Over the last year, forward electricity prices in ERCOT have continued to climb and set new highs every month. Figure 1 shows the price of wholesale electricity for calendar years 2023 through 2026 over the last 12 months. Notice that beginning in March, the rate of price increase has accelerated with the market setting new highs, followed by a slight correction and again testing new highs in the following month. Any trader will affirm that this is not sustainable in the long term and at some point, a downward move was inevitable. That move began in the middle of June. And as shown in Figure 1, prices have fallen over the next four calendar years. The most dramatic move can be seen in the 12-month strip for calendar year 2023. On June 14, calendar year 2023 was trading at $72.87/MWh. On June 27, 2022, that same calendar strip was trading at $52.39/MWh – a decrease of 28% over a two-week period.

A Review of ERCOT's Seasonal Assessment of Resource Adequacy report for Summer 2022

The Seasonal Assessment of Resource Adequacy report, otherwise known as SARA, is a quarterly publication from ERCOT that gives its assessment of the short-term risk of Energy Emergency Alerts. This assessment looks at both load growth and peak demand forecasts, along with generation capacity and probability of availability to determine the potential for the state’s power grid to run out of power when it is needed the most. In May, ERCOT published the SARA report for this summer, with the following highlights.

An Overview of Coincidental Peak Costs by ISO

Coincidental Peak (CP) is the measurement of an electricity meter’s actual usage at the time of the regional grid’s highest demand and determining that meter's share of the entire grid’s demand. This concept of identifying a facility’s share of the grid’s total maximum demand is often used in determining the allocation of specific cost components. The specific methodology of how that equation works and which cost components it impacts varies from region to region, and often even utility to utility, and even by customer class, but the overall concept is the same. In this post, we explain how this works in each of the major, deregulated electricity regions, and detail which costs are the most impacted by this variable.

If you have been shopping for retail power in Texas, then what we are about to report will not come as a surprise. However, if you have not seen wholesale power prices in ERCOT in a few months, you should probably sit down before you continue.

On behalf of the team at 5, I am pleased to forward our market letter for the first quarter of 2022. In this issue, we continue our focus on the energy transition and the strain that this has put on the energy market. Our last letter quoted Larry Fink of Blackrock on the importance of navigating the “global energy transition.” The past quarter’s events add geopolitical risks to the navigational challenges associated with this transition.

What is the Jones Act and how does it impact our energy markets?

In January 2018 a cold snap descended across the Northeast. And in Boston Harbor, a liquified natural gas (LNG) tanker appeared on the horizon, ready to unload its cargo at the only port terminal in the lower 48 states equipped to process imported gas. The massive ship flew a red, white, and blue flag, but not that of the United States. Instead, it was the flag of the Russian Federation. The ship is called the “Gaselys” which, in the Russian language, translates to “extinguished” and it carried natural gas sourced from the Yamal Peninsula in Siberia. The owner of the LNG export terminal in Russia from where this ship set sail is Novatek, Russia's largest independent producer of natural gas. This is the same company that was put under sanctions by the US Treasury Department in 2014 after Russia invaded and seized Crimea from Ukraine. And while the company was sanctioned, the natural gas that it sold to New Englanders was not.

Why did Lubbock vote to deregulate the LP&L service territory?

Lubbock, Texas, the 11th most populous city in the state and birthplace of rock ‘n roll legend Buddy Holly, is becoming a deregulated electric territory. On February 22, 2022, the Lubbock City Council cast a unanimous vote in favor of electric deregulation, the final hurdle to transition Lubbock Power and Light (LP&L) to competitive retail electric service. LP&L hopes to fully transition service by mid to late 2023. Lubbock will now join over 7 million Texas electric consumers with the right to choose their own retail provider.

An In-depth Comparison of Winter Storm Landon Versus Winter Storm Uri

Earlier this month, the first big test of the post-Uri Texas electrical grid was blowing south across the plains. Many had legitimate concerns given the forecasts of freezing rain in West and North Texas, along with sub-freezing temperatures as far south as San Antonio. Temperatures in Houston were even forecasted to be below 30ºF for several hours in the morning on Friday, February 4th, and Saturday, February 5th.

Conserve Power and Prepare for Potential Outages

A Review of the Texas Energy Grid Performance Throughout This Winter

As February approaches, the Texas winter has included an abnormally warm December, followed by two major cold fronts throughout January. With roughly three weeks to go to the 1-year anniversary of Winter Storm Uri (the notorious Arctic blast that pushed the state’s electric grid, and the various systems that rely on it, to the brink of total collapse), it is still too early to announce the official end of winter. Texas may very well get another few shots of frigid air before the bluebonnets crop up. Still, with a very faint light at the end of the tunnel (aided by a warmer-than-average forecast for the region in February), it is a good time to review the performance of the state’s energy systems after the recent cold fronts that passed through.