Weekly Power Outlet US - 2024 - Week 37

Five years to the date of shutdown, September 20, 2019, it has been announced that Three Mile Island has a new lease on life as Microsoft is going nuclear. Microsoft and Constellation have signed a 20-year purchase power agreement that should begin in 2028. For its part, Constellation says it will spend $1.6 billion to get the 835-MW plant (unit 1) operational. While terms of the deal have not been released, MSFT is touting the clean aspect of nuclear as much as the energy they are procuring for their future data center load. Unit 1 was shut down for economic reasons so the investment by both Constellation and Microsoft shows another example of the expected load demand anticipated by compute power.

As an aside, Unit 2 of Three Mile Island made famous by the 1979 accident is in the process of being decommissioned. At the time of the shut down in 2019 of Unit 1, it was estimated that the decommissioning process could take another 60 years.

Over the past year we've been involved in a handful of public speaking events where we talk about the electricity market and where we think volatility could come from in the years to come. One of the pillars of our argument is the physical grid with inadequate transmission and the transition of baseload generation. We've often cited MISO as a bright spot regarding being at the forefront of trying to address transmission with their Long Range Transmission Planning (LRTP) to be rolled out over four tranches. In 2022, MISO announced tranche 1 which included 18 projects totaling $10.3 billion. This past March, MISO announced studies for Tranche 2 with a total price tag between $17-23 billion. Tranche 2 drew some immediate criticism regarding the scope and price tag. Amongst the critics was MISO's independent market monitor Potomac Economics. Their argument, in very basic terms, was MISO might have its thumb on the scale of worst-case scenario and the price tag might be a little high to address realistic needs. This week, in a MISO Board of Directors subcommittee meeting, some of those arguments became interesting. RTO Insider wrote a fantastic summary of the meeting so instead of us trying to do it justice, we are including the link. Just for a primer, below is a screen shot. David Patton is the IMM representing Potomac Economics.

This week natural gas players from around the world are gathering in Houston for Gastech. The event bills itself as the "largest energy exhibition and conference for natural gas, LNG, hydrogen, climate technologies & AI (of course: editorial), energy manufacturing, and low carbon solutions". The list delegates and industry experts is impressive so it's always good to hear some of the comments coming from the show. Our source is the excellent website Gasoutlook.com. As expected, LNG was a major topic and there were some debates about the growth rate and possibly competition with wind and solar. One of our ongoing thesis points is that LNG will eventually become a commodity that trades on a world market like oil as more import/export facilities, along with ships, come online. We found this comment reported in a Gasoutlook.com story interesting.

The EIA storage report showed a build of 58 Bcf last week which was slightly higher than the estimates of 53 Bcf. The market barely took note as futures ticked slightly lower and then rebounded. As we've noted in the past, storage is now within the 5-year envelope. While that might be encouraging to some bulls, we can see from the chart below that the last two Septembers were much more in line with the average and lower in total storage. It's all about the cold this winter.

NOAA WEATHER FORECAST

DAY-AHEAD LMP PRICING & SELECT FUTURES

RTO ATC, PEAK, & OFF-PEAK CALENDAR STRIP

DAILY RTO LOAD PROFILES

COMMODITIES PRICING

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