Southern Power Pool: Natural Gas Rapidly Gained Market from Coal in April

For multiple reasons, SPP has been using substantially more gas and less coal this month.  Even though total generation, and thermal generation, are not up but down, the dispatch curve is suddenly favoring gas again.  Gas achieved its highest 1-day share in two years yesterday, at about 45% of the thermal power market.

As the heat begins to build, this trend will be important to track.  Last year gas was cheap.  Very cheap.  Until mid-summer.  This year, it seems that coal's price advantage isn't helping (In SPP specifically), so when that YOY comparison fades in June, will gas make new utilization highs?

Changes in MISO Natural Gas Market Share

Further to a previous post, higher gas prices and lower overall power demand have shifted the gas demand curve, and steepened the slope.  At lower aggregate demand, gas market share of carbon based power generation is much below 2016:

Nuclear Power Plant Outages Continue at Nearly 1.5 BCFED Over 2016

Nuclear power plant refueling and maintenance season continues with nearly 1.5 BCFED more power offline than last year at this time.  Outages should bottom out in the next two weeks as plants return to service for summer cooling season.

MISO Natural Gas Demand Struggles, as Total Demand Also Struggles

Total load in MISO this month remains anemic.  The lowest loads of the year, and the lowest April average load in many years, is holding down fossil fuel potential.  So far this month, there has not been a single day with load above the April 2016 monthly average!

With gas also losing market share to coal on price, usage of this hydrocarbon is down about 15% MTD. 

Natural Gas Inventory Builds Too Much

Today's natural gas inventory build of +54 BCF was above expectations, but gas didn't sell off too much, just down 2-4 cents.  

Inventories are high, but production has been stubbornly low.  Everyone is awaiting an expected surge in output, but projections continue to be revised lower, or rather 'later'.  

Exports have been price supportive, and imports from Canada, though high, are at the expense of Canadian storage inventories so it can't go on indefinitely.  

Losses of power burn market share to coal have been in line with consensus expectations, on the order of 3 BCFD so far this shoulder season.  Gas demand has been severely hurt by western hydro output, but helped by nuclear outages, both of which should persist for months (hydro more so).  

Natural Gas Storage VS Average

Here's another perspective on natural gas storage.  This is the relationship to the 5 year storage average.  Last year on this date, we were at the 5 year max, 679 BCF above the average.  This year, the anomaly has risen to 263 BCF from zero at Jan 1.

The grey region is the 5 year min-max deviation, which is revealing in that it shows how well the supply-demand balance guides inventories toward equilibrium by the end of injection season in November:

Alberta Gas Production Rises in April, Averaging 0.2 BCFD Above April '16.

Whether seasonal factors and timing, or a fundamental shift is taking place, TC Nova pipeline receipts in April are up from Feb and March, and are now above 2016 levels.

Output normally declines in May, and we will soon see whether the same pattern prevails in 2017.  If the higher rig counts are translating into more molecules, it could reverse the inventory trend we have seen since January:

Southern Power Pool: Natural Gas Market Share Declines in April (vs April 2016)

In SPP, a few bad things are happening for natural gas.  Total demand for carbon fueled power generation is down by about 2GW in April, and gas has lost market share to coal, from around 36-40% of thermal output last year, to 27-31% of thermal output this year.

The two primary culprits are (1) increased wind output and (2) higher natural gas prices.


Here are the poly lines for April '16 and '17, showing market share for natural gas:

The daily demand for carbon fueled power, with a 30-average line, for 2016 and 2017:

MISO: Gas Market Share of Thermal Generation = Down from 42% Last April to 34% This April

Much higher natural gas prices this year have made gas less competitive against coal in the MISO region.  MISO publishes excellent daily fuel mix statistics, unfortunately they also show that total load is down about 7% so far in April.  Most of that generation loss has been offset by declines in wind and nuclear output, but on average the wind will blow again, and nuclear power will return from maintenance.

Here's total output vs last year, for the last six months.  Load has been below the prior year in all but one month (December 2016).

ERCOT Reports March Fuel Mix

ERCOT's Demand and Energy Report for March 2017 was released yesterday.  It shows natural gas gained against coal:

But it also shows that the thermal power pie continues to shrink:

One big reason, besides low/no demand growth, is wind.  A big new generation record was set in March:

Texas Drilling and Permit Activity: Drilling Steady, Permitting Way Up

Completions have not yet accelerated, but permitting really took off in March, per the Texas Railroad Commission Drilling, Completion, and Permitting Report for March 2017:

Permits issued in March rose to 1,233 from about 930 in each of the three previous months (Mostly Oil permits, fewer Oil+Gas permits, and very few Gas permits:

Only 63 gas wells were completed in March.  Oil activity was much greater, at 475 new well completions, but still well below March 2016 (876 completions).

CONUS Winter a Bust. Now Almost 600 HDD's Below Normal

With winter drawing to a close in the continental US, the final verdict is very, vary warm.  Since Oct 1, we are nearly 600 HDD's below normal, and if next week's forecast holds, we will be on par with last year's warmth.

Nuclear Capacity Factor Drops Sharply, Requiring 1.5 BCFD+ of Extra Gas Power Burn

Substantial new outages over the weekend have resulted in a decline of over 3% in nuclear power output from Friday, and it equates to over 1.5 BCFD of gas replacement vs this date last year: