Webinar Analysts: El Niño Winter, Economic Outlook and PJM Updates
During the November Constellation monthly Energy Market Intelligence Webinar, Constellation’s Commodities Management Group (CMG) covered a range of topics, including the weather outlook for December and an overall El Niño forecast, the state of the economy, natural gas storage and production and power fundamentals
Weather Outlook
Chief meteorologist Dave Ryan provided an update on the weather, including the impact of El Niño on winter in North America. He mentioned that there is a high confidence that there will be a strong El Niño this winter, which generally means warmer overall temperatures. Dave also discussed the drought and annual water outlook for the West, with California expected to have another mild winter year with some storminess.
All Things Economic
Chief Economist Ed Fortunato reviewed current economic conditions, including the impact of inflation. He mentioned that while the Federal Reserve is trying to get back to a 2% inflation target, prices have inflated by 10% from a pre-Covid baseline. Ed also introduced his new recession predictor, which currently shows a low chance of a recession in the U.S. economy in the next three months, but the odds increase as time goes on.
Supply and Demand Fundamentals
CMG industry fundamentals experts analyzed natural gas production and storage, as well as renewable energy certificate markets and capacity in PJM. Natural gas storage is currently at a healthy level, with an end of season outlook that is solid. The team additionally addressed the impact of freeze-offs on natural gas production and state mandates on renewable energy certificate markets, as well as the PJM capacity market and upcoming auctions.
The panelists examined ERCOT, which is facing reliability and resource adequacy issues. During this past summer, ERCOT load was above 80 GW for a large part of July through early September and dispatchable generation was severely tested in the early evening hours on low wind days. “Net load” is a metric customers will have to be aware of in the coming years in ERCOT, CAISO and Northeast markets. This summer illustrated the need for more dispatchable generation. On November 3rd, Texas voters approved Prop 7 authorizing the state and PUCT to create the Energy Fund, which is a $10 billion fund to build more dispatchable generation for reliability in Texas through low-interest loans at 3%. This is in response to the fact that there is no formal capacity market in ERCOT like there is in PJM.
The panelists later addressed the global situation, including the impact of conflicts in the Middle East and Russia-Ukraine on energy markets. They mentioned that while there is currently no clear resolution to these conflicts in sight, there is still ongoing volatility in energy prices related to these conflicts. Further escalation could continue to have a significant impact on energy markets.
Market Trends and Temperature
The team concluded the webinar by looking at forward power charts, the “Market Temperature,” and other factors affecting the energy market.
We invite you to join us for our next Energy Market Intel Webinar on Wednesday, December 20th at 2 pm ET. Constellation energy experts will offer detailed and timely updates on factors affecting energy prices such as weather, natural gas storage and production, and domestic and global economic conditions. Register by visiting www.constellation.com/marketintelwebinar.
© 2023 Constellation. The offerings described herein, if applicable, are those of either Constellation NewEnergy, Inc. or Constellation NewEnergy-Gas Division, LLC, affiliates of each other. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. The views, thoughts and opinions expressed in the webcast by each participant belong solely to the speaker and not necessarily to the speaker’s employer (including Constellation Energy Corporation or any of its affiliates), organization, committee or other group or individual. Constellation does not make and expressly disclaims any express or implied guaranty, representation or warranty regarding any opinions or statements set forth herein. Constellation shall not be responsible for any reliance upon any information, opinions, or statements contained herein or for any omission or error of fact.