Parsing The Recent FERC Ruling On Renewable Energy -- April 18, 2020

See this post.

At the time of the original post, I did not have time to study this. At the time, I did not understand it.

So, time to go through it.

 As I understand it, the story began with the "original" FERC hearing earlier this week.

"Someone" requested a re-hearing, and according to the headline (above), FERC denied a rehearing.

So, let's go back to the original hearing.

From The National Law Review, February 20, 2020 (I have no idea how credible the source is). The article begins:

On December 19, 2019, the Federal Energy Regulatory Commission (FERC) gob smacked the renewables industry by issuing an order that makes it nearly impossible for most new renewable energy projects in the PJM system to sell capacity into the market. 

Approximately 55 individual parties have moved for FERC to reconsider the order including ten state public utility commissions, no less than five of which have indicated that they may consider pressuring their utilities to withdraw from PJM if relief is not granted.  

And, of course, as noted above, FERC denied a re-hearing.

Next paragraph from the linked article:

• East Coast affected
• West Coast (California) may or may not be affected

East Coast:

• PJM is the intended point of connection for approximately 8800 MW of offshore wind from North Carolina to Maine
• 55 individual parties negatively affected
• ruling could prevent these offshore projects from going forward

RTO: regional transmission organization

JPM is an RTO.

Third paragraph in the article:

• RTOs price capacity through reverse auctions.

This sounds confusing. A regular auction: highest bid wins. A "reverse auction": lowest bid wins. Sort of.

The "bids" or "offers" of the various suppliers of electricity (for example, the offshore wind farms) are stacked and racked based on price.

A line is drawn at the level where the capacity bids below the line equals the capacity required by the RTO.

Those entities below the line are eliminated from contracts for that auction period. Only the entities (e.g., the offshore wind farms) above the line get contracts to supply energy to the RTO.

This is one thing that confuses me -- but I think I understand it: the highest bid in the resulting stack sets the price for all lower bids. Bidders whose offers are higher than the highest bid receive nothing for their capacity.

If I'm reading that correctly, the highest bid is the bid that becomes the bid for all those entities above the line. Understanding it or no, it's not important for this discussion.

Next, fourth paragraph from the linked article. The reverse auction incentivizes a bit of hanky-panky. It behooves holders of high-cost generation to offer prices below the actual costs. That would increase their chances of being "above the line."

"After all, being paid something for capacity is better than being paid nothing" -- which would happen if their bid put them "below the line."

FERC has long required that initial capacity bids be tied to actual fixed costs of the resource (remember: hydroelectricity is really, really cheap; natural gas is really cheap; off shore wind is really, really expensive). This minimum pricing is called the minimum offer pricing rule or MOPR.

But get this: historically the MOPR has NOT applied to renewable energy projects. Say what? Historically? Offshore wind has not been around all that long. Has this all been done under Obama-like administrations?

But I move on.

Fifth paragraph: historically the MOPR has not applied to renewable energy projects. But recent orders have changed that.

In the PJM order, FERC cited the dramatic growth of state-subsidized renewable resources on the PJM system, including uneconomic nuclear and coal generation as well as renewables and offshore wind.

In fact, OSW is leading the way in the growth of renewables in PJM. The 8800 MW of OSW projects under development there compares to the approximately 600 MW of solar and wind resources that cleared the 2021 capacity auction.  

Further paragraphs, but I think I now get it:

In response to this wave of new state sponsored renewable capacity, FERC terminated the exemption for renewables from MOPR pricing and specifically applied MOPR pricing to new renewable energy projects that receive direct or indirect support from state and local governments.

Support has been defined broadly to include all state and local economic benefits for renewable projects, including renewable portfolio standards, mandatory purchase contracts, offshore wind renewable energy credits (ORECS) and even private renewable energy credits.  

As a practical matter, the PJM ruling means that capacity from offshore wind projects cannot clear the PJM capacity market: Absent subsidies, OSW costs are simply too high when compared with the costs of gas-fired peaking turbines against which they will compete. 

Then there is much more -- "a grandfather clause, as it were." 

Some argue that FERC is over-stepping its authority. States are allowed to choose from whom they want to purchase their electricity. If the electorate wants to pay higher prices for electricity to save the world, they should have that right.

So, it sounds as if the states want to pursue this, they can sue FERC -- which would eventually be a US Supreme Court case, I suppose. 

Anyway, to the extent it's clear, I think I understand it. 

Bottom line:

• FERC ruled that all electricity generators must play by the same rules when bidding in RTO auctions.
• The FERC may be overstepping its authority -- federal government vs states rights.

Now to post and go back to a comment from a reader who follows this and understands it much more closely than I do. Now I understand what the reader was saying, I agree:

Although there are several components to this FERC/PJM  capacity market auction situation, it might be condensed by describing it as a  state-subsidized subset of electricity generators (specifically the wind boys), having an unfair advantage in the pricing marketplace when competing against the natgas/coal power generators.

It is crucial to future wind projects as they simply CANNOT compete economically with the natgas generators and this directly conflicts with the ongoing "transition" narrative of the starry eyed state government players who continue to mandate electricity generation from renewables.

(This is primarily by fiat by ordering heavily regulated utilities to purchase set - and increasing - amounts of electricity from renewables).

To describe all this chicanery as rank political maneuvering would be stating the obvious, but - since we only have a couple of years left to Save The Planet, over the cliff we must merrily go.

One interesting bit of fallout ... as the political pressure continues to ramp up in favor of the renewables, states such as New Jersey and Massachusetts (part of the ISO, but similar conditions exist there), are chest thumping that they will pull out of these regional, federally regulated electricity consortiums and "go their own way"!!!

That stance is SO falling down funny and it reveals such a staggering degree of ignorance that - hopefully - more rational input will prevail in these matters.

Bottom bottom line, with Trump calling the shots out to 2024, the Age Of Renewables may be starting to recede from the American stage. 

Good riddance.

Another reader wrote:

We both are continually amazed at how New England consistently does everything wrong about energy ... especially New York State.

As you reported in your blog this "review" wasn't the first action. It started in 2012 and it's all about pricing natural gas ... and if a New England natural gas power plant is "necessary", hence Sierra club trying to do everything it can to make natural gas more expensive paving the way for wind.

I had to find an issue that doesn't involve coronairus ... and the attendant civil liberty violations (my convoluted anger management technique). If I find anything really profound I'll pass it along.

Good, bad, or indifferent, I have a much better understanding of what's going on, which makes for a wonderful Saturday evening as I watch Casablanca for the 157th time.

Ranting And Raving On A Sunday Morning -- And Then I'm Going Off Line To Read -- Good Luck To All -- February 3, 2019

From iceagenow:

NOTE: the graphic is from PJM. 

For the millennials who may not be able to read a pie graph (or even know what a pie graph is):

• coal: 33%
• natural gas: 33%
• nuclear energy (much of which will be going away in the out years): 27%
• subtotal: 93%
• multiple fuels, which I assume include heating oil, diesel, fuel oil: 4%
• subtotal: 97%
• I can't make out solar or wind on the pie graph

When you see these graphics and have just lived through the polar vortex, a sentient being (perhaps even Scott Adams) needs to ask "why" is anyone in their right mind promoting wind and solar energy? Even if it's all about CO2/global warming (and, of course, it isn't), putting up a few wind farms in the US will make no difference when the Indians and Chinese are going to be burning more fossil fuel (natural gas and coal) than ever before in the out years. Thank goodness India and China are on the other side of the earth; it will take longer for that atmospheric CO2 to reach America.

Transferring $100 billion from OECD to a couple of islands in the South Pacific, administered by a committee in South Korea, tells me:

• this whole thing is a scam; and,
• this $100 billion won't do anything to combat AGW (which doesn't exist anyway)

1,500 private jets carrying 1,500 non-scientist billionaires also speaks volumes. If they aren't concerned about CO2 emissions, why should the rest of us be concerned? Couldn't they have at least jet-pooled and/or car-pooled?

Fact check:

• there were not exactly 1,500 private jets flying into Davos
• not all private jets carried only one or two passengers; some carried more
• not all private jets were owned by billionaires; some were leased; and some of the "billionaires" were only multi-millionaires

What was it that P. T. Barnum was said to have said?

• “Nobody ever lost a dollar by underestimating the taste of the American public.”

Whenever our granddaughters have a question they cannot answer, I tell them to a) google it; or, b) follow the money.

Google, in this case, is unhelpful. Google searches on AGW will simply take you to religious arguments: one either "believes" in AGW or one doesn't "believe" in AGW. When it comes to AGW, I am not agnostic. I am an atheist.

In this case, it's all about "following the money."

As one example this story is all over the AGW blogosphere, but won't be reported in the mainstream media. Just as the mainstream sports media won't report on how the PGA ruled on Justin Thomas' infraction yesterday (but that's another story).

This is not some low-level worker-bee. This is the head of the UK global warming climate scheme/scam:

How much has Algore made on this scam?

See comments below to explain why this screenshot is posted here:

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The Book Page

Genius: The Life and Science of Richard Feynman, James Gleick, c. 1992.

The Market, Energy, And Political Page, Part 3, T+2 -- November 8, 2018

From oilprice: 

Data points:

• China's crude oil imports in October: 9.61 million bopd (almost equal to the entire amount produced by any of the three -- the US, Russia, Saudi Arabia) -- and that's just imports
• independent refiners (teapots) driving demand -- drove demand before import quotas expire
• last month, China said it will raise by 42% the oil import quota for non-state refiners (teapots) for 2019, as new refinery capacity is planned to enter into operation next year
• China increasing more Canadian WCS vis a vis WTI due to $50 price spread

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US Coal

Take any two consecutive years in the graphic below and see if you can find any two consecutive years in which more coal plants were closed that in the current two consecutive years, 2018 - 2019.

Another open book test?

From twitter today:

For more on PJM, click on the tag below, "PJM."

On Average, New England Will Have Enough Electricity This Winter -- October 19, 2018 -- Nothing About The Bakken

If you came here looking for the Bakken, skip this page, scroll on! 

Updates

October 22, 2018: in the original post, I asked what happened to coal in New England? The last coal plant was shut down in early 2017. Link here.

October 20, 2018: a graphic that might help. PJM stands for Pennsylvania, (New) Jersey, and Maryland)

October 20, 2018: maybe New England can buy electricity from PJM if push comes to shove. From oilvoice.com:

The average annual capacity factors for natural gas-fired generators in the PJM Interconnection—the largest competitive wholesale electricity market in the United States—have increased in recent years, reflecting greater use of natural gas-fired generators in the region.

The increase in PJM's capacity factors for natural gas-fired generators is the largest of any regional transmission organization in the country in the past five years (2013–2017).

Similar to the rest of the country, the share of natural gas-fired electricity generation in PJM has increased during the past five years as relatively low natural gas prices have made natural gas more cost-competitive with coal.

Much of the increase in generation from natural gas is from generating units using combined-cycle technology. By comparison, the use of natural gas-fired combustion turbines in PJM has remained relatively constant.

Average annual capacity factors for natural gas-fired combined-cycle generators in PJM first surpassed those of coal-fired generators in 2015. Relatively lower natural gas prices—in part because of PJM's proximity to Appalachian natural gas production—have been a primary driver for increasing natural gas capacity factors. 

October 20, 2018: from an earlier link, the core of PJM (Pennsylvania, Maryland, New Jersey, Delaware, Virginia, West Virginia and Ohio).

Original Post

This is what happens when you don't build wind towers and solar farms -- you risk running out of electricity. Hmmm. Sure.

This is a regional story; I've blogged about it often but if one doesn't keep reading about it, one forgets all the details. It gets confusing.

This is up in New England, Boston, specifically.

From The Boston Globe.

Link here.

Balance of power: Brisk enough for you yet? Try going without electricity. As the heating season arrives, the cooler weather again brings concerns that we could run out of juice on chilly days.

Just yesterday, the CEO of grid overseer ISO New England, Gordon van Welie, said we were precariously close to rolling blackouts -- “one large contingency away,” as he put it to an Associated Press reporter -- during last winter’s cold snap. Yes, it’s his job to tell everyone the sky is falling; ISO’s priority is ensuring the lights stay on across the region. But his warnings are sounding starker.

The giant Mystic gas-fired plant in Everett could hold the key -- especially now that it’s on the brink of closure. Owner Exelon is already retiring two smaller turbines there. The fate of its larger natural gas-fired units, Mystic 8 and 9, remain up in the air.

Archived. 

Data points as I understand them. Note: I could be way wrong on a lot of this stuff. I don't follow the New England electric grid all that closely.

• the largest power plant in New England is Milstone, in Connecticut
• the second largest power plant in New England is Mystic
• over the years, ISO New England has relied more and more on natural gas
• Mystic power plant is owned by Exelon, based in Chicago
• source of natural gas for Mystic is a natural gas import terminal literally next door
• the import terminal was formerly known as Distrigas, but is now also owned by Exelon -- the article didn't say if the terminal had a new name; maybe Mystic Terminal?
• so Exelon, Chicago-based, owns both the fuel source and the power plant
• Exelon, Chicago-based, says Mystic is no longer economic to run
• in an attempt to make it more economic to run, Chicago-based Exelon has already retired two smaller gas-fired (?) turbines at Mystic (the article did not say whether these turbines were gas-fired or coal-fired or run by hamsters on a tread mill)
  
• Chicago-based Exelon is considering unplugging two larger natural gas-fired units, Mystic 8 and 9, to bring the plant back to profitability
• apparently, Exelon plans to shut down Mystic entirely by 2022
• did we mention that Mystic is the second largest power plant in New England?
• the writer of the linked article seems to be as concerned about the fate of the natural gas import terminal as the power plant
• if the power plant is closed, the import terminal is no longer needed
• the import terminal imports LNG from "foreign shores"
• Exelon says it needs $1/month/each customer to keep the plant open until .... drum roll ... 2024  -- but it cannot increase rates without federal government (FERC) approval

So many questions not addressed in this article:

• was Boston also the home of the Big Dig? 
• the writer does not mention that as recently as Labor Day, 2018, an "anomaly" pushed the grid "to the brink"; link here.
• why is the writer so worried about the import terminal? after all, if Mystic is closed, apparently there's no need to import foreign LNG
• why is New England importing foreign LNG when this country, the US, has a glut of LNG and is exporting same?
• why is Mystic unable to make a profit? where are customers getting their electricity? 
• did this happen overnight? Or is this simply poor planning?
• why is solar energy and/or wind energy not making up the difference?
• is ISO England learning the same lessons that Germany and Spain learned? If so, were those lessons being taught a decade ago?
• can Milstone provide the necessary power to preclude rolling blackouts?
• it sounds like "everyone" is being alarmist; apparently ISO New England can purchase electricity from outside the region based on other articles; not sure if that is true; if so, no need for "rolling blackouts" -- there are other sources for electricity

ISO New England is linked here. 

• What happened to coal?
• On the "fuel mix" graphic today, coal is not even shown (I keep looking, assuming I'm missing something).

Last December 27, 2017, coal made up 5 - 6% of the mix. What happened to the coal in less than a year?

Bottom line: 

It looks like to me that there really isn't a problem for the customers served by Mystic. On average, Mystic has more than enough electricity. On average, Mystic has so much excess electricity, the utility "gives it away" -- at least giving away enough to preclude profitability. So, on average, Mystic's customers will do just fine. On average they have more than enough electricity, enough that on average they don't need the region's second largest power plant any more. 

Wow. When you think about it -- when you put it that way -- that's amazing. A region able to shut down its second largest power plant and still have enough electricity on average for all its customers. Imagine all the CO2 that won't be emitted. And the sacrifice? Occasional rolling blackouts. David Henry Thoreau would be supportive. 

By the way, we're talking "blackouts," not "brownouts." 

But my understanding is that this will be a mild winter in New England. What, me worry?

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

More On Mystic

This was from a post on July 12, 2016. To save you the trouble of having to click on the link and leave this page, here is that post:

This is a cool story from Bloomberg. Again, I would not have known about this story had it not been for the blog and readers who alerted it to me sometime ago.
I've actually blogged about the Mystic River (once) before. See these other posts regarding the linked Bloomberg story above:

• New England's appetite for Trinidad's natural gas, September 30, 2015
• US LNG imports from Trinidad, July 25, 2015

Here's the most recent article, titled "Pipeline Phobia Keeps New England's Unlikely Trade Route Open" -- reminds me of the rum and molasses trade during the Revolutionary War:

Thanks to the shale revolution, the U.S. has plenty of natural gas of its own. All along the eastern seaboard, a chain of import terminals -- built when the country expected to get its fuel from abroad -- now lie idle.

Except one.

For reasons that have to do with environmental politics and geology, New England is bucking the trend. Three or four times a month, a police helicopter escorts giant ships through Boston Harbor, as they deliver liquefied natural gas from Trinidad to a terminal on the Mystic River. [And spewing all that CO2.]

Why buy from the Caribbean, when so much cheap gas is pumped out of Pennsylvania and Ohio? One objection is the new pipelines needed to bring it to New England. The Northeast is famously cold in winter, and it sits on beds of granite that make underground fuel storage a problem, so gas and power prices typically spike way above the rest of the country when there’s a freeze. But using shale gas to cut the bills means a longer-term commitment to fossil fuels, and any proposed pipeline route triggers local objections: it will leave a scar along the Catskill Mountains, or pose a safety risk to residential neighborhoods. That’s the dilemma that has given Engie SA’s import facility near Boston, unlike all its peers, a new lease on life.

“We’ve been competing with pipelines since we opened,” Carol Churchill, a spokeswoman for the French utility in Massachusetts, said by phone. Once the gas arrives in Boston, some of it goes straight to an adjacent Exelon Corp. power station and the rest is transported via existing pipes or by truck. “It doesn’t make sense to build a pipeline to satisfy demand for 30 to 40 days a year,” Churchill says.

That argument has seen off a few potential rivals. Kinder Morgan Inc. scrapped its proposed $3.3 billion Northeast Energy Direct project in April, after failing to sign up enough customers. The Constitution Pipeline, intended to bring Marcellus gas from Pennsylvania, has been held up because New York denied a water permit, amid concern about contamination of the city’s supply.

Solution or Stopgap?

Instead, New England relies on tankers like the BW GDF Suez Everett, a regular visitor, whose logbook reflects the surge in Yankee demand. It used to roam the world’s seas, putting in at places like Singapore, Nigeria and Yemen; this year, it’s been plying a straight shuttle between Trinidad, where it loads up with LNG, and Boston.

Engie’s terminal there looked like it was sliding into disuse a couple of years ago, but now it’s taking in more cargoes than at any time since 2012. It supplied 11 percent of New England’s gas in January.

To pipeline-builders, that’s a stopgap not a solution. They point out that New England, like other parts of the U.S., has a growing appetite for natural gas in homes and power plants, as dirtier fossil fuels like coal and oil are phased out. Gas-fired plants are providing more than half of the Northeast’s power supply this month, up from 15 percent in 2000.

Wow, I did not know it was a French utility. Now, it finally all makes sense. LOL. This is how the 13 colonies continue to thank France for their help in the Revolutionary War.

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The Mystic River or As The Native Americans Call It: The Big River River

From wiki:

The Mystic River is a 7.0-mile-long (11.3 km) river in Massachusetts, in the United States. Its name derives from the Wampanoag word muhs-uhtuq, which translates to "big river." In an Algonquian language, missi-tuk means "a great river whose waters are driven by waves," alluding to the original tidal nature of the Mystic. The resemblance to the English word mystic is a coincidence.  

And no, the "original Pocahontas, being from "Virginia" was not Wampanoag. Again from wiki:

... Pamunkey Indian Tribe, descendants of the Powhatan chiefdom, of which Pocahontas was a member, became the first federally recognized tribe in the state of Virginia.

The more recent "Pocahontas" is probably of Wampanoag heritage. Or, more than likely, not.

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Whales

Whales can be divided into two large groups: baleen whales and toothed whales. Baleen whales split from toothed whales (Odontoceti) around 34 million years ago. Hard to believe, but that would be some years before Bernie Sanders arrived on the scene. 

Baleen whales (systematic name Mysticeti), known earlier as whalebone whales, form a parvorder of the infraorder Cetacea (whales, dolphins and porpoises).

When we "lived" in Boston many years ago, I was always struck by the common root word for the Mystic River and the Mysticeti. I never did fully understand the relationship between the two if there was one. I visited the best whale museum in the world in New Bedford, MA, but I don't recall if I asked about that when I visited. If I didn't, it was another missed opportunity.

If you are in the area, the three things you cannot miss when visiting New Bedford, MA:

• the Whaling Museum;
• Seamen's Bethel; and,
• the little soup and sandwich shop that is overcrowded in the summer and empty in the winter across the street from Seamen's Bethel

 No one ever gives John D Rockefeller enough credit for saving the whales.

ISO New England Spot Electricity Spikes To Over $220/MWh -- December 18, 2017

Link here.

Too much non-dispatchable wind and solar and not enough natural gas?

For comparison: PJM -- under $23/MWh. See comments below:

For comparative purposes, the wholesale spot pricing in 13 state PJM region - found at PJM site/Data Shortcuts/Operational Data - is under 23 bucks.

This is why businesses all over the world are looking at relocating there. 

The problem lies in the bars at the right side of the graph:

Meanwhile, South Australia and Victoria will see spot prices for electricity hit $315/MWh later today. Link here.

Northern Illinois: Next Month's Electricity Price Hike Is Just The Start -- Crain's -- What Intermittent Energy Is Costing You -- May 24, 2017

Updates

May 26, 2017: another op-ed on the recent PJM auction. People can vote with their feet.

Something has gone wrong in the northern Illinois electricity market. Electric bills are rising even though demand is slowing, energy prices are low and generating capacity is plentiful. As my colleague Steve Daniels wrote the other day, Commonwealth Edison customers will see the energy portion of their bills increase 13 percent between now and October, and another 5 percent by June 2018. (Energy charges make up about half the bill; the rest is for delivery.)

What gives? Well, a lot of factors unrelated to supply and demand determine the size of our electric bills. For example, we pay the cost of a political deal approved by Gov. Bruce Rauner and state legislators to prop up inefficient nuclear power plants owned by ComEd's Chicago-based parent, Exelon. We also pay fees to support renewable power sources and charges related to "smart grid" upgrades to ComEd's electrical network.

Then there's the charge we pay to assure adequate electricity supply in a region that produces far more power than it consumes. Every electric bill includes a payment to power companies like Exelon for their promise to serve up juice when it's needed most. Capacity charges are established through bidding processes overseen by PJM, a regional power grid administrator for the District of Columbia and all or part of 13 states, including northern Illinois.

Original Post 

This could be added to the earlier PJM post from today but for various reasons, I'm posting this as a stand-alone post. A huge "thank you" to a reader for spotting it and sending it to me.

From Crain's:

The substantial hike in Northern Illinois' cost of electricity beginning next month is just the beginning of the increases for years to come.

With energy costs remaining at historically low levels, the price all consumers pay qualified power generators simply to promise to produce during the highest-demand days of the year keeps rising.

These "capacity" costs—essentially an additional reservation price embedded in the energy cost ComEd customers see in their electric bills—will approach the cost of the electrons themselves beginning in 2019 and now continuing through the first half of 2021.

The bottom line for customers of Commonwealth Edison is that the 8 percent increase they'll experience in their electricity rates over the next several months is just the first installment.

The reason: The capacity charge is set three years in advance. PJM Interconnection, the regional power-grid operator for Northern Illinois and all or parts of 12 other states to the east plus Washington, D.C., holds an auction each year at this time to establish the capacity price three years from now.

Actually it's not just "intermittent energy," but all nuclear energy.

Why I Love To Blog -- Reason #43 -- May 24, 2017

Just moments ago I completed a fairly lengthy note on PJM and recent energy requirements auction.

After finishing that, I went to twitter and this was the first link, from Bloomberg:

`Gas Apocalypse' Looms Amid Power Plant Construction Boom 

The lede:

The glut of cheap natural gas from a single, gigantic, shale basin that straddles the Northeast, mid-Atlantic and Midwest has sparked a massive construction boom of power plants. Dozens have been built in the past two years alone.

There’s just one problem: There isn’t nearly enough electricity demand to support all the new capacity. And as wholesale electricity prices plunge, industry experts are anticipating a fire sale of scores of plants in the region. Many, in fact, have already been sold along the PJM Interconnection LLC grid, the nation’s largest, encompassing 13 states from Virginia to Illinois.

“Everything in fossil fuels is for sale,” said Ted Brandt, chief executive officer at Marathon Capital LLC, a mergers-and-acquisitions adviser in Chicago. “People are bleeding.”

More:

Drawing from abundant, cheap and nearby natural gas in the country’s most prolific shale field, the new plants are adding a gigantic amount of power generation -- more than 20 gigawatts --- to a region that arguably has more than it needs. The new gas-fired plants are also coming online at a time of market turmoil, buffeted by Obama administration efficiency policies that have helped tamp down demand and by the Trump administration’s determination to keep old coal-fired plants going.

Spot wholesale prices at PJM’s benchmark Western hub slumped to an average of $28.79 per megawatt-hour last year, falling by more than half since 2008 as the shale boom took hold. Many players are exiting the market.

Wow, another memo for Jane Nielson.

The tea leaves suggest that without federal and state mandates/relief/subsidies the following industries are the canaries in the coal mine: nuclear, solar, and wind (perhaps not in that order).

PJM Provides Update On Efficiency Of Intermittent Energy -- May 24, 2017

From an earlier post:

Solar Energy: Nameplate Capacity Vs Achieved Renewable Energy Output 

The European solar energy experience:

• Germany: 78 GW / 10.4 GW (13.2%)
• Spain: 27.7 GW / 6.8 GW (24.4%)
• Italy: 27.1 GW / 4.4 GW (16.2%)
• UK: 16.7 GW / 4.0 GW (24.4%)
• France: 14.9 GW / 2.6 GW (17.3%
• Sweden: 5.5 GW / 1.2 GW (22%)
• Denmark: 5.4 GW / 1.4 GW (25.6%) 
• Rest of Europe: 39.5 GW / 7.9 GW (19.8%)

This is not news. It has been reported many times on the blog -- data sent to me be a regular reader -- that "achieved renewable energy output" vs nameplate capacity works out to about 25% at best.

Overall, the effective capacity factor in Europe for solar energy was 18%.

Does anyone know the similar number for natural gas? Answer: 87% 

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PJM

Note: an update to this PJM post is at this link, posted at 7:51 p.m. Central Time. 

The reader who sent me the link to the article linked below suggested:

a) the whole issue is a mess
b) the article is way more than any reasonable person with a life would want to know
c) the whole issue is a mess (oh, did I already say that?)

Whatever. Time to look up the definition of obfuscation.

From rtoinsider, some data points on the recent PJM auction to contract for electricity:

• wind: 13% capacity factor (CF)
• solar: 38% capacity factor (significantly exceeds results in Europe which suggests some fancy math)
• this was the first PJM auction that required year-round availability (N.B. wind and solar)
• prices have come down significantly, as much as 25% in most of the regional transmission organization (RTO) or PJM in this case
• last year: $100
• this year: $76.53
• ComEd (Illinois): $188.12 ($202.77 previously)
• Duke OH/KY: $130 this year
• MAAC: $86.04 ($100 last year) -- most of Pennsylvania
• EMAAC: $187.87 (less than $120 last year) -- EMAAC is New Jersey, Delaware, Maryland
• this is the first year in which all generation must be Capacity Performance (CP): must be available throughout the delivery year; faces stiff penalties for nonperformance (in other words, smart operators will have excess NG peakers to back-up wind (in summer) and solar (in winter)
• season demand response (DR) no longer allowed; PJM committed to 558 MW of demand reductions under price-responsive demand (PRD)
• electricity demand decreasing: PJM forecasts a 2.1% reduction in peak load
• "we have units that are at financial risk in the area that, if they retire, it could create a reliability issue" -- confidentiality restricted much more comment, but it sounds like they are talking about coal-fired plants
• PJM: for year 2020/21 has a 23.3% reserve margin; highest ever in the 14-year history of the auctioin (technically the BRA, Base Residual Auction); by regulation, requires a 16.6% reserve
• cost load: $7 billion in 2020/21 -- about the same as 2019/20
• new generation: 3,144 MW (UCAP); of that, about 2,824 MW was mostly natural gas combined cycle and combustion turbines (NG-CCCT) (think GE?)
• wind: 888 MW (6,828.5 MW nameplate capacity; 13% CF)
• solar: 125 MW (330 MW nameplate capacitiy: 38% CF)
• amount of intermittent resources offered as CP dropped by 3,400 MW from last year
• Exelon: third year in a row that TMI left the capacity auction empty handed; Three-Mile Island (TMI) now depends on Pennsylvania; TMI has not been profitable for five years

Disclaimer: I do this quickly; there will be typographical and factual errors. If this is important to you, go to the source. I understand about 2% of the entire article.

Wind: with a CF of 13%, I suppose that means that when you see 100 wind turbines, if everything was working as advertised by the wind farm developer, one would need only 13 turbines.

FERC Wants To Know Why Electricity Transmission Is So High In New England -- January 11, 2016

Updates

Later, 2:24 p.m. Central Time: see one of the comments below. I brought the comment up here for easy googling (comments aren't google-searchable):

A few weeks back I did some quick research on residential utility rates since Pennsylvania is touting their low cost as an inducement to both commercial and residential growth.

It is pretty easy and effective by just googling in 'utility rates' and the state.

Several Pennsylvania utilities charge 6 cents or less per kW.

The great commonwealth of Massachusetts - where the Attorney General, no less -- released a report denying the need for new natural gas pipelines - has rates at 18 cents/kW.

New restaurants and senior citizen residential complexes are forced to emplace underground propane tanks - to be resupplied via trucks - to accommodate their heating needs.

And then folks wonder why the roads are in such bad shape in Boston with all those propane and heating oil trucks (and recycling trucks) driving on them, needlessly, day in and day out.

Original Post

Background posts:

• this is insane: utility rates up 88% along the East Coast, August 23, 2015
• Chicagoans to pay higher utility bills going forward due to Polar Vortex, extreme winter 2013 - 2014, August 22, 2015
• the northeast electricity grid is likely to hold, February 19, 2015
• PJM wants to postpone some planned generating plant retirement next year, December 24, 2014
• court ruling -- if it stands -- means annual cost to reserve enough power capacity would rise as much as 124 percent, September 15, 2014
• PJM, an update -- RBN Energy, June 6, 2104

Now, the latest update:

The cost of moving electricity from one place to another, which appears on your electric bill as transmission, is much higher in New England than in other parts of the country, and the Federal Energy Regulatory Commission wants to know why. [Comment: LOL.]

In an order issued on Dec. 28, FERC commissioners wrote that New England transmission rates appear to be “unjust, unreasonable and unduly discriminatory or preferential” and called for an investigation. [Comment: an investigation shouldn't take long; find a mirror.]

The commissioners wrote in their order that the owners of transmission towers in New England appear to set rates with no meaningful justification and no real opportunity for them to be challenged. “The rates appear to lack sufficient detail in order to determine how certain costs are derived and recovered,” according to the commission order. “ [Comment: really?]

Rate protocols should afford adequate transparency to affected customers, state regulators or other interested parties, as well as provide mechanisms for resolving potential disputes,” the order states, adding that, “integrity and transparency ... are critically important to ensuring just and reasonable rates.” [Comment: really? In New England?]

The commission has set in motion a process that could lead to a settlement with the transmission owners and ISO-New England, the grid operator; or it could lead to hearings, legal arguments and an eventual order dealing with the transmission costs and how they are set.

Why do I get the feeling that after this is all said and done, things will be worse?

I want to know why potato chips are so expensive.

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For The Archives

At least three good articles from the December 21 & 28, 2015, issue of The New Yorker.

• "The Siege of Miami," Elizabeth Kolbert, rising seas threaten Miami
• "Negotiating the Whirlwind," David Remnick, a John "Served in Vietnam" Kerry profile; a very, very long article at eleven pages; look for a book on Kerry by Remnick in 2017
• "Drunk With Power," Kelefa Sanneh, a book "review" of The War on Alcohol, by Lisa McGirr, an analysis of US alcohol prohibition, January 1, 1920, to 1933. Memo to self: re-watch The Great Gatsby for the umpteenth time. Ms McGirr notes the same thing the narrator in The Great Gatsby noted: with Prohibition, folks began drinking more than ever. 

From the Kerry profile, so much to write about. Very, very interesting. It could be the prologue or the introductory chapter to a 6-volume biography of John Kerry (Kerry would no doubt suggest a minimum of eight volumes). The number of blind spots demonstrated by the writer, David Remnick, was incredible. But that did not detract from the article. One learns how naive Kerry really has been over the entirety of his life, and will continue well into retirement. Near the end,

"When he retires, Kerry said, he'll write a book and stay involved, 'somehow' in pubic affairs, particularly environmental issues."

Remnick does not mention that Kerry is the nation's #1 fanboy of manmade global warming (MMGW).

However Remnick does mention that Kerry and his wife have no shortage of places to hide out.

Kerry and Heinz have no shortage of residences; in addition to the houses in Georgetown (1) and Nantucket (2), they live in an eighteenth-century five-story pile on Louisburg Square, in Beacon Hill (3); in a family compound on Naushon, a private island off Cape Cod (4); in a fifteenth-century English farmhouse that was reassembled on the bank of Big Wood River, in Sun Valley (5); and on a ninety-acre farm called Rosemont, outside Pittsburgh, where Heinz spent time with her first husband (6), H. John Heinz III, ... who died in 1991.

A 15th-century English farmhouse that was reassembled on the bank of Big Wood River, in Sun Valley. Sun Valley. 

It's not just the number of homes, it's the size of the homes for a couple with no children living with them: a five-story home on Beacon Hill? Really? And a 90-acre hobby farm outside Pittsburgh? Really?
 
It's not just the number of homes or the size of the homes; it's the "locations" which sound like homes where the Princess of Monaco or where one of the thousand princes of Saudi Arabia would live: on Beacon Hill. On a private island off Cape Cod. In Georgetown. In Nantucket. Sun Valley. A 90-acre hobby farm.

And they say there is no royalty in the US. Give me a break.

It's not just the opulence for the sake of opulence, but the hypocrisy, talking about MMGW and maintaining a minimum of six homes and the carbon footprint that entails.

But other than that, a pretty good article. But as I said earlier, a lot of blind spots. By both the writer and the subject of the profile

A Reader Has A Question About Deductions And Royalties -- August 22, 2015; Polar Vortex Re-Visited

Updates

Saturday, August 29, 2015: from the discussion group --

Re: Is there a new deduction against royalties of 15%? (show original)

Well if it is 15% or what have you, it is write off on your next year's taxes, especially if U live out of state.  I did for last year and I had money coming back......

Sunday, August 23, 2015: how many folks remember this post about Chesapeake deducting transportation costs from royalty checks? Folks, I think we have the answer to the 15% deduction (unless Hess provides another explanation). A reader writes:

We are receiving royalty checks from Hess. I was told the new deduction they are showing on the checks is for transportation. In other words, they changed the gross pricing from wellhead to a collection point and show the difference as transportation.

They made the change some months ago and didn’t bother to tell the owners why.

XTO shows the gross as the wellhead price.

CLR includes a specific transportation charge each month. They all handle the pricing differently.

The deduction for the state income tax is 3.22% (code 12 on the Hess check). The severance tax withholding is 11.5%.

So, unless we get a note from Hess, we have the most likely answer. 

Sunday, August 23, 2015: a reader provides this answer which hopefully answers the original question --

I was reading your column this morning in regards to the 15% N.D. tax. I live outside N.D. and here is what the oil companies take out of my check:

• Gross Production = 5.00% 
• Oil Extraction = 6.50% N.D. 
• Withholding = 3.22% 
• Total: 14.72%

Sunday, August 23, 2015: see comment suggesting that Hess is taking 9.7% for taxes ("Tax Column"). The 15.7% is in the "Lease Other Deductions."

Later, 10:37 p.m. Central Time: a reader replies --

Keep in mind the 15% tax is a withholding tax, meaning that you will get credit for it as taxes paid in when you file your North Dakota individual tax return.  It was implemented by the state to make sure non-resident's filed their individual tax returns.  The withholding should be larger than your actual tax if you file so you should get a refund on your tax return if you have no other ND source income.

Again, I'm not sure the entire 15% is due to a withholding tax -- I don't know. The withholding went into effect in 2014 (that's accurate -- see link below) but the amount of withholding tax seems to be less than 15% but still not sure.  If the actual tax is 3.22% and withholding is 15%, a sizable refund seems to be in order.

Later, 7:57 p.m. Central Time: see first comment -- a reader suggested this to explain the 15% deduction:

The 15% is a change in ND Tax Law which requires oil companies to withhold the minimum tax on out of state owners of royalties. The change took effect July 1, 2015 I believe. 

I found the post I was looking for regarding new legislation affecting oil and gas industry but did not see the 15% deduction. Page 3 of the North Dakota income tax booklet says the withholding is only 3.22% and it began in 2014 -- see additional comments from other readers. It's possible the 15% includes this 3.22% withholding plus other deductions, but there must be much more to the story.

Original Post

 

Over at the discussion group, a reader had this question:

Is there a new deduction against royalties of 15%?

I just got my check for some new wells and just realized that there appears to be a 15% deduction showing up in the "Other Deductions" column - and last year there was never a charge in this column.

The wells are on pipelines and as far as I know, there shouldn't be flaring charges for the oil. Hess is the oil company. 

I don't have the answer to this one.

Maybe readers with minerals and royalties can provide some help. I do know that a long time ago when I followed other discussion groups there were comments about "Other Deductions." There have been new North Dakota regulations with regard to flaring (as noted by the reader) and removing volatile gases before shipping by rail.

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Chicagoans To Pay Higher Utility Bills Going Forward

Due To Polar Vortex, Extreme Winter 2013 - 2014

The Chicago Tribune is reporting:

Chicagoans will see a portion of their electricity bills rise in coming years because of new electric grid rules tied to the polar vortex back in 2013 - 2014.

The auction will increase part of the average ComEd residential customer's electricity bill in 2018-19 by roughly $82 a year compared with what customers are paying now, and by about $100 a year compared with what they might pay in 2017-18. The increases per month in the ComEd region are about two to three times greater than what some analysts had been predicting.

The auction, which is held every year and sets prices three years in advance, was the first to implement the controversial rules that were approved after the extreme winter of 2013-14, when grid operators had to scramble to keep the lights on. The rules allow power plants in northern Illinois and other states to make more money from consumers in order to shore up electricity in frigid weather.

Electricity generators and others in Chicago's regional grid system, which stretches from northern Illinois to the Atlantic Ocean, pulled in an additional $3.4 billion this year over last.

Driving prices even higher in the Commonwealth Edison region was a reduction in energy supply caused by limitations on imports, as well as Exelon's Quad Cities nuclear plant failing to be picked in the auction for the second year in a row.

The polar vortex, which brought one of the worst winters in decades to cities across the U.S., rendered nearly a quarter of PJM power producers inoperable on a particularly brutal January day that saw temperatures plummet to negative 12 degrees in the Chicago area.

At the time, some coal plants that had promised to provide electricity stopped working because their conveyor belts froze, while some natural gas plants could not obtain enough fuel because of increased demand for heating.

The new rules specifically apply to PJM's capacity market. Capacity is an industry term that generally refers to a power producer's ability to provide electricity to the grid. Power producers make money through capacity markets by committing to supply a certain amount of electricity to consumers three years in advance if needed.

There are so many story lines here, I can't even begin to go through them, but, of course, the biggest irony is the global warming myth superimposed on the polar vortex of 2013 - 2014.

Anyway, there's much, much more at the link. If you can't get to the linked story because a password/subscription is needed, google Chicagoans to be charged more for electricity in coming year.

That's how I got there after a reader alerted me to the story.

Those who live in North Dakota or grew up in North Dakota are probably re-reading the paragraph about " temperatures plummeting to negative 12 degrees in the Chicago area." Really?

From mid-January to mid-March, North Dakota can stay that cold 24/7 and much, much colder, routinely dropping to -40 degrees in February. To the best of my knowledge, REC or MDU do not have nuclear reactors to provide electricity. It's pretty much lignite, coal, and natural gas as far as I'm aware.

Yes, a  lot of story lines in that article. "Temperatures plummeting to negative 12 degrees?" The roughnecks keep working in that weather; maybe they don't frack, but they keep on drilling. And the truckers certainly continue hauling water and oil in minus-12 degree weather.

By the way, the Farmer's Almanac forecasts a colder-than-normal winter over much of the US this next winter. Previously posted.

Wow, Natural Gas Kills Nukes -- July 30, 2015, Part III

In addition to the war on coal, there is also the war on nukes. And in both cases, natural gas seems to be winning. Crain's is reporting:

Looks like Exelon's Quad Cities nuclear plant is a goner come September.

Chris Crane, CEO of the Chicago-based utility giant, which also is the largest nuclear plant operator in the country, made clear on a conference call with analysts today that he doesn't see a way to keep money-losing Quad Cities open in the absence of a state law to charge ratepayers throughout Illinois more to bolster revenues at Exelon's nukes. Exelon says that three of its six Illinois plants are losing money as wholesale power prices remain historically low due in large part to the low cost of natural gas.

Exelon has established September as the time it must decide the future of Quad Cities, and an anticipated revenue windfall for Exelon's nukes courtesy of a regional power-plant auction set for next month almost certainly won't be enough, Crane said.

That auction, conducted by regional grid operator PJM Interconnection to set the price of “capacity” paid by all utility customers to qualifying power plants, is expected to materially hike electricity rates beginning in June 2018, as well as revenues for big power generators like Exelon.

PJM has changed the rules of the auction to virtually ensure that companies will get paid more and energy prices for customers will rise. Exelon's Illinois nukes are in line to see hundreds of millions in additional revenue beginning in mid-2018 from the changes.

There are so many story lines in that article. Much, much more at the link. Times are a'changing. 

The Northeast Electricity Grid -- PJM -- Is Likely To "Hold" -- February 19, 2015

I forgot to post this earlier today. A reader sent me a link to this article which reminded me of my oversight:

Natural gas fill rate (a dynamic link): -111.

Again, at the link, scroll to the bottom of the page, and look at the graph. I find this absolutely incredible. You really have to zoom in, but the current curve is very, very slightly above the 5-year average. With the amount of natural gas that is being used in this very cold winter, this is really quite remarkable.

Which leads me to the aforementioned article that a reader sent me earlier. Last year at this time there were concerns whether the PJM grid, the electrical grid in the northeast, would "hold" this year. It has and it's another interesting story being reported in Pittsburgh Business Times:

Demand on the regional electrical grid Thursday night and Friday will probably exceed the height of last year's uber-cold Polar Vortex, but PJM Interconnection and utilities say they're more than ready to meet those needs.

The electrical grid operator PJM Interconnection expects a peak of about 140,000 megawatts of electricity to be generated and delivered to customers Thursday in the Pittsburgh region and elsewhere in its multistate footprint, much of which is being battered by either subzero temperatures, snow or both.

That's about the same level as the Polar Vortex, when there was 140,510 megawatts for peak demand on January 7, 2014, after temperatures plunged below zero in much of the Northeast including Pittsburgh. PJM expects demand to go between 1,000 and 2,000 megawatts higher around 8 a.m. Friday after temperatures plunge to the double-digits below zero, even in some parts of western Pennsylvania.

If you think it's colder than the average winter and, even than last year, you're not imagining it. February is tracking 9.2 degrees below normal per day, when the average high should be 39.3 degrees instead of the 30.6 dgrees it is so far in Pittsburgh. The average low so far in February is 11.2 degrees, instead of the normal 23 degrees. Last year's average for the entire winter was 5.4 degrees below normal.

More at the link.

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Foreign Investment Continues

Houston Business Journal is reporting:

Norway-based Yara International ASA and German chemical giant BASF SE confirmed they will build a major ammonia plant in Freeport to open in 2017 at BASF's existing property.

The companies stated that the $600 million "world-scale" plant will use hydrogen as raw material, which will reduce capital expenditures, maintenance and carbon dioxide emissions significantly. Yara and BASF said last year that they wanted to build the plant in Freeport but that they were still awaiting board and regulatory approvals at that time.

Lighting For US Highway 85, State Highway 23 Corridor Near Watford City -- December 24, 2014

Bakken.com is reporting:

State transportation officials say additional roadway lights will be installed on the U.S. Highway 85 and North Dakota Highway 23 corridor near Watford City.

The project is scheduled to be completed in mid-February.

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Ohio-Area Electric Grid -- For The Archives

ColumbusBusinessJournal is reporting:

The electric grid operator that includes Ohio lines wants to postpone some planned generating plant retirements next year to help hedge against potential winter power shortages in 2015.

PJM Interconnection, a regional transmission organization that handles electricity for 61 million Americans in 13 states and Washington, D.C., said this week it will seek to delay the idling of 2,500 megawatts of electric generation through April 2016.

"PJM Vice President for Operations Mike Kormos said the RTO is acting in light of the 22 percent forced outage rate from last January and uncertainty over the role of demand response in the wholesale markets," the publication said.

During January 2013's polar vortex cold snap, peak electricity demand led to 22 percent, or 40,000 megawatts, in forced outages of PJM capacity, compared with the average rate of 7 percent.

American Electric Power Company Inc. CEO Nick Akins has pointed to such strained capacity as a warning sign that environmental regulations starting next year, which will shut down 7,200 megawatts worth of AEP generation, will threaten reliability.

?

12:03 p.m. CDT -- off the net for awhile. Active rig count: 199.

See first comment: on further review -- it turns out that the actual count is well less than 199 due to some "double counting" or "double reporting."

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Micro-, Mobile-LNG Plant 

A reader sent this to me some time ago; I've been so busy I forgot to post it:

Dresser Rand is set to introduce into the market shortly the world's first micro, mobile LNG plant.they are calling it LNGo.

More can be found at this link.

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We've been at 199 active rigs in North Dakota for the past 72 hours. My hunch is that Lynn Helms is in McKenzie County right  now cheering the roughnecks on, maybe even in flame-resistant Carhartt coveralls and steel-tipped boots and a hardhat helping to get another rig up and running before another one comes down. I'm sure there's a phone call into CLR's Harold Hamm to delay taking down any active rigs. All we need is a few more hours. Closer than 4th down and inches in an NFL game.

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The Texas oil and gas industry is in its golden age. 

Lebas pointed out to the Energy Resources Committee that jobs in the oil and gas production sector rose above the 400,000 level last year for the first time, at an average wage ($125,000) that is three times the state average.  Tax collections from the industry via the sales and production taxes exceeded $13 billion during 2013, and will be even higher this year.

Oil and gas development also helps to create jobs in other industries.   The advent of massive new reserves of affordable domestic natural gas has in recent years led to a nascent manufacturing renaissance in the U.S.   Industries that use natural gas as a feedstock  – fertilizers, chemicals, clothing, plastics, steel, and many others – have begun to invest tens of billions in new plant and equipment here in the U.S., creating domestic jobs that had been sent overseas over the last quarter century.

For the state’s government, this Golden Age in oil and gas has also led to a bit of a Golden Age in the state’s fiscal situation.  Prior to the boom’s beginnings in 2010, Texas state government had been in a state of chronic budgetary shortfalls for about a decade.  In fact, when the legislature convened in January 2009, that shortfall was estimated to be as high as $25 billion for the following  2 year budget cycle.  In 2007, the legislature and Governor had to figure out how to close about a $10 billion shortfall.

When the legislature convenes in January of 2015, Lebas estimates that it will enjoy a budgetary surplus in the vicinity of $7 billion.  In addition to that, Lebas agrees with the Comptroller’s estimate that the state’s Rainy Day Fund will have a balance of about $8.4 billion, and that is assuming that Texas voters approve a ballot initiative in November that would allocate about $1.7 billion in Rainy Day Fund money to the Texas Department of Transportation to help pay for road improvements and repairs.   Guess how the Rainy Day Fund is funded:  via severance taxes levied on oil and natural gas.

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For The Archives: Negawatts

Chicago Business is reporting:

The decision has significant pocketbook ramifications. Eliminating negawatts to meet peak demand would tend to raise prices because it would force consumers to buy from less-efficient, higher-cost power plants that otherwise wouldn't qualify for capacity payments. The independent market monitor for PJM, which plays a market-referee role for the power grid stretching from Chicago across all or parts of 13 states to North Carolina's Outer Banks, estimated late last month that—if the court ruling stands—the annual cost to reserve enough power capacity to meet demand during peak periods would rise as much as 124 percent from today's levels.

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A Red Line "Among The Greens"

Yahoo!Finance is reporting: President Obama says that if Syria shoots an American airplane out of the air, that means WAR! So I guess we have another red line:

Apparently Obama now has a red line in the sky. He's put red lines in the yellow sand, red lines in the Black Sea, and now a red line in the blue sky. Quite artistic, he is. But he loves green the best. As in the "greens" at Martha's Vineyard.

The Great Unraveling. From The New York Times, no less. The Obama legacy. 

Outside Of The Bakken, My Number One Interest Is The PJM Story -- So Many Stories Intersect At PJM

Active rigs:

	6/6/2014	06/06/2013	06/06/2012	06/06/2011	06/06/2010
Active Rigs	194	189	215	171	121

RBN Energy: a PJM update.

Sitting within or near the Marcellus/Utica shale gas play and facing tightening environmental rules that start kicking in next April, power generators in the PJM (a large region that includes the states of Pennsylvania, New Jersey, Maryland, Delaware, West Virginia and Ohio as well as parts of Virginia, North Carolina, Kentucky, Indiana, Illinois and Michigan) and New York electricity markets very likely will burn increasing amounts of natural gas the next few years.

But with pressure to rebuild depleted gas inventories after this year’s Polar Vortex winter and the next wave of coal-unit retirements still months away, to what degree will generators in the region turn to gas this summer? In this episode in our gas power burn series, we provide a progress report on gas-inventory rebuilding and look at this summer’s coal-versus-gas dynamics in PJM and New York.

In the first episode of our series, Should I Store or Should I Burn—Will Power Burn Jeopardize Gas Injection Season—we recounted how the polar vortices in January and February (and colder-than-normal weather in December 2013) resulted in record draw-downs in stored natural gas.

By the beginning of spring, gas inventories were well below 900 Bcf. While the pace of inventory rebuilding has picked up in recent weeks (119 Bcf the week ending May 30, according to the U.S. Energy Information Administration, or EIA), the inventory level (at 1.5 Tcf as of May 30) remains a hefty 33% below where it was at the same time last year (2.4 Tcf) and 37% below the five-year average for late May (2.4 Tcf).

Note: RBN Energy posts generally disappear over time and archived for subscribers. If you want to read this story before it goes away, do it sooner, not later.

According to EIA statistics, in the summer of 2013, generators in the seven states that make up the core of PJM (Pennsylvania, Maryland, New Jersey, Delaware, Virginia, West Virginia and Ohio) plus New York consumed an average of 4.6 Bcf/d. In the gas-friendly summer of 2012 (hot weather and low gas prices), gas consumption by generators in the core of PJM plus New York averaged 5.3 Bcf/d, or 16% higher than the summer of 2013.

EIA does not provide state-by-state, month-by-month forecasts of expected gas-fired generation or gas consumption for power production, but does provide forecasts for the broader Northeast and Midwest regions, which together include PJM and New York.  But if we assume gas-fired power generation in the PJM/New York subset of the combined Northeast and Midwest this summer to be equal—at best—compared with last summer, and quite likely down a little, we might expect a summer of 2014 gas power burn in PJM/New York of perhaps 4.5 Bcf/d.

If that turns out to be the case, then that surplus gas will likely increase storage injections. But if PJM and New York have a brutally hot, humid summer and a lot of gas-fired power is used to keep pace with spiking electricity demand, significantly less Marcellus/Utica gas would be diverted to the region’s underground storage facilities.

That doesn’t mean of course that those storage inventories can’t be replenished by inflows from Gulf Coast, Rockies or Canada – the traditional gas suppliers to the Northeast.  However, a return to the summer of 2012’s gas power burn level of 5.3 Bcf/d could reduce locally produced gas injection by some 800 MMcf/d, or nearly 100 Bcf over the four-month summer period—unless all that gas demand forces gas prices high enough to spur more local gas production (and it may well). The result could be logistics challenges getting sufficient gas into NY/PJM storage from outside the region before winter.

By the way, the activist environmentalist Mr Steyer is probably very, very aware of the value of these generators to terrorists, particularly the ones who have just been released. I say that because it was noted yesterday that Mr Steyer is quite concerned about terrorist attacks on the Keystone XL North pipeline, which has not been built yet.

Go to the linked article to see the rest of the story.

Note to self: saved.