Energy Markets Update 

Weekly natural gas inventories

The U.S. Energy Information Administration reported last week that natural gas in storage increased by 63 Bcf. There was an injection for the same week last year of 27 Bcf while the five-year average injection is 38 Bcf. Total U.S. natural gas in storage stood at 3,618 Bcf last week, 7.8% less than last year and 3.2% lower than the five-year average for this time of year.

$1.2 Trillion Infrastructure Bill Passes House

Late last week the U.S. House of Representatives passed the long awaited $1.2 trillion infrastructure bill, a major victory for President Biden and Democrats in congress. Since the bill was passed, the DOE has released a fact sheet on the bill explaining what it means for the energy industry overall calling it “a long-overdue investment in our nation’s infrastructure, workers, families, and competitiveness.” The bill includes over $62 billion in funding for the DOE, which will be used to tackle issues such as energy efficiency and grid modernization. The DOE went on to say, “Extreme weather events like the Dixie Wildfire, Hurricane Ida, and the 2021 Texas Freeze made it clear existing US energy infrastructure cannot endure the impacts of climate change. Modernizing and expanding the electricity grid will make our energy sector more resilient, while enabling the buildout of affordable, reliable, clean energy to support President Biden’s goal of 100% clean power by 2035.” In addition to the transmission industry, the other energy industry winners in the bill include battery makers, owners of some existing nuclear power plants, and the budding hydrogen industry. In other news, COP26 enters its final week where 105 leaders have signed a pledge to cut methane emissions 30% by 2030, India has delivered a net-zero target and 46 nations have promised to phase out coal plants over the next two decades. However many climate researches are already sounding the alarm that pledges made thus far are inadequate to keep warming within the 1.5-degree limit that experts agree is necessary to avoid climate catastrophe. The United Nations recently concluded that even if official climate pledges known as Nationally Determined Contributions (NDCs), were implemented, warming by the end of the century could reach 2.7 degrees. For more information on the infrastructure bill and COP26 please review last week’s post here.

NRG Won't Acquire Liberty Power Connecticut Customers

Liberty Power Holdings, which was forced into receivership following Texas’ power market failure in February, has asked a bankruptcy court to approve an amended customer book purchase agreement with power conglomerate NRG. As a result of the amended agreement, NRG will no longer acquire any of Liberty’s Connecticut customers and those customers will instead be transferred to default service. Liberty went on record to say, "[T]he Debtors believe that many of their customers under the Connecticut Customer Contracts will experience a rate reduction as a result of being returned to the local utility company, and therefore will not be damaged by the proposed rejection hereunder." Based on winter rates already published by the utility and the forward market indicating one of the most expensive winters to date, this argument appears to be patently false. Unrelated to the amended NRG agreement, Liberty is also looking to drop its remaining residential and non-residential accounts in the East after “a supplemental sale process did not identify a cost effective sale transaction.” In total there are 687 residential and 1,624 non-residential accounts to be dropped to default service.

Gas utilities expand renewable natural gas project investments in Q3

The investment boon in renewable natural gas (RNG) continued throughout the third quarter as a number of prominent gas utilities across the U.S. have created unregulated business units to develop projects. Due to markets for green gas created by the U.S. EPA’s Renewable Fuel Standard and from California's Low Carbon Fuel Standard, prices in excess of $50/MMbtu can be secured for the injection of cleaned gas from wastewater treatment plants, landfills, food and agricultural waste projects. The cleaning of waste gas and the process of bringing RNG to pipelines requires industry expertise that distribution utilities are uniquely qualified to deliver. U.S. gas distributors have recently expanded investments in RNG projects due to tax credits proposed in the $1.75 trillion Build Back Better Act. According to Northwest Natural Holding Co., “There are roughly 300 RNG projects in operation or under construction today in the U.S., up from about 50 a few years ago, with nearly 100 more in development.” NW Natural has also recently announced the formation of a nonregulated subsidiary to invest in RNG projects. They will begin with a $50 million project to develop RNG production facilities at two landfills. Other utility providers with existing or planned RNG projects include Northwest Natural Holding Co, Chesapeake Utilities Corp, DTE Energy Co, AtlasGas Inc, One Gas Inc, and Dominion Energy Inc.

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