Webinar Analysts: Regional Power Outlook, Natural Gas Fundamentals and a Weak La Niña
During Constellation’s November 2021 Energy Market Webinar, the Commodities Management Group (CMG) featured the outlook for this winter and was followed by an overview of the primary electric power markets by region with an emphasis on the near and mid-term price drivers in those markets.
Constellation’s Chief Meteorologist, Dave Ryan, spoke to the winter forecast that is driven by a “weak La Niña” condition in the upper atmosphere. Ryan noted that during past weak La Niña years, western Canada and the upper Midwest and Northeast experience below-normal winter temperatures while the southeast U.S. remains above-normal on the warm side. Ryan did note that New England and the Northeast generally may have a winter that is colder and stormier than in the recent past.
Natural Gas Fundamentals
Next, the team moved into natural gas market fundamentals, noting that in recent weeks, production of gas has ticked up a bit from a mostly flat performance in 2021. Additionally, natural gas storage levels have attained the five-year-average brining some near-term relief to a gas market that was moving up fast in September and early October. Exports of LNG and pipeline gas are expected to remain at elevated levels well into 2022 as Asian and European prices are providing high net-back incentives for exports.
Regional Power Updates
The outlook for electric power prices in New England for this winter was discussed by Brandon Fong. An emphasis was put on the potential for winter weather to drive pricing to the upside as the region may find itself short of natural gas on peak winter days. Fong noted that the marginal cost of power from oil-fired generation or LNG imports could be quite high, thereby driving the overall market should sustained cold winter weather tax the generation stack.
Britt Lyons covered the New York power market, citing the shutdown of the Indian Point nuclear generating station as a potential source of electric power supply stress should there be a cold winter. The gap in power supply per the nuclear shutdown will be met mostly with gas-fired generation potentially placing more demand for gas upstream of New England and again posing a scenario for support and potential upside to power prices pursuant to weather.
Bill Sticka covered the PJM and MISO markets emphasizing the risks that a shortage of coal could potentially have in the market this winter. Coal storage levels are down 35% year-over-year prompting PJM to request coal-fired generators to hold back if stockpiles reach a certain level. This could act as a source of pricing upside if winter weather forces coal generators to curtail output.
Keith Poli covered the ERCOT market where new rules for reliability are in place for power generators. ERCOT has put in place a number of new rules and tests for winterization of power-generating assets to ensure reliability should a winter event repeat itself in Texas. The officers of generating companies are required to sign off on the measures that ERCOT has mandated to make sure that a widespread outage does not repeat itself.
Greg Kosier wrapped up with a review of the outlook for the California power market taking note of the constraints in the pipeline system and natural gas storage facilities potential impact to winter pricing. A good start to the snowpack in the Pacific Northwest may ease the market in that region in the spring should hydro levels improve year-over-year.
We invite you to join us for our next Energy Market Intel Webinar on December 15 at 2 p.m. ET where Constellation energy experts will continue to offer detailed and timely updates related to the energy market, economy and weather, and much more each month. Register by visiting www.constellation.com/marketintelwebinar.