Wednesday, June 14, 2017

Nuclear Power Closes Output Gap

Electricity output from nuclear power plants fell below 2016 levels in mid March, and the gap has averaged more than 1 BCF of natural gas equivalent since then.  But the extraordinary maintenance and repair season is finally wrapping up, and as of today output is back above 2016 levels.  This represents an important loss of incremental demand for natural gas at a time when it is struggling in the power sector against low aggregate demand, mild weather, renewables, and cost competition against coal.  

Tuesday, June 13, 2017

Fossil Fueled Electricity Pie is Shrinking

Renewables are driving gas out of the dispatch curve in most major power systems across the US.  Out west, solar is the driver.  Everywhere else, it is primarily wind.  Renewables are benefiting from learning curves, price advantages, legislation, subsidies, growing awareness/favorability, and supporting technologies.  I think the hope for fossil fuels was that the pie itself (load) would also be growing.  The hope for natural gas was also based on some well known advantages over coal.  


The reality is a story of victimization by success combined with economic stagnation.

Wind is the pupil at the head of the class.  It is doing so well, especially in ERCOT and Southern Power Pool.  It has seen rapid installation and a steadily rising capacity factor.  

Here is one small illustration.  With large YOY increases in wind output, Southern Power Pool is generating more non-fossil power (mostly wind).  With wind averaging almost 12GW of output for the last four days (a big new record), the running 30 day average output for non-fossil fuels has held well above the prior year average all through 2017: 

and with gas taking less market share from coal, due primarily to price differential:

It will be hard for natural gas demand to rise to the levels seen in prior years under these circumstances, especially if total electric demand stagnates, which seems to be happening almost everywhere.

It will take special weather or something more dramatic (curtailment of the nuclear fleet?) to light a blue flame under natural gas at this point.  Supply is promising to overwhelm in Q3-4 as well (maybe that won't materialize?), so the $2's may be the new home for Henry Hub.  LNG is ramping up but it's slow and a known quantity.  Supply disappointment is most likely to come in the form of temporary delays, so a price catalyst may be lacking for a while.

Thursday, May 25, 2017

Pacific Northwest Hydro Generation Poised to Overwhelm

Hydro output in Bonneville Power Admin has averaged 12GW this month, against last year's 10GW.

June output last year dropped off quickly, averaging below 9 GW.  This year could dwarf that, with river levels high and forecasts for demand low in the West.  Power will be moving south to California, and the little bit of gas fired burn that is still in the dispatch curve in CAISO will fade further unless heat moves in quickly.

Tuesday, May 23, 2017

Coal to Gas Switching in MISO Region Fades as Nuclear Reactors Return to Service

Weekday market share for natural gas has been strong over the last six weeks in MISO, but the single biggest factor driving that is nuclear capacity factor.  Nuke capacity factor has been well below the prior year for April and May, with average output around 200 GWHD this year, vs 280 last year.

As nukes ramp back up, gas should fade from the mix.

Friday, May 19, 2017

Nuclear Power Output Begins Recovering, But Not Quickly

Nuclear power output rose to an 80.9% capacity factor today, but is running more than ten points below the prior year.  That equates to about 2 BCFD of natural gas replacement value.  This extreme differential should only persist for another two weeks or so, when the gap will begin to close with the end of maintenance season.