Western Hydropower Surplus Fading Quickly

The record snowfalls and subsequent runoff in the Pacific Northwest has led to massive electrical output this year, but the effect is wearing off suddenly and quickly.

In June, the surplus generation over 2016 was equivalent to about 1 BCFD of natural gas.  But June's average hydro output of 12.8 GW has fallen to 8.6 GW as of yesterday, and should generally decline further throughout the month.  

This should reduce exports to California, which would in turn increase thermal generation there.  Thermal output in CAISO has been badly lagging prior years up to now:

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.  

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.  

However. 

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.

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.

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.

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.  

Nuclear Power Capacity Factor Rising But Not Quickly

Nuclear power reactors are returning to service, but they will need to ramp up quickly starting tomorrow if they are to close the near 1 BCFE gap with May 2016:

MISO Natural Gas Power Burn Loses Ground to Coal

So far in May, gas is taking a 28-38% market share against coal's 62-72% of thermal generation.  Unfortunately the curve is steeper than last May also, so gas takes a lower share of lower load days, and load has been light.  To make matters a little worse, a temporary opportunity to increase thermal output due to nuclear outages will go away soon.  

Another Giant Leap Forward for ERCOT Wind Power Generation

ERCOT released its Demand and Energy Report for April 2017 this week, and wind power posted another record, up 47% over last April, and within 25% of both Natural Gas and Coal in total generation.  It averaged about 9 GW for the month:

Meanwhile, natural gas lost market share to coal in ERCOT:

Nuclear Power Output Lagging 2016 by 1 BCFE

As the maintenance and refueling season approaches an inflection point this week, output from reactors is currently about 1 BCF-gas-equivalent  below last year.  As the graph indicates, reactors were rapidly returning to service in May 2016.  The same directional trend is evident this year, month-to-date.  

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. 

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:

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:

Nuclear Power Output Stabilizes, Near 2016 Levels

As we move through refueling and maintenance season, nuclear power output levels should continue to drop, but the outages have not outpaced 2016 by much so far.  April should see larger year-on-year differentials, at least that's what is expected.