March 19, 2024

Risk Management Blues

V.P. of Competitive Power Ventures (CPV) Speaking at TEPA in Philly

PJM Regulatory Review

PJM Regulatory Review

  • The Governor of Pennsylvania, Josh Shapiro, introduced a carbon cap and trade program that would replace the current Regional Greenhouse Gas Initiative (RGGI). While still requiring legislative approvals, the plan’s goal is to foster the growth of renewable investments by establishing specific clean energy %’s for diverse resources like wind, solar, hydropower, battery storage and even modular nuclear reactors.
  • PJM and FERC were found to have violated the filed rate doctrine when they changed the rules for how the 2024/2025 Base Residual Auction (BRA) after it had already posted initial results. These findings were announced in a unanimous decision by the United Staes Court of Appeals for the Third Circuit. Market participants are still waiting for comments and next steps guidance from PJM.

Market Drivers

Energy Market Update

  • Domestic natural gas producers continue to throttle back current production and reduce future drilling and/or delay completions which has helped lower production by about 3.5 BCF/D to its current average of approximately 102.5 BCF/D. Haynesville production in particular looks to be declining a bit more rapidly than originally expected. This is down from December’s all time high of 106 BCF/D and will help reduce the possibility of storage congestion later in the year if maintained.
  • Oil prices have rallied back above $80/BBL as strong global demand, tensions in the Middle East and no US Strategic Petroleum Reserve releases have helped keep the market biased to the upside.
  • Weather-adjusted natural gas fired power demand is expected to remain robust throughout the balance of the year supported by low prices.
  • Freeport LNG has extended the outage at one of its liquefaction trains as it continues to investigate the on-going operational issues that has plagued the terminal. Train 3 was expected to re-start in March, but this has now been pushed out at least one month thus leaving more supply available in an already over-supplied market.
  • Plaquemines LNG is still targeting Q3/2024 for the initial phase of commercialization and perhaps the first cargo of the super-chilled gas to be exported. The timing could help mitigate the possibility of storage congestion which could be an issue in late Q3 given current inventory balances.

Forward Pricing

Renewable Energy