Energy Insider Blog

According to the National Oceanic and Atmospheric Association (NOAA), summer 2013 will be above average in West Texas and in the Mid-Atlantic states.  The outlook both in terms of temperatures (left hand side) and projected rainfall (right hand side) is summarized in the following set of four maps, with the top maps being the outlook for June and the bottom ones the outlook for the entire summer (June-August).

In looking at energy management risks, it is rare to find a scenario where both the supplier and the end user can benefit.  However, with the expansion of demand response programs to include what is called “economic demand response” offers a rare situation where not only do the supplier and end user benefit, but so does society as a whole.

In the 1960s, the Jetson’s was a Saturday morning cartoon staple that included a robot butler, flying cars, and an automated house.  Some fifty years later, flying cars and robot butlers are not quite here, but the ability to fully automate a house is coming to fruition as a result of machine to machine (M2M) technology relying on the vast mobile network which has sprung up in the U.S. and around the world. 

While the general framework for electric restructuring is relatively set in most states with retail choice, legislative action continues as interest groups from generators to consumers to suppliers attempt to enhance the market structure.  Following is a list of selected proposed legislation dealing with electric restructuring in California, Maryland, Michigan, New York, Pennsylvania, and Texas.

The constant evolution of retail energy markets puts the burden of energy procurement and energy risk management on end uses. Such practices are typically not the core business of energy end users, so it is unlikely to find the in-house expertise necessary to effectively manage energy solutions. Areas of energy management include: product structuring, contract negotiation, market intelligence, fundamental and technical analysis trends, and the potential impact of regulatory and/or legal changes.  One way for an end user to mitigate energy risk and implement effective energy risk management strategies is through the retention of an advisor who is an unbiased energy expert.

The first part of this 2 part series addressed 3 factors that will impact natural gas and electricity prices in 2013 and beyond.  Part 2 explores the challenges faced by the power sector in terms of future grid reliability, summer weather outlook and the impact of continued drought conditions on power prices.

Energy risk management strategies vary in complexity and success, but those which deliver the highest value tend to look at the entire energy management picture.  A holistic energy risk management strategy comprises:

(Part I) 

Retail electricity customers face a host of challenges heading in to the summer of 2013.  Part 1 of this 2 part series addresses factors impacting natural gas prices and the impact these will have on electricity prices during this summer and beyond.  Part 2 will focus on two more drivers: energy reliability opportunities in electricity markets and weather.  Understanding the impact that these 5 drivers have on energy prices is critical for risk management purposes.

Over the last couple of years, significant attention has been paid to the practice of “fracking” in which a slurry of water, sand, and chemicals are injected at high pressure to crack open rock formations which hold natural gas and oil.  The use of fracking has fueled the boom in natural gas production and could help the U.S. achieve energy independence by 2030 or sooner.  The boom in natural gas production from fracking has kept natural gas, and therefore energy prices, lower than expected.  In the mid-2000s, most analysts predicted natural gas prices would reach the $10-11/MMBTU range as compared with the current price of less than $3.50/MMBtu.  In short, technology improvements have allowed producers to unlock previously uneconomic or unavailable natural gas and oil deposits in the U.S. Fracking provides substantial economic benefits across the entire U.S. economy;  however, there are concerns about fracking’s environmental impact which are currently being addressed to determine if this technology is to fuel future energy independence for the U.S.