ies webinar: energy outlook, q4 market intelligence update
TRANSCRIPT
Energy Grid Price Outlook & Energy Strategy Q4 2015 Energy Market Outlook December 2, 2015
Presenters: Jonathan Lee, Senior Energy Market Intelligence Manager andIan Bowman, Director, Product Management, both with Ecova
Today’s Topics
5 Key Considerations for Renewables in your Energy Strategy• What are Distributed Energy Resources? • Why consider renewables.• What do you need to know about renewables for 2016.
Energy Market Outlook• Update on major electric and natural gas market drivers.• Wholesale energy market outlook for 2016.• The top retail rate cases of 2015 and what can be expected for 2016.
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5 key considerations for Renewables in Your 2016 Energy Strategy
Why aren’t we doing more to quantify?
Prices have come down. . . Are we
ignoring financial opportunities?
What would the benefits be?
We want to be seen as a leader.
1Clarify Stakeholder PrioritiesWhy & How Renewables Fit This Organization
2 Identify Constraints Early To Reduce the Risk of Getting Stuck in Implementation
An Approach to Wrangle Priorities & Constraints:1. One slide per stakeholder ‘Persona’ with bullets stating key issues2. Plot the top few probable approaches on a ‘Materiality matrix’3. One slide states ‘Buying principles’ to fit your priorities & constraints
1. PersonasEmployee
2. Materiality Matrix3. Buying Principles
Finance
Stak
ehol
der I
mpa
ct
Impact on Organizational SuccessLow
Owned Solar shade structuresat HQ sites
National RECSWind Offtakes
Community Solar
Energy Team
Investors
End ClientsChannel Partners
3A High Renewable Goal is a Marathon2016 ITC Deadline is Not the Finish Line
4Proactively Handle Financial Risks in “Remainder of Supply”
5Where Are Opportunities Today?
Commercial Avg: $2.25
http://www.nrel.gov/docs/fy16osti/64793.pdf
Scenario: 30% ITC, Cash Purchase
Good Report from NREL in
October
Top States even without ITC
5 Key Considerations for Renewables
1) Clarify Stakeholder Priorities 2) Identify Constraints Early 3) A High Renewable Goal is a Marathon…not a sprint 4) Proactively Handle Financial Risks in “Remainder of Supply” 5) Where are Opportunities Today?
ELECTRIC AND NATURAL GAS MARKET DRIVERS2 December 2015
Bearish – Market Influencers Driving Prices Lower:
Natural Gas Production – Near record pace, continued improvements in drilling efficiency.
Natural Gas Storage – All-time high.
Weather Forecast – Strong El Niño conditions bring drier/warmer conditions to the northern U.S.Demand – Moderate temperatures lessening need for residential/commercial heating.Economy – Slowing growth in manufacturing/industrial sectors.
Bullish – Market Influencers Driving Prices Higher:
Gas-Fired Electric Generation – Power sector demand for gas at record high.Natural Gas Pipeline Constraints – New capacity alleviating some pressure, but regional markets still at risk.LNG – Sabine Pass LNG export terminal coming online late 2015, early 2016. Environmental Regulations – EPA Clean Power Plan.Interest Rate Hike – Fed interest rate hike would increase the cost of capital and potentially slow natural gas production.
Even with tremendous drop in gas rigs, production continues to grow.
Marketed gas production expected to average above 80 bcf/day in 2016.
STRONG NATURAL GAS PRODUCTIONEIA - December 2015
Drilling efficiency in the Marcellus shale region jumped
97% from 2012 to 2015.
RECORD NATURAL GAS STORAGE LEVEL
• Set a new record high working gas in storage level at 4,009 Bcf.
• Surpassed previous record at 3,929 Bcf (2012).
• Injected 2,542 Bcf during the year (9% below last year’s record pace, but 16% above the 5-year average).
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Nat
ural
Gas
Stor
age
Leve
l (Bc
f)Natural Gas Storage
Low
Peak
WINTER WEATHER OUTLOOKAccuWeather, Farmers’ Almanac, NOAA
Could this winter mirror that of 1997/1998, the second
warmest winter since 1895?
SUPPLY OUTPACING DEMAND
Gas production continues to outpace demand, which has put downward pressure on natural gas prices.
Power Sector experiencing large increases in 2015, but expected to decline in 2016
Industrial demand anticipated to see continued annual growth
EIA – December 2015
RECORD GAS-FIRED GENERATIONEIA - December 2015 The proportion of electricity generated from
natural gas outpaced the previous five-year average by 5.0%
During 2012, low gas prices led to record annual gas-fired generation at 24.9 bcf/day
2015 YTD power sector demand has averaged 26.5 bcf/day 0%
5%
10%
15%
20%
25%
30%
35%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
U.S. Electricity Generation from Natural Gas (%)
2010-2014 Avg 2015
Natural-gas fired generation surpassed coal as the largest electric generating source three months in 2015.
NATURAL GAS 12-MONTH STRIP HOVERS NEAR 14-YR LOW$MMBtu – 27 November 2015
On November 20th, the strip came within 3 cents of 2002’s low
In 2002 and 2012, the last two times the 12-month strip operated at these rare depths, price-recovery to $3.00/MMbtu occurred within 38 and 19 days
ELECTRIC 12-MONTH STRIPS NEAR 2012 LOWS$MMBtu – 27 November 2015
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Nov-15
$20
$30
$40
$50
$60
$70
$80
$90 ERCOT AVG NY ISO J PJM NEPOOL MISOPG&E NP15 W
$/M
Wh
12-Month Rolling Strip
NYMEX Correlation
ERCOT HZ 99.02%
NY ISO J 91.59%
PJM West 79.69%
NEPOOL 91.28%
MISO 81.09%
PG&E NP-15 98.61%
OUTLOOK: NATURAL GAS PRICING
In general, pricing is expected to gradually, and slowly rise through the end of 2016. The EIA anticipates Henry Hub spot prices will remain below $3.00/MMBtu through June 2016 and $3.50 for the remainder of 2016. This appears to be a reasonable cap level for settlement prices as well based on current fundamentals and trend lines.
EIA - December 2015
OUTLOOK: COMMERCIAL ELECTRIC PRICINGEIA Average Retail Rates ($/MWh) - December 2015
Jan-1
4
Mar-14
May-14
Jul-1
4
Sep-14
Nov-14
Jan-1
5
Mar-15
May-15
Jul-1
5
Sep-15
Nov-15
Jan-1
6
Mar-16
May-16
Jul-1
6
Sep-16
Nov-16
$60
$80
$100
$120
$140
$160
$180
$200
East North Central Mid-Atlantic New EnglandPacific South Atlantic South Central
$/M
Wh
Average 2016 Commercial Rates Compared to 2015:
East North Atlantic: +0.8%Mid-Atlantic: +1.7%New England: +8.8%Pacific: +3.0%South Atlantic: +1.9%South Central: +1.3%
TOP ELECTRIC UTILITY RATE CASES - 2015
NV
BG&E – Feb 2015 3.5% - 5% increase
Kansas City Power & Light – Oct 2015 9% increase
Alabama Power – Jan 2015 4.93% increase
Pacific Gas & Electric – Jan 2015 4.6% increase
San Diego Gas & Electric – Jan 2015 7% increase
XCEL Energy PSCO – Apr 2015 4.55% increase
Com Ed – June 2015 5% increase AEP PSO – Jun 5% increase National Grid RI – Jun 5% increase
ANTICIPATED ELECTRIC UTILITY RATE CASES - 2016
NV
Pacific Gas & Electric – Jan 2016 5.0% increase
San Diego Gas & Electric – Jan 2016 6.5% increase
Avista Utilities ID – Jan 2016 4.5% increase
Unitil MA – May 2016 5.6% increase El Paso Electric Company – Jan 2016
9.0% increase XCEL Energy NM– Jun 2016
7.0% increase Con Edison NY – Jan 2016 6.5% increase PPL Utilities – Jan 2016 11% increase Santee Cooper – Apr 2016 6.7% increase Wisconsin Public Service Co – Jan 2016
9.4% increase
MAJOR TAKEAWAYS WHOLESALE NATURAL GAS AND ELECTRICITY ARE HOVERING AROUND (OR
BELOW) 2012 LOWS.• Strong natural gas production continues to outperform demand for the fuel.
• EL NIÑO CONTINUES TO STRENGTHEN INTO WINTER• El Niño typically brings warmer/drier conditions to the major gas consuming North during
winter, which could reduce pipeline constraint related volatility in New York and New England. • DEPRESSED PRICE LEVELS PRESENT OPPORTUNITY FOR LONG-TERM
APPROACH TO DEREGULATED THIRD PARTY SUPPLY CONTRACTS.
• ENERGY PRICE FORECAST• Wholesale natural gas and electricity prices are expected to slowly rise into 2016.
Upside supply price risk is more likely than further downside moves. At the same time, many utilities are proposing rate case increases for infrastructure improvements and regulatory compliance.
Upcoming Webinars
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Q&A
Thank You!