Answering Your Biggest Energy Market Outlook Questions

Constellation’s recent webinar on the fall energy market outlook saw a strong attendance from energy and facilities managers across the country. It also prompted some important discussions and raised thought-provoking questions.

(If you missed the webinar, you can watch a recording here.)

Because you asked, our energy management experts rose to the challenge with answers. Here are seven questions and answers from our recent webinar.

1. How does Constellation get the data from customer interval meters?

Constellation receives customer usage data that is used to measure peak load contribution (PLC) from utility billed data that is collected from interval and monthly meter reads.

2. Do peak load contribution programs provide simply advance notification of peaks? What are other components of the service?

Constellation’s market experts monitor the grid 24 hours a day, seven days a week, and predict what peak hours will be. We will send out a notice a day ahead of a possible peak day or a same day of notification that morning based on weather forecast and ISO load forecast.  So far this summer, Constellation has correctly predicted the highest year-to-date peak load days in the NYISO, ISONE, PJM and ERCOT markets. Peak Response only includes a peak load contribution reduction.

3. You noted there has been a 60 GW reduction in coal generation in the past year. What percentage of total coal generation does that represent?

The 60 GW of retirements represent about 18 percent of installed coal capacity or 330 GW as of 2012.  Many of the coal units that retired were under 400 MW of capacity and over 30-40 years in age with a capacity factor of between 30-40 percent. This low of a capacity factor meant they ran approximately one-third of the year, primarily in winter and summer. The reduction is significant because it means energy producers are shifting to natural gas and more renewable sources of energy, which will help us meet long-term goals but has the potential to impact short-term reliability and price volatility.

4. Regarding the new gas generation replacing retiring coal plants, are you saying that the horror stories we were hearing about the awful effects (apart from the consequential unemployment) of all these coal plants closing was totally overblown?

The new gas fired generation capacity that replaced retiring coal was a partial factor in gas fired generation demand that was higher on average this summer by approximately a little over 2 Bcf/d.  While there is enough gas supply to meet power generation demand needs in summer months, natural gas demand peaks in winter months.  As we saw with the Polar Vortex in 2014, gas demand nationally got to +130 Bcf/d.  As the table below from EIA illustrates, total U.S. demand has been averaging 72 Bcf/d the past several weeks.

The retirement of coal units that are replaced in part by gas fired units could lead to price volatility in winter months when gas demand peaks and available pipeline capacity could be limited.

Source: EIA  (http://www.eia.gov/naturalgas/weekly/#tabs-supply-2)

5. Will the presidential election have a long-term impact on the energy industry?

Some of the potential long-term impacts of the election on the energy industry will be related to EPA regulations.  Currently the Clean Power Plan is before the U.S. Court of Appeals and likely will be appealed to the Supreme Court.  The next president’s Supreme Court appointment will likely have a key impact in that decision.  Other areas that could be affected are goals for renewable energy development, wind and solar production tax credits and drilling for oil and natural gas on federal lands.

6. Can we use backup generators?

If you are only participating in Peak Response, you can run a backup generator. If you are also participating in Demand Response, there are some contractual restrictions based on the contract. Running a backup generator reduces your peak load contribution (PLC) cap tag, which limits your ability to perform in Demand Response the following year. The lower your PLC, the less you can enroll in DR. Every year in Peak Response would lower your Demand Response opportunity progressively, as long as you hit the peaks.

There is ‘add-back’ if a DR event is called during a 5 CP hour.  The customer cannot capture a reduced PLC and DR participation.  The ISO would add back the reduction from a PLC perspective.

7. Could I please know how many hours of downtime you guys ask to be able to catch the NYISO peak this year?

So for this year, the summer to date peak load for NYISO was August 11 at 32.076 MW.  Constellation issued a notice for the hours ending at 3-6 p.m. Constellation had also issued notices for July 14, 15, 18, 22, 25 and August 12 for similar hours. The NYISO will finalize the peak day in the fall when final load data is made available.

Still have questions? Our energy management experts are here to help! Contact your Constellation representative to learn more about strategies you can use to manage energy costs in the coming year or request a consultation today.