Energy Market Update

March 2021

Edge Insights energy experts are constantly monitoring energy market conditions in order to help ensure the best possible pricing and contract terms for our clients.  The following report is a snap shot of current conditions intended to help our clients stay informed of market dynamics.

Market Overview:

The recent ‘Polar Vortex’ caused enormous damage in Texas  and  constrained natural gas delivery for a good portion of central U.S. .  

The primary problem in Texas is that to avoid federal regulations the Electric Reliability Council of Texas (ERCOT) that runs the electric grid in Texas, is not connected to the national power grid.  This prohibited ERCOT from relying on neighboring states to supplement its crippled electric generation during this crisis.  Because this grid does not usually deal with extremely low temperatures it was not winterized, like is done in the northern part of the country.  Additionally, wind is a big part of Texas’ electric generation, and freezing precipitation crippled the windmills.  Oil / gas wells were frozen and could not produce, and with a severely reduced source of fuel or wind, the electric generators were not able to keep up with the demand.  The Federal Energy Regulatory Commission (FERC)) is reviewing and working with ERCOT and other federal agencies to address and find solutions for the future.  It will take some time to work out the legal and insurance ramifications of this event.  The dip in the Polar Jetstream this far south was quite unusual.  Climate activists are suggesting that increased temperature departures across the globe can cause this dip in the polar Jetstream.

This extreme event has reduced natural gas storage levels below the 5 year average.  This will support higher market rates and avoid the very low prices we saw in 2020.  Above normal winter temperatures in 2020  financially hurt many producers, so any period of supply and demand balance gives them a chance to pay down debt and possibly open new wells over time. 

Across the country we are seeing above average temperatures forecasted for March, which will reduce demand on natural gas, at the same time LNG exports are also slowing.  Storage levels are expected to return to a normal range by spring.

This chart shows the natural gas NYMEX Futures historic to current market average strip prices.

March’s gas index price settled on February 24th at $2.854/Dth, up 9.4¢ from last month.

This chart shows the 12 month average wholesale electric pricing on PJM Western Hub. 

Natural Gas Storage Update: 

The storage report for week ending February 26th shows a withdrawal of 98 Billion Cubic Feet (Bcf).  This puts levels at 8.8% below the 5-year average by 178 Bcf, and 277 Bcf below last year at this time.  Current percentage of total capacity is at 42.2% at 1,845 Bcf.

Energy news:  ALTERNATIVE ENERGY COMPANIES ARE A HOT INVESTMENT ITEM

Alternative energy companies that utilize hydrogen as a fuel source rather than fossil fuels, are making their investors a lot of “green” over the past 6 months.  Stock prices on alternative energy companies are up sharply.  Quite simply a fuel cell converts the chemical energy from a fuel such as hydrogen, and an agent such as oxygen, into electricity.  There are many applications for fuel cells, including portable power plants, cogeneration,  cars, buses, and forklifts, among others.  The technology is impressive, but many challenges remain before this technology will be widely accepted and make sense from a financial standpoint.  Fuel cells are less efficient than other types of electrical generation, and they are far more expensive.

In the run-up to the 2020 election and after the election ended, with Joe Biden taking over for Donald Trump,  the prevailing thought is that “green energy” will become a much larger part of the energy scene globally.  The thinking is that the government will be much more likely to support these types of companies, both financially, and with steeper regulations on traditional energy providers, which would make alternative energy more competitive.    Let’s take a look at some of companies in this area and what they do:

Fuel Cell Energy (FCEL)  Stock price as of 2/25/21: $17

(from Yahoo finance):  FuelCell Energy, Inc., together with its subsidiaries, designs, manufactures, sells, installs, operates, and services stationary fuel cell power plants for distributed baseload power generation.

This company has been in existence since 1969 and is based in Danbury CT

Plug Power (PLUG)  Stock price as of 2/25/21: $45

(from Yahoo finance):  Plug Power Inc. provides hydrogen fuel cell turnkey solutions for the electric mobility and stationary power markets in North America and Europe. It focuses on proton exchange membrane (PEM) fuel cell and fuel processing technologies, fuel cell/battery hybrid technologies, and related hydrogen storage and dispensing infrastructure.

Plug’s main market at present is forklifts.

This company has been in existence since 1997 and is based in Latham NY

Ballard Power (BLDP):  Stock price as of 2/25/21:  $28

(from Yahoo finance): Ballard Power Systems Inc. engages in the design, development, manufacture, sale, and service of proton exchange membrane fuel cell products. The company offers heavy duty modules, fuel cell stacks, backup power systems, and portable power/ unmanned aerial vehicles (UAV), and material handling products

This company was founded in 1979 and is a Canadian company.

Disclaimer:  Edge Insights is in no way offering any advice or opinions on investing in any of these companies.

Market Opportunity:  

 The out years on the futures market are good, so longer term deals for electric and natural gas should be considered if renewing contracts.

The market opportunity is a ranking of how we perceive timing of contract purchases for natural gas or electric.

Information provided by the Energy Division of Edge Insights, Inc.

Note:  Our clients have the option of purchasing 100% of their electricity from renewable sources, such as wind and solar.  Speak to your Edge Insights representative for more information.

Benchmarking electric and gas consumption will let you quantify your energy efficiency efforts.  Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

February 2021

Edge Insights energy experts are constantly monitoring energy market conditions in order to help ensure the best possible pricing and contract terms for our clients.  The following report is a snap shot of current conditions intended to help our clients stay informed of market dynamics.

Market Overview:

The current market is experiencing a normal upswing from winter as energy investors patiently wait for some direction resulting from the new administration’s policies.  We see the potential for offsetting fundamentals.  Supporting higher prices are the renewing of environmental regulations, which would increase costs for producers and pipeline companies, high demand for LNG exports and growing need for piped gas to Mexico.  Support for lower prices would come from a variety of things, such as continued high production of dry natural gas, reduced fossil fuels for electric generation, and increased use of renewables.  Natural gas will continue to be the bridge fuel for the future as shown in the chart (right) just released EIA.Gov’s Annual Energy Outlook for 2021. 

The growing renewable energy used for electric generation (left) is dramatic, especially with solar.  As electric demand grows, this should more than offset the reduction in coal use, and eventually a reduction of natural gas use.  Click HERE for the complete article:

Note that these charts do not show predictions, but modeled projections based on currently known assumptions and methodologies.

The natural gas NYMEX Futures historic to current market average strip prices are below.

February’s gas index price settled on January 28th at $2.76/Dth, increasing 29.3¢ from last month.

This chart shows the 12 month average wholesale electric pricing on PJM Western Hub. 

Natural Gas Storage Update: 

The storage report for week ending January 29th shows a withdrawal of 192 Billion Cubic Feet (Bcf).  This puts levels at 7.9% above the 5-year average by 198 Bcf, and 41 Bcf above last year at this time.  Current percentage of total capacity is at 61.5% at 2,689 Bcf.  

Energy news:  Why does the U.S. need to continue importing and exporting crude oil

Foreign oil dependence is more complicated than you may have realized.  Crude oil comes in many forms, from heavy to light, and various sulfur contents, the lower content referred to a sweet crude.  The lowest quality of crude is from tar sands… what the Keystone XL pipeline would have provided.  The U.S. does not produce enough of the types we need to satisfy our refined final product needs, so…

  1. We must import crude oil of different qualities to optimize production, given its mix of refining capacity. 
  2. The U.S. has more light crude oil than it can handle domestically, while this same quality of oil is in high demand in Asia Pacific and other regions that mainly have simple refineries (without conversion capacity).

We will be using oil for quite a while into the future, and will not be able to stop importing and exporting oil and It’s refined products.  Excerpts provided by API.Org

Market Opportunity:

Short term pricing has recently spiked up on cold temperature forecasts.  Long term electric and gas contracts are fair and expected to improve over the coming weeks. 

The market opportunity is a ranking of how we perceive timing of contract purchases for natural gas or electric.

Information provided by the Energy Division of Edge Insights, Inc.

Note:  Our clients have the option of purchasing 100% of their electricity from alternative sources, such as wind and solar.  Speak to your Edge Insights representative for more information.Benchmarking electric and gas consumption will let you quantify your energy efficiency efforts.  Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

January 2021

Edge Insights energy experts are constantly monitoring energy market conditions in order to help ensure the best possible pricing and contract terms for our clients.  The following report is a snap shot of current conditions intended to help our clients stay informed of market dynamics.

Market Overview:

December Short Term Energy Outlook by the Energy Information Administration (EIA.Gov) posted this:

“In 2021, the forecast natural gas share (for electric generation) declines to 34% in response to a forecast increase in the price of natural gas delivered to electricity generators from an average of $2.44/MMBtu in 2020 to $3.38/MMBtu in 2021 (an increase of 39%). Coal’s forecast share of electricity generation falls from 24% in 2019 to 20% in 2020 and then returns to 24% in 2021. Electricity generation from renewable energy sources rises from 18% in 2019 to 20% in 2020 and to 21% in 2021.

The nuclear share of U.S. generation remains close to 20% through the forecast period.”

Natural gas along with electric prices peaked at the end of October, but have seen a substantial sell off and increased volatility since then.  The extended temperature forecasts are showing peak heating demand during late January, and again in late February. Natural gas storage levels are expected to fall below the 5 year average in concurrence with demand and with help from increasing LNG exports. U.S. natural gas production is lagging behind last year by 3.2 MMBtu’s per day, and may continue well into the latter half of the year.  Going forward, we are watching to see how domestic consumption will be affected as we begin to see results from the COVID-19 vaccine.

The natural gas NYMEX Futures historic to current market average strip prices are below.

This chart shows the 12 month average wholesale electric pricing on PJM Western Hub. 

January’s gas index price settled on December 28th at $2.467/Dth, dropping 42.9¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending January 1st shows a withdrawal of 130 Billion Cubic Feet (Bcf).  This puts levels at 6.4% above the 5-year average by 201 Bcf, and 138 Bcf above last year at this time.  Current percentage of total capacity is at 76.1% at 3,330 Bcf.  
(note: current level is showing as a small square on week one)

Energy news:  

U.S. renewable energy consumption surpasses coal for the first time in over 130 years

In 2019, U.S. annual energy consumption from renewable sources exceeded coal consumption for the first time since before 1885, according to the U.S. Energy Information Administration’s (EIA) Monthly Energy Review. This outcome mainly reflects the continued decline in the amount of coal used for electricity generation over the past decade as well as growth in renewable energy, mostly from wind and solar. Compared with 2018, coal consumption in the United States decreased nearly 15%, and total renewable energy consumption grew by 1%.  (Read full article on EIA.Gov)

Market Opportunity:

Short term pricing has recently dropped and the wholesale market is good, however long term electric and gas contracts have been the best choice for the past few months. 

The market opportunity is a ranking of how we perceive timing of contract purchases for natural gas or electric.

Information provided by the Energy Division of Edge Insights, Inc.

Note:  Our clients have the option of purchasing 100% of their electricity from alternative sources, such as wind and solar.  Speak to your Edge Insights representative for more information.

Benchmarking electric and gas consumption will let you quantify your energy efficiency efforts.  Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

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