the PJM territory is in the mid-$50s per megawatt-hour. On Tues Jan 7, the next-day delivery price was $240 per MWh. Real-time power prices were running much higher at $1,000 to $1,500 per MWh.

Who is PJM? PJM is the managing oversight body for power generation and transmission in the Mid-Atlantic and parts of the Midwest. Based in Valley Forge, PJM Interconnection controls a series of power grids fueled by natural gas, oil, nuclear power and coal. 

The article goes on:

Gas utility companies that are expanding their pipeline infrastructure in the Mid-Atlantic are: National Fuel Gas with their extensive Marcellus acreage footprint; Dominion Resources soon-to-be spun off MLP; Spectra Energy East Tennessee and Texas Eastern pipeline; and Kinder Morgan Tennessee pipeline. Most of the planned added pipeline capacity will carry additional production from the Marcellus and Utica shale natural gas fields.

While natural gas-fired capacity in PJM's territory will continue to grow, so will the problems of sufficient fuel. AEP and EXC offer coal and nuclear generating exposure in the Northeast/Midwest. NRG operates 17,500 MW of non-natural gas facilities in PJM's jurisdiction, or about 37% of total company capacity.

 Regular readers of the blog, through links to RBN Energy, already know this story but the SeekingAlpha graphics are very nice.

The SeekingAlpha article targets investors interested in pipelines to New England. I'm really not interested in that angle. What interests me is where the natural gas that is so sorely needed by New England is coming from. It's coming from the Marcellus and the Utica, both reliant on fracking. A ban on fracking is the end of the domestic oil and gas industry (someone else said that, not me).

A lot of story lines in this SeekingAlpha article and the RBN Energy series on the New England situation.

Bottom line: relief won't reach New England until 2016 (two more winters) and the relief that comes on line in 2016 won't be enough to solve all the problems. (And Cape Wind will not be the answer, either.)

By the way, The New Hampshire Union Leader reported that New England pays 40% more for energy than the US average.

Economic growth in New England will be constrained by the lack of natural gas pipelines in the region for at least another two years, and perhaps longer, according to a group of energy experts speaking at St. Anselm College on Monday.

"Growth in jobs and income will lag the national average despite many other advantages we do have in the region," said Lisa Shapiro, chief economist at the law firm of Gallagher, Callahan and Gartrell in Concord.

Shapiro was one of several speakers at the workshop "New England's Energy Future and its Effect on the Regional Economy," which was hosted by the New Hampshire Institute for Politics.

Natural gas delivered to New England can at times cost seven to 10 times higher than the national average on the continental U.S., she said, given the high demand for transmission and the lack of space on pipelines, particularly in the coldest months.

"We really are at such a comparative disadvantage compared to the rest of the country," she said, when businesses size up the cost of energy in planning an expansion or relocation.

From 2010 to 2012, energy prices in New England declined 6 percent, she said, but the region remains the highest-priced market for energy in the U.S. "We are now only 40 percent above the national average, but we had been at 50 percent," she said.

North Carolina, Texas, even California are options for companies wanting to relocate.

The Headlines Just Keep Coming -- Maximum Emergency Generation Alert For Tuesday -- Wind Turbines Need To Spin At Max Rate; President's "War On Coal" Vs Mother Nature

Perhaps the president's "war on coal" has met its match in this most recent storm. Maybe cooler (pun intended) heads will now re-think this crazy idea to kill coal plants which will result in a) blackouts; and/or, b) surging electricity rates. Forbes is reporting:

The Boston Business Journal reported this week that the entity responsible for maintaining reliability on the New England power grid, ISO-New England, has recommended against the recently requested closure of the 1,500 MW Brayton Point facility in southeastern Massachusetts in 2017. 

According to the BBJ, the plant owner, Equipower Resources, had notified ISO-NE in October of its intentions, stating that it was no longer economical to run the plant. After three months of review, ISO-NE determined that the plant (with three coal-fired units generating 1,055 MW and a natural gas-fired unit at 435 MW) would be needed to ensure system reliability.

The BBJ noted that a planned power line addition – the Interstate Reliabilty Project – would reduce the need from Brayton to just one unit, but that this power line may not be ready in time to meet the planned June 2017 closure date.

By its own admission, ISO-NE “does not have the authority to prevent a resource from retiring.” But, as noted in its recent press release related to the closure of the Vermont Yankee nuclear plant, it can “work with market participants to develop potential market enhancements, including a pay-for-performance mechanism that will create strong financial incentives for generators to assure that they have adequate fuel arrangements to be able to produce electricity when called upon by the ISO.”

I remember those commercials: "This is your brain. This is your brain on drugs." I sometimes wonder if the best and brightest at Harvard who are now making public policy might have been the targets of those public service announcements, based on the decisions they are making. If so, the PSAs missed their targets. By a wide margin.

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I'm too busy to do much with this story, but I will post the links and maybe come back to it, but it's a huge story with many story lines.  The first story I can think of: while mainstream media is mesmerized by wind turbines to manage some crisis that may or may not exist, Mother Nature gives us a crisis we can experience in our lifetimes.

Here are the two links a reader sent me. First, Reuters is reporting:

PJM Interconnection, the power grid agency for the mid-Atlantic and parts of the Midwest, called for all electric generation to be available to meet rising demand Monday night and Tuesday as frigid temperatures grip the region.

PJM issued a Maximum Emergency Generation Alert for Tuesday to warn power-plant operators that system conditions may require them to be available to meet record demand.

Second, Dallas Business Journal is reporting:

Below-freezing temperatures are straining the state's electric grid, prompting calls for conservation Monday morning. There was a threat of rotating outages.

The Electric Reliability Council of Texas issued an emergency alert level 2 just after 7:15 a.m. Monday as power reserves dipped below 1,750 megawatts. By 8 a.m., the warning had been scaled down to a level 1 alert and the threat of rotating outages had subsided.

ERCOT also called on big power users to cut back on their power consumption during critical times to reduce load on the grid, a program called demand response.

"We have brought on all available electric generation and have deployed all demand response programs that have contracted with ERCOT to reduce electric use in emergency situations," said Dan Woodfin, director of system operations for ERCOT in a press release. "Conditions appear to be improving at this time and we do not expect to implement rotating outages this morning."

So far, no mainstream media op-eds or stories calling on our elected officials to "do something."

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A Note to the Granddaughters 

I am back in my element. I would love to be back in academia, maybe college all over again. I'm in my T. E. Lawrence ("Lawrence of Arabia") phase. I saw the movie for the first time ever the other night in Blu-Ray. It was incredible. I had just read the Korda biography of T. E. Lawrence and the movie was an excellent recap. Yes, there were historical errors, and a bit of artistic freedom, but then, on the other hand, who really knows all the facts? Smile.

Be that as it may, I've spent the day at the Huntington Beach library reading / perusing four additional biographies and putting the story together.

After seeing the movie, I remarked to my wife that the director failed to make his point in the Deraa episode (in which Lawrence was tortured for two (?) days and sodomized an unknown number of times). The director, David Lean, has been quoted as saying the same thing: that if he had a chance to do it over, he would have done more with Deraa. Now that I've read a bit more and have had time to think about it, I feel that the director got it exactly right the first time. Sometimes one can over-think these things, and in general, the hunches of geniuses are the best. Lean was a genius and his hunch to film Deraa the way he did was the correct way. Anything differently would have centered the movie differently. The "Lawrence of Arabia" trailer in my mind is that of an army of Arabs on camels in full charge across the desert. A movie clip of a rape scene etched in my mind would not be what I would want.

Natural Gas Skyrockets In New England; Nothing On Front Page Of The Boston Globe, Maybe Not That Big Of A Deal

Nothing on front page of Boston Globe about the natural gas situation in New England. See previous post, same subject. 

Boston is preparing for first big storm of the season.  Four to six inches forecast to Boston central; up to 10 inches in areas north of Boston. We spent much of the past four years with our granddaughters in the Boston area and we can only imagine what this is going to be. It would be incredibly fun and beautiful. I wish I were there to enjoy it.

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A Note To The Granddaughters

First: a note to regular readers. All (or at least most) posts, notes, links regarding global warming will now be found in "notes to the granddaughters, and not in the "upper" part or "main" part of the post. There will be very few, if any stand-alone posts on global warming. More on that later.

Having said that, did you all catch the Drudge-linked story of 5 to 6 feet of snow in upstate New York? This winter storm will span over 1,000 miles and could affect up to 110 million people, about as many people who will have their insurance canceled by ObamaCare.

And then this: new study -- the earth was warmer during "ancient Roman times' and during "the medieval period." I assume Algore is updating his slide presentation. The Romans burned a lot of coal, I suppose.

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Taxi, Harry Chapin
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Operator, That's Not The Way It Feels, Jim Croce

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A Note to The Granddaughters

I have never lived anywhere that I didn't eventually come to love. Some places I have come to love sooner than other places. I thought about that today, driving from Grapevine, TX, where we currently live, up to Plano, TX, to visit a Planonite who reads the blog and, who invited me to lunch to talk about the Bakken. More on that luncheon at some other time when I have time to reflect on our 3-hour discussion.

I have never lived anywhere that I didn't eventually come to love. Some places I have come to love sooner than others. Harry Chapin, above, brings back memories of my coming of age days, visiting the love of my life -- in a different life, in a far away place, in a time long, long ago. It was Boston, 1975, or thereabouts. I loved Boston, then, but that was because of her. "She took off to find the footlights, I took off to find the sky." [She died some years ago; I can write about her and not frighten the current love of my life.]

Almost at the other end of the spectrum (continuum?) was Incirlik Air Base, eastern Turkey. Turkey, the country, north of Syria. It took multiple visits and then a two-year tour to really fall in love with eastern Turkey. If I had no significant other now, and no daughters, and no granddaughters, I could see myself back in Turkey, living out the rest of my life there. The early Christians found solace there.

Interestingly, at the very end of the continuum was RAF Lakenheath, England, or England, in general. We were there for four years the first time; I never "liked" East Anglia the entire time we were there. The English, it seemed were living in the 1950's and working half-time to catch up. It was so bad, our wing commander sent out a directive that Air Force personnel were to make no more jokes about the British civil servants.

I recall all that because it took me a "New York minute" to fall in love with the Dallas-Ft Worth metroplex. Except for the absence of an ocean and the mountains, we lack for nothing. The interstate and state highway system between Grapevine (northeast of Ft Worth) and Plano (north of Dallas) is incredible. I think 99% of the national highway transportation CAPEX is being spent in Texas; the other 1% in the Bakken. The Texans have a unique way of laying out their divided highways, frontage roads, farm-managed roads, u-turns, etc.

So, it was a great drive. The drivers were Texas-friendly. The roads: not one pothole. And lots of new construction. Think jobs.

Holy Guacamole, Batman! Regular Readers Knew This Was Coming ... But Did We Really Think It Would Happen; Natural Gas Spot Price In New England Up To $20 And It May Get Worse

Updates

December 18, 2013: update on the debacle in New Hampshire.
 

Original Post

[Yesterday, I wrote that we would be reading about this in February, 2014. Wow, talk about perfect timing. Thank you, Mr. RBN Energy.]

That "thump" you heard was me falling off my chair, for the second time in less than three minutes, hitting the floor here in a Barnes and Noble-owned Starbucks in Southlake Town Centre, Texas.

I fell off my chair the first time reading about comments from our energy secretary. This time this caused me to fall off my chair (you may have to read this twice to confirm you are not dreaming), from Forbes:

The widely predicted explosion in New England’s energy prices has started sooner than most people expected.

The price of natural gas at Boston’s Algonquin Citygate climbed from $4.13 per MMBtu last Wednesday to $20.40 on Tuesday. (See sidebar at the right for the spot price of natural gas in the rest of the US -- about $4.00.)

Natural gas prices are tightly correlated with electric power prices in New England.  These near-record natural gas prices at the Algonquin trading point pushed forward, wholesale power prices up to more than $100 per megawatthour (MWh) at the Massachusetts Hub for December 2013.

While the $100 per MWh future price may have seemed high at the time, the actual market price is likely to be significantly more than that amount. The real time locational marginal price spiked above $350 per MWh in southeastern Massachusetts early this morning and remained above $250 per MWh for most of the day.

To put this in perspective, spot prices for wholesale, on-peak power in New England are typically between $30 and $40 per MWh.

New England? Think Boston. How is that off-shore wind turbine project working out? Cape Wind? I'm waiting for Ms Elizabeth Warren to comment on this.

The big story line here? This is the end of any real talk about banning fracking. Banning fracking in the US will shut down the domestic oil and gas industry; OPEC prices will skyrocket just on the news.

I thought the Canadian oil sands was the canary in the coal mine with regard to how low the price of oil might get; but the canary in the coal mine turned out to be Boston.

This story in Forbes is not a one-off. It has been predicted for quite some time, and I've posted at least twice on this. A huge "thank you" to RBN Energy for being the first to predict this to readers. If I had time, I would look for additional RBN Energy posts, but too much to do, to include sending a huge "thank you" to the reader who alerted me to this most recent debacle. Throw in ObamaCare and New Englanders are facing a real nightmare come January, 2014. Winters, all things being equal, tend to get colder as we move from December to January to February, but, with global warming, all bets are off. 

Coal, Wind, Natural Gas Energy In The Midcontinent Independent System Operator (MISO) Territory

A reader sent me this article from Platts regarding future energy picture in the Midwest: broad strokes -- natural gas with/without wind replace coal; transmission lines will be the long pole in the tent.

There is a lot of information in the linked article. This is what I took away from the article in my reply to the reader who sent me the article. The reply may not be ready for prime time (much of what I post on the blog probably isn't) but these were my first thoughts (and I may have missed the point of the article).

So, with that "disclaimer," my thoughts on the linked article:

Hi, ----

Wow, there's a lot of information in that article.

1. You mentioned Alliance. That was a very small piece of the entire article, but very, very timely:
http://themilliondollarway.blogspot.com/2013/07/enbridgealliance-offers-post-2105.html which you probably saw (posted yesterday).

2. The gist of the linked article you sent me, of course, was coal in MISO will be replaced by natural gas with/without wind.

3. Natural gas, for sure.

4. Wind requires huge tax breaks, govt subsidies; but it's the politically correct thing to do, so very likely we will see more wind, even though it doesn't make economic sense, and will actually result in more stress on the grid, and probably increased demand for natural gas.

5. There are two obstacles to wind. The article mentions both of them. First, the article questions whether there are enough "good" locations for wind. (Wind is where there is little demand for more energy which leads us to paragraph 6.)

6. Interestingly enough, it's the very last paragraph that is the most important in this very long article with regard to wind:

Minnesota Power's Rudeck agreed. "Investment in the transmission system is key to ensuring the reliability of the grid going forward. It is the companies' and grid owner's responsibility to work together and find a solution for the new capacity."

7. There have been recent articles (which I did not post) that suggest that new transmission lines necessitated by wind farms will be the biggest hurdle. If you recall, Pickens lost a lot of money on his wind bet in western Texas because he could not get the transmission lines in -- that was two to three years ago. Forbes had a great article on the problems with wind back in December, 2012.

8. It is minor challenge to convert from coal to natural gas; the plants are there, and the transmission lines are there.

9.  Also, did you note PJM in the article? I assume they are talking about the energy broker, PJM -- something new for investors, newbies.

10. So, bottom line:

a) great article; thank you for sending; I will post with the above comments
b) the govt is likely to support wind power because it's the "PC" thing to do
c) wind still has hurdles -- 

• i) where to place wind farms; and, 
• ii) transmission lines

d) the govt will probably force exiting utilities to put in new transmission lines; no matter how costly wind is, it's the "PC" thing to do -- it will happen
e) natural gas story for North Dakota is only going to get better and better; at the sidebar near the top, I have two "featured presentations": the Bentek presentation talks to both oil AND natural gas in the Bakken
f) the linked Platts article introduces PJM for some of us
g) the Alliance pipeline story was minor part of this article, but huge story on its own

11. Bottom, bottom line with regard to wind: I think we will know by the end of 2014, if not by the end of 2013, whether the wind industry will keep growing. Renewables practically "broke" Spain (maybe others in the EU) but the US is much bigger; "we" can go on making dumb policy decisions for a long, long time and not notice the damage. Sort of like the laboratory frog that died when the researchers gradually turned the water temperature up to boiling, so slowly the frog did not notice.

The President Keeps His Promise -- Kill The Coal Industry

Updates

August 13, 2013: this Motley Fool article is confusing, hard to read, poorly written, but close reading gives one an idea of where utility prices are headed. I'm not sure if I'm reading what Motley Fool has to say, but it sounds like natural gas is subsidizing the high cost of renewable energy. Wind is the least expensive renewable energy source out there, and it still requires huge government intervention to make it "profitable." If the link breaks:

Despite the rising supply of higher-priced coal-based energy and its nuclear problems, Duke did not end North Carolina's renewable energy program.

It is buying 7 megawatts of commercially-produced solar, for instance, and will continue to purchase solar power from rooftop owners. The company also has installed over 1,000 megawatts of wind power. Duke's policy of grabbing energy with both hands for re-sale to others should be subject to question, because the Energy Information Agency notes that wind farms are becoming more efficient, and total demand is down.

Efficiency pays, it's the cheapest renewable fuel there is, and the more efficient the economy gets the harder it will be for marginal electricity suppliers to profit on their investments.

May 22, 2012: I have no idea how accurate this politically-charged message is but I will archive it, allowing us to to check it out later.

Last week PJM Interconnection, the company that operates the electric grid for 13 states (Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia) held its 2015 capacity auction. These are the first real, market prices that take Obama’s most recent anti-coal regulations into account, and they prove that he is keeping his 2008 campaign promise to make electricity prices “necessarily skyrocket.”

The market-clearing price for new 2015 capacity – almost all natural gas – was $136 per megawatt. That’s eight times higher than the price for 2012, which was just $16 per megawatt. In the mid-Atlantic area covering New Jersey, Delaware, Pennsylvania, and DC the new price is $167 per megawatt. For the northern Ohio territory served by FirstEnergy, the price is a shocking $357 per megawatt.

Why the massive price increases? Andy Ott from PJM stated the obvious: “Capacity prices were higher than last year's because of retirements of existing coal-fired generation resulting largely from environmental regulations which go into effect in 2015.” Northern Ohio is suffering from more forced coal-plant retirements than the rest of the region, hence the even higher price.  

Original Post 

Kill Coal

Link here to campaign fulfillment story.

Michael Brune, executive director of the Sierra Club, an advocacy group fighting coal-fired power, said in an interview that the regulation shows that President Barack Obama is moving to a cleaner energy future.

"It's a strong move," Brune said. "It means there will never be another coal plant built without new technology and it probably means even those won't be built because they can't compete."

And so it goes.

He's probably not going to get a lot of support from West Virginia this fall.

The coal industry will suffer the same fate as Osama bin Laden under new climate regulations proposed by the Environmental Protection Agency, the head of the United Mine Workers of America said this week.

“The Navy SEALs shot Osama Bin Laden in Pakistan and Lisa Jackson shot us in Washington,” Cecil Roberts, president of the powerful union, said.

Kudlow, CNBC, thinks this is absolute insanity, killing the coal industry for any number of reasons. He will have EPA representative on his show this evening (date of original post).