Q3 2015 Energy Market Outlook Energy Prices and Market Intelligence Q3 Update September 10, 2015 презентация

Update September 10, 2015

Presenter: Jonathan Lee, Sr Energy Market Intelligence Manager, Ecova

Gas Production, Storage: Near-record pace.
Power Sector Demand: Helped keep the downside limited.
Summer Recap: Near the 10-year norm.
What’s on the horizon?
Natural Gas Pipeline Projects: Impact to volatility and basis prices.
LNG Exports: First LNG export facility coming online late 2015.
PJM Capacity Performance: FERC approved PJM’s new capacity structure.
2016 Budget Influencers
Downside Pressure: Gas production, healthy natural gas storage, weak winter demand, pipeline capacity additions.
Upside Potential: Gas-fired generation growth, LNG exports, EPA regulations, unexpected weather, reliability enhancements.

ENERGY MARKET INTELLIGENCE

2015 than 2014
Dry gas production expected to average around 74 bcf/day in 2015
Continued growth seen through 2016

STRONG NATURAL GAS PRODUCTION

EIA - September 2015

Boom largely due to shale production in PA, OH, and WV, which accounted for 2.4% of U.S. production in 2008 and now accounts for nearly 25%.

15 bcf per day in 2015.

in industrial demand due to chemical plant additions

FACTORS FOR INCREASED PRODUCTION

EIA - September 2015

prices
Potential reduction in associated gas output
LNG market less attractive
Interest rate hikes
Environmental regulations

RISKS FOR SLOWING PRODUCTION

EIA - September 2015

high.

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 – September 2015

natural gas outpaced the previous five-year average by 5.1%.
During 2012, low gas prices led to record annual gas-fired generation at 24.9 bcf/day
EIA predicts 2015 annual power sector demand will average 25.2 bcf/day

West was hot and dry, while the rest of the country was near normal.

Increased power sector demand limited the decline in natural gas prices.

SUMMER 2015 RECAP

NOAA, AccuWeather; EIA - September 2015

Fall, while the is West, North, and East Coast are projected to be above-normal for much of the time.

NOAA, AccuWeather: September 2015

Fall Outlook

through the winter, which could help CA drought, and keep the North drier and warmer this winter.

El Niño patterns, as shown below, primarily reach maximums during Dec-Feb and typically persist for 9-12 months.

EL NIÑO WINTER IMPACT

NHC/NOAA; AccuWeather: September 2015

by 2018

3.1 Bcf/day of expansions in 2014 to benefit Northeast
4.9 Bcf/day of expansions planned for 2015 to benefit Northeast
New England to see additional pipeline capacity in 2016

- September 2015

One of the longest pipelines in the U.S., measuring 1,700 miles long.
Zone 3 fully bi-directional.
Only U.S. pipeline directly linking Rocky Mountain and Appalachian supply basins to consumers in the Midwest.

9.6%

Trading Channel

performance, but that will likely lead to increased costs for consumers.

Restructuring of PJM’s capacity market due to deteriorating resource performance and ongoing change in generation mix
Stems from the poor generator performance during the price spikes in January 2014
Phased In, but initially effective June 2016, with transitional auctions for planning years 2016/2017 and 2017/2018. Base auction for 2018/2019 to include
2016/2017 transitional auction results showed increases between 23%-63% from base auction (still below 2015/2016)

Plan will cause natural gas and renewables to become a much bigger part of the U.S. generation mix.

Clean Power Plan goal to reduce carbon dioxide emissions from power plants
Carbon pollution from power sector set to be 32% below 2005 levels by 2030. (An increase of 2% from last year’s proposal)
States must submit initial plans to EPA on how they will meet the standards by Sept 2016 and final complete plan by Sept 2018
Must meet progressive goals starting 2022 through 2029. (Two year delay to start of program, originally 2020)
Coal expected to fall to 27% of generation mix by 2030, while renewables expected to double to 28%

influencers can vary quite a bit by region. Know the potential risks in each market and tailor your energy procurement buying strategy to meet your budget needs.
#2: ENGAGE STAKEHOLDERS EARLY AND OFTEN
Communicating the fundamental factors affecting regional energy markets can help reduce surprises when they occur (i.e. extreme winter of 2013/2014). It also develops further communication around energy procurement strategy, potential building enhancements, and cost-cutting initiatives.
#3: TRACK VARIANCES FOR COST AND USAGE
By tracking variances in cost and usage, you can better understand what’s driving the variance. Also analyze multiple levels (portfolio, regional/division, site) to identify trends or isolate poor performers.
#4: ADJUST AND COMMUNICATE AS NEEDED
The energy markets are in a constant state of change. Identify fundamental shifts in the market to evaluate whether the current strategy needs to be adjusted.

2012.
Strong natural gas production weighing heavily on wholesale natural gas and electricity prices
POWER SECTOR DEMAND FOR NATURAL GAS TO INCREASE
With around 14,000 MW of coal-plant retirements scheduled for 2015, gas-fired generation will continue to grow and potentially introduce more volatility.
EL NIÑO STRENGTHENING 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
NATURAL GAS PRICE FORECAST
Wholesale natural gas prices are expected to slowly rise into 2016. At this point, upside risk is more likely than further downside moves

MAJOR TAKEAWAYS

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8th, 2015 at 11a PST