Energy Management

The Terms All Energy Managers Should Know

As part of their role, energy managers often required to stay apprised of the latest market and weather factors impacting energy prices.

Natural gas storage and production levels, oil and gas imports and exports, and how many days in a year that consumers have had to heat or cool their homes (known as degree days)…these are only a few important factors (of many) requiring monitoring in order to get a feel for energy prices now and in the short- or long-term.

You might be asking, “is this relevant to electricity buyers?” The answer is yes – power prices generally mirror natural gas prices, so gas prices are relevant to electricity purchasers, too.

The Energy Information Administration (EIA) — a statistical and analytical agency within the U.S. Department of Energy that collects, analyzes, and disseminates independent and impartial energy information — sums up the major factors affecting supply and demand:

Major supply-side factors affecting prices include:

  • Amount of natural gas production
  • Level of natural gas in storage
  • Volumes of natural gas imports and exports

Major demand-side factors affecting prices include:

  • Variations in winter and summer weather
  • Level of economic growth
  • Gas-fired power generation burns

Constellation market analysts monitors these supply and demand factors on a regular basis and share their insights in our Energy Market Intel Webinars and in our Weekly Gas Storage and Weekly Energy Market Update email communications.

In order to help clear up some of the most confusing terms in the industry, get a sneak peek of some of the definitions from our new Energy Terms to Know webpage below. These terms will give you more insight into the inner-workings of the energy market, allowing you to walk away a more informed consumer.

Power & Gas Terms

Bcf – Billion cubic feet – standard unit of measurement for natural gas supply/demand – 1,000,000,000 MMBtu = 1 Bcf.

MMcf – Million cubic feet – standard unit of measurement for natural gas supply/demand – 1,000,000 MMBtu = 1 MMcf

Spot Market – A financial market in which financial instruments or commodities are traded for immediate delivery (or “on the spot”).

Forward Market – A financial market in which financial instruments or commodities are traded for future delivery.

Injections – In reference to underground natural gas storage, when physical natural gas is stored underground to be pulled out and used later.

Withdrawals – Refers to physical natural gas being removed from underground storage to supply the market with additional inventory during a time of high demand (i.e., during winter).

Liquefied natural gas (LNG) – Liquefied natural gas is composed of methane and some mixture of ethane used to convert natural gas to liquid form for ease and safety of storage transport. It is cooled to approximately -256⁰ Fahrenheit so that it can be transported from countries with a large supply of natural gas to countries that demand more natural gas than they produce.

Pipelines – A key method for moving natural gas from producing regions to consumption points.  There are interstate pipelines and intrastate pipelines that face different regulatory requirements.

Production – Natural gas production is measured in one million cubic feet (MMcf)/day or a billion cubic feet (Bcf)/day.

Storage – Measured in cubic feet; physical natural gas is stored underground to be used later.

Weather Terms

Degree Days – A key component of measuring the energy needed to heat or cool residential homes and businesses is a degree day. The starting temperature is 65 degrees F. A heating degree day (HDD) is a measure of how much the daily average temperature (average of the maximum and minimum) is below 65⁰ F. A cooling degree day (CDD) is how much warmer the average temperature is above 65⁰ F. Heating and cooling degree days can be population-weighted (i.e., PWHDD or PWCDD).

ENSO – Acronym for El Niño/Southern Oscillation; the interaction between the atmosphere and ocean in the tropical Pacific that results in a variation between below-normal and above-normal sea surface temperatures and dry and wet conditions over the course of a few years, particularly those in the central Pacific or region 3.4.

El Niño – Above-normal temperature anomalies greater than a half degree Celsius or more for a period of 90 days.

La Niña – Below-normal temperature anomalies greater than a half degree Celsius or more for a period of 90 days.

To continue learning about energy to help you to make smarter energy choices for your business, check out our new Energy Terms to Know page, which includes definitions and 101 videos.

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