It’s always an interesting discussion with non-technical people involved in contracting for power supply. Energy contracting is oftentimes the responsibility of personnel who are not familiar with the price dynamics of the power markets. The conversation will typically start with “we use a lot of electricity…..we should see a great price”. While that may be true, it’s not necessarily the magnitude of usage that drives the price, but the consistency and level of demand. What’s the difference between demand and usage? Power demand is the amount being drawn from the grid at any point in time; usage is the aggregate of demand across time. A consistent or flat demand profile, meaning a higher load factor, will command a better price than that associated with a low load factor. So why is that?
Massive contrast between colder than normal temperatures in Nov-2014 and above normal temperatures in Dec-2014 have caused very high price volatility in the Natural Gas futures market. Shifts in weather forecasts and record production have been the main price action drivers during the first half of the winter.
Topics: system operators, Acclaim Energy Advisors, energy management consulting, risk management, energy procurement, weather outlook, reliable energy, demand response, energy regulations, energy savings, power generation, Weekly Energy Insights, natural gas, energy management, energy management consultants, strategic energy sourcing, reserve margin, energy price spikes, Price Spike, energy blog, power outages, Natural Gas Supply, NG Demand, energy supply, Winter Weather, demand, scarcity pricing, current outlook
On Friday, February 28, ERCOT published its 2014 Capacity, Demand and Reserves (CDR) report. Resource adequacy has been at the forefront of ERCOT’s electricity policy debate. Forecasting future demand is critical for planning purposes to determine how much generation will be needed in future years to meet peak demand. Resource adequacy concerns have prompted the PUCT to approve mechanisms that increase the duration and frequency of scarcity pricing signals in ERCOT to support adequate generation development in the state. One measure, that has also encouraged some Commercial and Industrial customers to take advantage of higher prices through prices response (load shedding and Distributed Generation (DG) dispatch), is the October 2012 decision to increase the system-wide offer cap to the following levels, effective on the dates below:
Topics: ERCOT, risk management, Energy Solutions, energy procurement, demand response, energy reliability, power generation, Weekly Energy Insights, reserve margin, energy price spikes, energy blog, reserve, report, energy efficiency, U.S. energy, PUCT, forecasting, CDR, capacity, demand, load shedding, distributed generation, scarcity pricing, current outlook