Login

Category: Politics

Five Years and Fifty Blogs Later

Posted on by m.usman@jjtestsite.us

Choice! Energy Management’s blog, The Burn, is an extensive and diverse selection of posts on all the latest energy news including technology, politics and business. Our goal is to open pathways for productive conversation, as well as examine Choice’s place in the world of energy.

Where has the time gone? Five years ago, Choice! Energy Management began publishing monthly blogs to help our clients, future clients, and anyone interested in energy market current events stay informed. We have written about things as small as how to read your commodity supply contract, to things as complex as global trade affecting domestic energy markets. Our light-hearted themes have ranged from Joe Dirt to Alex Trebek (may he rest in peace), crossing Sporting Events, TV Shows, Movies, and Music. As we look back on our first fifty blog posts, we reflect on the good, the funny and the outrageously accurate predictions.

The Good

Taking complex topics and boiling them down in to blogs is no easy task. Whether explaining complex market dynamics, or presenting new technologies in the field of energy services, our blogs strive to make things simpler. Below are two of our favorite blogs that we feel exemplify our succinct style.

DOMO ARIGATO, MR. ROBOTIC PROCESS AUTOMATION: In the theme of the classic Styx song, we present an in depth look at what sets our proprietary platform Choice! Data Connect apart from other energy invoice and data collection platforms.

ERCOT DISASTER: MYTHBUSTERS: We look to the popular 2000’s TV show MythBusters, for a way to analyze the ERCOT power market. We debunk divisive and untruthful myths in the immediate aftermath of Winter Storm Uri in Texas.

The Outrageously Accurate

The mission of The Burn is to start conversations in the energy world. We don’t often tip our hand on our market intelligence, but do like to point out fundamentals and trends that could ultimately affect energy market prices. Below are a couple of the blogs that panned out just the way we foretold.

STRANGE TIMES: NATURAL GAS STORAGE LEVEL: Published 10/16/2018, this Stranger Things themed blog highlighted the bullish market fundamentals that eventually led to the highest NYMEX natural gas prices we have seen in the last 7 years. NYMEX Prompt traded at $3.20/MMBtu at the time of this blog, and a month later skyrocketed to as high as $4.92/MMBtu.

ENERGY PURGATORY: SOCAL: Published on 8/22/2018, this blog came fresh off the Natural Gas and Power market chaos in Southern California at the time. We suggested hedging against “purgatory-like” price uncertainty in the region. Everything that can go wrong is still going wrong in this market, and prices continue to climb today. 

The Funny

Energy markets and energy industry services are not the most humorous topics to write about. Nevertheless, we persist, adding in what we perceive to be top shelf, grade A humor; chasing that dream of being the first energy consultants on Saturday Night Live. Read below and judge kindly.

STRATEGERY: An SNL skit themed dive into why Choice! is distinguished from the rest when it comes Strategic Procurement of Natural Gas and Electricity.

HOLIDAY MOVIES AS NATURAL GAS FUNDAMENTALS: A nostalgic Christmas blog comparing six classic movies to natural gas market fundamentals. The blog is informative for those who know nothing about energy markets.

We look forward to writing more energy market blogs in the future and appreciate you as an audience. Energy is a complex topic and as witnessed by recent blackouts and pipeline outages, it is growing in importance, deeply impacting our lives and businesses every day. It is our passion and mission at Choice! Energy Management to provide the knowledge and services necessary to keep your business doing what it does best. For more information on how we can best serve you, please reach out to a Choice! consultant today.

ERCOT Disaster: MythBusters

Posted on by m.usman@jjtestsite.us

By: Chris Amstutz

The winter storm of the century in the energy capital of the world has frozen all preconceived notions of the Electric “Reliability” Council of Texas. As the snow melts and the plumbing repairs begin, the analysts at Choice! Energy Management find solace in aiding Texans through these difficult times. With any natural disaster, people want answers and to know how their interests will be protected in the future. This has given way to the blame game and many myths about the Texas power market. To help address these questions we look back to the long running, scientific TV series MythBusters. The causes of the ERCOT disaster are innumerable and it is with an open mind that we dissect the situation.

Myth (noun): A widely held belief not factually proven; an exaggerated or idealized conception.

Myth #1: “ERCOT should have been able to prevent the power outages with the 7 day notice they had of the impending weather event.”

Answer: Busted

This disaster has shown the weaknesses of the ERCOT grid, especially in the winter. Generation assets in Texas did not have the infrastructure upgrades to prevent malfunction during the cold, known as winterization, and this is likely the main reason for failure last week. Winterization was an expense spared by generators since a deep freeze does not occur often, helping Texans to enjoy lower power prices. Like the Titanic heading for the Iceberg (see the MythBusters confirm that Jack could’ve survived with Rose here), the 7 day forecast was not enough time to prepare the grid.  ERCOT operates under the assumption of a ten-year normal winter (which will certainly change now), and this event was likely a one-hundred-year event.

Myth #2: “One single energy generation source (renewable, fossil fuel, or nuclear) was to blame for the blackouts.”

Answer: Busted

This popular political talking point (everything is political these days), has been thrown around a lot. To this we point to the graphic below. Yes, the wind turbines were frozen and yes, natural gas and coal did have the largest absolute decreases in generation available, but pointing to half the truth is not the truth. In all reality, the frozen precipitation had huge impacts on every generation source. From pre-freeze levels, it is estimated that natural gas lost 15-20 Gigawatts (GW’s) of generation, not including the 15 GW’s that were offline for seasonal maintenance. Wind Generation fell from 5-10 GW’s pre-freeze to 1-2 GW’s during. Coal lost 6 GW’s during the freeze, and even the incredibly steady nuclear baseload lost 25% (1.3 GW’s) due to the fear of insufficient water supplies. Future ERCOT conversations will now involve adequate winterization, and a repricing of all assets not protected from winter weather and sufficient reliability.

Myth #3: “This was a black swan weather event so the chances that prices get this crazy again are tiny.”

Answer: Busted

A black swan event is defined as something “unpredictable” but this weather event has occurred before in ERCOT. The Christmas cold of 1989 was the most similar event to this, with colder absolute temperatures but not lasting as long. The grid also came close to blackouts in the 2011 cold event. When you also look at demand side issues, like the fact that Texas has added 1.5 million homes since 2011 (the most of any state by 600k homes), and 62% of these homes require electricity for heating, it compounds the issue. We have discussed power market volatility in our past blogs here, here, and here. With less reliable, non-winterized generation on the grid, ERCOT will remain susceptible to price spikes, and higher futures prices will be needed to steady the market.

Myth #4: “Forces outside of Texas wanted the blackouts to occur, and sabotaged Texans in some form.”

Answer: Busted

While not a widespread myth we have seen this claim thrown around. There is no reason to believe at this time that willful negligence or any other human induced action in the short time leading up to and during the event caused the power outages. From fake snow conspiracies (see here), to rumors of Department of Energy sabotages, there has not been any evidence of at this time. It is true that several members of the ERCOT board (including the now former chairman) reside out of state, but as of today all of these members have resigned due to criticism.

The last two weeks have certainly been difficult. Consumers are very much justified in demanding that reliability of the grid is prioritized to prevent an event like this from happening again. However, everyone is quick to forget the enormous amount of savings the ERCOT market structure has provided Texas in past years. The critics of the free-market ERCOT system are now louder than ever, and the future of this system is unknown. Opportunity will favor the informed, as the implications shake out from this event. The analysts at Choice! Energy Management take pride in helping our clients prepare, and look forward to helping more Texans navigate this ever-changing energy world.

New Year Same Crazy: Regulatory Changes for Energy

Posted on by m.usman@jjtestsite.us

By: Chris Amstutz

Whoever started the idea that 2021 was going to be a more simple, normal year should be run out of town. *Insert more 2021 vs. 2020 meme’s here*.  New COVID strains, new politicians, and continued social uneasiness is making it feel like the 14th month of 2020. Add the fact that complex energy market regulations are back in the headlines and the chaos only grows. We have seen many stories floating around regarding the recent Executive Orders passed by the new Biden Administration affecting energy markets. As with all changes of the guard, it is out with the old and in with the new. We are here to dispel some of the fake news, and lay out what the facts are pointing to at this time.

Despite what your great uncle says on Facebook, Choice! Energy Management takes no stance of morality or political affiliation on any of the issues discussed, and merely hopes to shine a light on events that influence energy market prices.

Executive Order (EO) 13990: Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis

This EO was signed on the first day in office (Jan. 20) and most notably takes aim at cancelling the Keystone XL Pipeline. This notorious pipeline was set to transport 800,000 barrels of oil per day from Alberta, Canada to Nebraska. This infrastructure project is a lightning rod of symbolism, as it has now spanned 3 administrations worth of attention. Its cancellation is seen as a large blow to the Canadian oil industry, as well as the Gulf coast petrochemical industry. It is seen as a big win for environmentalists and Native Americans whose land is near the pipeline’s path.

EO 13990 also repeals more than 100 EO’s from the Trump Administration on climate and energy infrastructure policies. Many of the EO’s from the Trump administration were in place to repeal notable regulatory orders from the Obama administration (Cross State Air Pollution & Clean Power Plan ). The orders now being reinstated will impose limits and increased regulation on pipeline construction, pollution, drilling, emission standards, and power generation fuel sources.

Executive Order(EO) 14008: Tackling the Climate Crisis at Home and Abroad.

This Executive Order is the beefiest of them all on the energy front, and entails many climate and energy policies promised on the campaign trail. The order most notably directs the Secretary of the Interior to impose a 90-day moratorium on new oil and natural gas leases on public lands/waters (though in a way this does break Biden’s other campaign promise to not ban fracking). A few highlights of the implications of the drilling ban are:

  • The area most affected by the ban is the Permian region of Southeastern New Mexico.
  • Many of the companies operating in this region have “stockpiled” leases and the largest producers have up to 3 years to continue operating as usual.
  • Small drilling companies and ironically New Mexico tax revenues (a state that voted 55% for Biden & whose Albuquerque Congresswoman will be the next Secretary of the Interior) will be the most negatively affected.
  • Decreases in oil and gas supply will be minimal in the short run, but could fall in 2-3 years (just in time for a new set of election promises) if the policy is continued.

The winds of change were not limited to the ban on drilling leases. Other policies laid out in EO 14008 include:

  • The establishment of a National Climate Task Force across 21 Federal Agencies, as well appointing John Kerry as Special Presidential Envoy for the Climate.
  • The official development of emission reduction targets. The campaign promise was to set a path to cut all greenhouse gas emissions from the nation’s electric sector by 2035 and to make the country carbon-neutral by 2050.
  • A commitment to clean infrastructure projects, which will likely be manifested in significant grants and continued subsidies for renewable energy. This will have a continued influence on the power industry.

Executive Action: Commitment to the Paris Climate Accord

On his first day in office, President Biden also signed the action recommitting the U.S. to the Paris Climate Accord. While this action does carry a symbolic weight, it does not directly impact the energy markets at this time. The implications will be felt later, with further action taken on the previously discussed EO 14008 (the beefy EO). The extent to which the U.S. commits to lowering carbon emissions will impact all sectors of the energy markets. Natural gas and oil may see increased demand in the next 10 years, but could begin to lose demand past that. Coal usage will likely continue the slow decline. All carbon commodity usage forecasts depend upon on the penetration of renewable energy technologies in the market. Power prices will also be affected but those implications are largely regional and include nuances such as battery storage and intermittency/grid reliability issues.

All in all, the recent Executive Orders have been symbolic of the Biden Administration fulfilling campaign promises. You can view all of President Biden’s Executive Orders here. While there may not be immediate implications for the energy markets from these EO’s, the symbolically anti-carbon stance of this administration will likely have price implications in the next 2-3 years. Pipeline infrastructure, changing power market dynamics, and federal subsidies and taxes are all long term influences. Like any complex market, change takes time, and the implications will show in the future. We may not be able to see the exact path forward at this time, but we do have an idea of the direction. After all, it’s not like anyone accurately predicted the events of 2020 anyway.

via GIPHY

Cover Image Illustration by Jack Taylor, Bloomberg Green