CPV RETAIL BLOG

March 19, 2024

Flexibility and optionality are critical parameters to focus on when building a portfolio whether you are on the buy side or the sell side. If you were not a believer of this prior to February 24, 2022, you certainly are now that the war in the Ukraine is entering its 3rd year. (Some would argue that the war started more than a decade ago but let’s stick with the narrative.)

Risk Management Blues

Flexibility and optionality are critical parameters to focus on when building a portfolio whether you are on the buy side or the sell side. If you were not a believer of this prior to February 24, 2022, you certainly are now that the war in the Ukraine is entering its 3rd year. (Some would argue that the war started more than a decade ago but let’s stick with the narrative.)

Even though volatility has subsided dramatically since post-invasion peak prices occurred in September of 2022, the volatility decline was primarily driven by two consecutive warm winters which allowed the worst-case scenarios envisioned for Europe to be avoided. Betting on weather as a risk management tool is not recommended given all the different products available to end-users to manage price risk.

Establishing the goals of your procurement strategies even if it is simply “lower costs” helps frame the discussion with your prospective partners. We do a lot more listening than talking at CPV Retail so we can develop these product offerings from your own ideas and for your own unique circumstances.

Natural gas and electric power are the two most volatile commodities in the world and require a disciplined focus to properly manage. Let the team at CPV Retail utilize our collective expertise and years of experience to construct a flexible procurement program for you!


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

Matt Litchfield, Vice President, External and Regulatory Affairs, of CPV will be joining a panel of experts to provide an update on PJM’s legislative and regulatory market on March 21. We are looking forward to seeing Matt. Hope to see you there.

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

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