ERCOT 

There are two words that describe the reaction of most commercial clients shopping for electricity in Texas: Sticker Shock. Figure 1 shows how the wholesale price of electricity for calendar years 2025 through 2028 has traded over the last four years. In ERCOT, electricity markets were at all-time lows of approximately $20/MWh in the months immediately before the pandemic. Over the last 48 months, power prices in ERCOT have more than doubled as wholesale prices are now more than $50/MWh for calendar years 2025 through 2028. The steady rise of electricity prices in ERCOT is largely driven by concerns that there is not enough supply to meet growing demand across the state. This demand is coming from power-hungry data centers used to support the rapid growth in AI, technology, and cryptocurrency mining in addition to manufacturing and population growth throughout the state. While substantial amounts of electricity from new solar and wind-generating assets have come online, those intermittent resources cannot be counted on to operate on demand. These are some of the dominant factors that have pushed up wholesale electricity prices in ERCOT.  

W. Edwards Deming, the father of Total Quality Management, famously stated,"Without data, you're just another person with an opinion." Deming was instrumental in using data and statistical process controls to make better business decisions. When it comes to energy markets, there is a data deficiency and a lack of price transparency for most clients. Without adequate energy market data, many energy-related decisions are made on speculation, inadequate or inaccurate information that can lead to actions taken on biases and false assumptions.Level5 is a proprietary platform built entirely in-house by 5’s industry-leading development team. For clients, it serves as a data repository, usage analysis tool, and supercharged market analysis engine. Since 5 is a data-driven company, Level5 forms the foundation of our energy advice and is at the core of our customized energy strategies. 5 firmly believes that better energy decisions are formed from better energy data.  

Hurricane season officially began this month and in a report at the end of May, NOAA predicted between 17 and 25 named storms for the period between June 1 and November 30. According to NOAA, “The upcoming Atlantic hurricane season is expected to have above-normal activity due to a confluence of factors, including near-record warm ocean temperatures in the Atlantic Ocean, development of La Nina conditions in the Pacific, reduced Atlantic trade winds and less wind shear, all of which tend to favor tropical storm formation.” It is only three weeks into hurricane season and Tropical Storm Alberto has already pounded Mexico and parts of Texas with torrential rain and flooding. Many clients ask how hurricane and tropical storm activity affect energy prices. In the past, significant hurricane activity in the Gulf of Mexico had a major impact on natural gas prices. In the 1990’s, hurricane tracking was one of the most important fundamentals energy traders watched. The destructive capabilities of a powerful hurricane in the Gulf of Mexico heading towards the large production regions (Corpus Christi TX to Mobile AL) would cause drilling and production platforms in the Gulf to evacuate their personnel, typically requiring the well to be closed. This would result in a dramatic reduction in the amount of natural gas produced for a week or more if there was substantial damage to the platforms. As shown in Figure 1, the highest natural gas prices in the last thirty years occurred in the wake of Hurricanes Rita and Katrina in 2005. Both storms caused major disruptions to the production and flow of natural gas.   

New York, like many states across the country, has a standard by which certain qualifying renewable generation assets are awarded one Renewable Energy Certificate (REC) for each MWh of electricity delivered to the grid. RECs provide two main functions to the market:

One of the most common questions clients ask when purchasing electricity or natural gas is, “How much money am I going to save?” This is a reasonable question and for many years, savings could be realized because energy prices had been trending lower. Figure 1 shows how the NYMEX has settled over the last 31 years. This chart shows that natural gas hit its peak in 2006 in the wake of Hurricane Katrina and Rita where gas prices approached $14/Dth. 

Bradley University is a prestigious private university located in Peoria, Illinois. Known for its commitment to academic excellence and community engagement, Bradley University offers a comprehensive range of undergraduate, graduate, and professional programs in diverse fields of study. 

As trusted energy advisors, 5 manages Bradley University’s energy procurement strategy and execution, including Bradley University’s participation in demand response. As 5 sought additional value for Bradley, our experts identified an opportunity to achieve energy bill savings through participation in community solar. 5 orchestrated a community solar offtake agreement for Bradley University that will add new renewable energy to Illinois’s power grid. Our team performed an invoice analysis to calculate the savings opportunity for Bradley, vetted multiple solar developers, helped present the business case, and negotiated contract terms to guide Bradley to a successful agreement. 

PEORIA, Ill., March 5, 2024

5, a leading energy and sustainability advisory firm, orchestrated a community solar deal between Bradley University and Nexamp that will help to add renewable energy to Illinois’ power grid. Bradley University will be the anchor subscriber on four community solar projects developed by Nexamp in Illinois in the next two years. The projects stand to produce over $115,000 in annual cost savings for Bradley University, and over 26,000 MWh of renewable electricity to advance Illinois’ renewable energy goals.