The Kobiona Monitor
Volume 3 / Number 2 February 23, 2021
Kobiona’s leadership has enlisted the help of our Market Intelligence Desk to craft this monthly publication to share major market dynamics impacting future power and gas prices. As every client’s situation is unique, we encourage you to review market movements with us to decide whether any action on your part could serve to lower your future costs or avoid known, coming increases.
February on Track for Top 10 Coldest in History
After December and January ranked among the warmest in history, many thought the U.S. might make it through the winter of 20/21 unscathed. Mother Nature had other plans and, as of this writing, February 2021 is on track to land in the Top 10 Coldest Februarys since 1950, currently in slot #8. Except for some blocking and lingering Arctic air drifting down from Canada impacting the west, it appears most of the country will head into March under fairly typical conditions.
Harsh winter weather through most of February across the U.S. has driven natural gas reserves down to just 2.5% above the five-year average. The EIA’s February 18th report reported stocks at 2,2819 BCF, a mere 7 BCF (2.5.%) above the five-year average of 2,224 and 105 BCF below where inventories stood this week last year. Last week saw the largest withdrawal of the season to date at 237 BCF.
By now you’re probably saturated with Texas energy talk. The situation down there is both heart-breaking and troubling, to say the least. The historic storm shone a light on what many would argue were known deficits in proper weatherization of generation and transmission. Among other problems, ultimately energy generation of every source – from natural gas to nuclear units to coal and wind turbines ceased functioning. Unlike other parts of the country, ERCOT functions as an island so energy from neighboring states cannot be pumped into its grid in the way New York and New England sometimes back each other up in severe conditions.
The TX quagmire matters, regardless of where your business resides. Why? Because the situation rewrites the natural gas balance sheet, if you will, for the entire country. Natural gas production, which had been fairly steady through mid-month at 90 BCF/day, dropped to 69 BCD/day during the storm due to freeze offs, as just one example. Overall natural gas inventories will likely end the season far below projections, likely under both the 5-year average and last year’s levels. Here are a collection of articles we think capture the situation from different and interesting angles:
WSJ: https://www.wsj.com/articles/dont-blame-wind-for-texas-electricity-woes-11613500788?mod=series_winterstorm https://www.wsj.com/articles/texas-freeze-power-grid-failure-electricity-market-incentives-11613777856?mod=searchresults_pos17&page=1
New England Capacity Auction (FCA 15) Clears Higher, But Below Expectations
Preliminary results from ISO-NE’s annual auction, setting forward capacity prices for June 1, 2024 – May 31, 2025, took place the second week in February. Most analysts had expected compensation for generators to clear higher than the year prior.
We saw zonal separation for the first time since FCA 9 (impacting 18/19): CT and WCMA cleared at $2.61/kW-Month; NH, ME and VT cleared at $2.48/kW-month; SEMA, NEMA and RI cleared at $3.98 kW-month.
If you have questions regarding how this event impacts your future pricing and budgets, please reach out.
Source: ISO-NE and Constellation
Questions? For those tasked with procuring power and gas for the first time — or the tenth time — the industry can seem overwhelming with densely-technical and sometimes conflicting information. We welcome your questions on how to apply our observations, as well as your feedback on The Kobiona Monitor. Please share how we can make this publication more useful by calling us on 844-209-7972, or contacting us via email, firstname.lastname@example.org.