Weekly Power Outlet US - Week 3

Weekly Power Outlet US - Week 3
Photo by American Public Power Association / Unsplash

March weather in January, the WEF, and the ERCOT Capacity Market.

Energy Market Update Week 3, brought to you by Acumen.

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January continues to rage on like it’s early March which has led the natural gas and electricity markets to continue to trade accordingly. Any attempted rally in natural gas is quickly faced with immediate pressure to sell. Storage is no longer an issue, and production continues to be strong which leaves only weather to drive the market. There may be some chill on the horizon.

In case anyone missed it, the yearly get-together in Davos, Switzerland called the World Economic Forum (WEF) is underway. Regardless of feelings about the event or group of attendees, the event usually does create news or comments worthy of mentioning. Joe Manchin spoke at one of the events. While not wanting to rehash all his comments, there are some worth noting. His tone was somewhat apologetic to those in Europe because the US couldn’t help more to meet their energy demands given the war. Imbedded in his comments was the hint that the US will double its ability to export LNG in the future. While this isn’t a totally new concept, it is more confirmation of our theory that natural gas prices will continue to trade on a world market much like oil. This undoubtably will add to volatility in gas and electricity going forward.

Finally, the Texas Public Utility Commission voted to essentially implement a capacity market in ERCOT. The term “performance credit mechanism” has been used to describe the new program. We will continue to watch this development. In the meantime, we can’t help but notice the irony as NERC/FERC are kicking off investigations into the failures of capacity assets in PJM last month.

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