Natural Gas Rally, LNG, Offshore Wind
Energy Market Update 2024: Week 1, brought to you by Acumen.For More Updates Like This, Subscribe Here!
Natural gas has started the year with a nice rally with February contracts rallying over 10%. The weather models for the US are slightly more blue with potential for colder weather to be pushing down from Canada while some winter storms make their way up from the US Southwest. Coincidentally, Northwest Europe has been getting slammed with some of the coldest air it's seen in a long time and there doesn't seem to be a break in the forecast. Infact, according to a Reuters story, Finland grid operator Fingrid has called for curbing of electricity consumption as morning and evening peaks are reaching eight-year highs. The operator states, "there is sufficient power capacity, but today and for the rest of the week it is very important that all electricity users participate in consumption flexibility". Fingrid's peak load is 15,000 MW which would be roughly the size of ISO-NE on an average winter day.
Along with some colder weather, estimates for US production for the first week of 2024 are projected to be off roughly 3-4% from the highs of November which is still well above year ago levels. This news might be helping offset the EIA storage data that showed a draw of 14 Bcf for the week ending December 29 vs. and estimated withdrawal of 50 Bcf. Normally, that would be a rally killing number, but garnered almost no attention Thursday morning.
USA! USA! USA! The US is back standing on the center step taking the gold for 2023 on LNG exports. Ok, that might be a little dramatic, especially since it was expected as Freeport was back online after a 2022 fire, which was the only reason Qatar took the title in 2022. 2023 exports rose roughly 15% to 88.9 million metric tons over 2022. December exports were 14.9 Bcf/d which is at US capacity.
We mention this in the context of a theme that says the growth in LNG capacity will create some parity between the European and US natural gas markets somewhat mirroring what the supertanker has done with oil prices around the world. As a reminder, EIA's projections have capacity moving to 25 Bcf/d by 2027, which is almost a double from today.
2023 was a tough year for offshore wind projects, and it doesn't look like the start of 2024 is bringing meaningful change. Wednesday, Equinor and BP announced that they reached an agreement with the New York State Energy Research and Development Authority (NYSERDA) to scrap a 1200 MW project called Empire 2 to be located southeast of Long Island. Empire 1 (800MW) and 2 had just cleared federal permitting. Equinor stated the economic circumstances, given interest rates, inflation costs, and supply chain issues, were going to make the project unviable as it stands. This isn't an outright pulling the plug, but given the current economics, it's hard to see an offtake agreement that would make this viable.
There was a sliver of good news on the offshore sector. Vineyard 1, off the coast of Massachusetts, delivered its first power to the grid this week. The delivery was delayed a few days by some weather and extra precautions. The project flowed 5 MW through one turbine and is expected to get to the expected opening five turbines early in 2024. While not a totally smooth start, the offshore crowd will take it.
NOAA WEATHER FORECAST
DAY-AHEAD LMP PRICING & SELECT FUTURES
RTO ATC, PEAK, & OFF-PEAK CALENDAR STRIP
DAILY RTO LOAD PROFILES
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