Energy Markets Update
Weekly natural gas inventories
The U.S. Energy Information Administration reported last week that natural gas in storage increased by 81 Bcf. There was an injection for the same week last year of 50 Bcf while the five-year average injection is 79 Bcf. Total U.S. natural gas in storage stood at 3,369 Bcf last week, 12.9% less than last year and 4.9% lower than the five-year average for this time of year.
First-in-the-Country Agreement Will Save 9 RI Housing Authorities 40% of Their Energy Costs
SourceOne has spearheaded a first-in-the-nation effort, as nine authorities from the Public Housing Association of Rhode Island (PHARI) collectively entered a remote net metering agreement with developer Nautilus Solar Energy. The deal, unique in that it aggregates the buying power of multiple independent housing authorities, will enable the construction of approximately 15 MW of solar generation in RI while also guaranteeing the participating authorities nearly 40% in electricity savings over the next 20 years.
By entering into the deal, the authorities have agreed to offtake 20 years of “remote net metering credits” (or “RNMCs”) from the solar project, which are generated for every kWh that the solar project outputs. These credits are then are then applied to the utility invoices of the authorities’ electricity bills, functionally decreasing their financial obligation to their local utility National Grid. Projected savings to the authorities are estimated at $30M during the course of the agreement.
Speaking on the matter, Veolia North America senior vice president and chief executive officer of SourceOne Mike Byrnes stated “We’re proud to bring our experience partnering with PHARI to support innovations that provide clean renewable energy for everyone in Rhode Island, and on a broader scale, the ecological transformation that needs to happen everywhere.”
SourceOne Energy Advisor Alexey Cherniack, and co-author of this blog, said “this deal was made possible, in part, by a forward thinking energy policy in Rhode Island that provides a mechanism for public entities and housing authorities to share in the financial benefits of renewable energy.”
While the coming solar development will total 55 acres, it will be split into three different arrays, providing clean energy to the nine participating authorities of Providence, North Providence, Newport, Cranston, Smithfield, Warwick, Warren, Bristol, and Lincoln. As Rhode Island has some of the highest electricity rates in the nation, the fact that the deal provides a significant measure of guaranteed savings, while also doing so in a sustainable fashion, is an impressive combination of public & commercial efforts.
Advised by SourceOne, Nautilus was selected by the Board of Commissioners of each housing authority to be the sole contractor for the community solar projects from start to finish. Over the past 10 years, SourceOne/VNA has been providing advisory services to PHARI on matters of energy markets and risk management. As the owner of contract portfolio, Nautilus will oversee construction, and management and maintenance for 25 to 30 years, with the project expected to begin in early 2022. In addition, the energy generated from the projects will be fed into the grid of Narragansett Electric Co., a unit of National Grid.
Criticism from Manchin puts clean power program in jeopardy
A key piece of U.S. President Joe Biden's aggressive climate plans is actively in jeopardy as Senator Joe Manchin has told the White House and congressional leaders that he does not support the proposed Clean Electricity Performance Program (CEPP) currently in the Democrats’ proposed $3.5T reconciliation package. Designed to incentivize utility companies to increase their share of electricity generation for clean resources, while also penalizing utility companies who do not, the CEPP is touted as one of the most impactful climate measures of the reconciliation bill.
Manchin, a strong defender of fossil fuels who represents West Virginia as a Democrat, plays a key role in the passing of the reconciliation bill, as the Senate is split 50-50 and the Democrats need every party vote to move forward with reconciliation (with VP Kamala Harris to act as a tiebreaker in the event of a 50-50 Senate vote tie). Before his opposition, he had voiced support for a program that would reward utilities for switching from coal to natural gas, which, while cleaner, is less ambitious than needed for the Biden administration’s clean energy goals.
According to an analysis by Energy Innovation: Policy and Technology, an energy and environmental policy firm, the most powerful emission-reduction provisions in the bipartisan infrastructure bill and the broader legislation Democrats hope to pass on party-line votes (referred to as the “infrastructure bills”) “is the combination of clean energy tax credits and the Clean Electricity Performance Program, which drives the power sector to 70 to 85% clean energy.”
Gutting the clean energy component of the spending bill would be a devastating blow for Biden’s climate agenda just two weeks before he heads to a closely watched U.N. global climate summit in Glasgow, Scotland, likely undermining Biden’s negotiating hand at the meeting. Despite Biden’s decision to rejoin the Paris climate agreement on his first day in office, many have openly questioned whether the U.S. leader can follow through on his ambitious emissions-cutting goals given the domestic political challenges. Biden has pledged to cut U.S. emissions by 50% to 52% by 2030 compared with 2005 levels, and the climate provisions in the spending bill are key to achieving those reductions.
Democrats have pointed to other climate programs in the legislative package as they seek to offer something Biden can take with him to the UN climate summit. Among them are hundreds of billions in dollars in tax breaks for alternative energy and electric vehicles and a fee on methane emissions from oil and gas operations. A plan approved by the Senate Finance Committee that ties the value of tax credits for energy production to its carbon intensity would reduce emissions in the power sector by 73% in the next 10 years, according to the panel’s chairman. Other climate programs Senate Democrats have eyed for the package are the elimination of tax credits for fossil fuels, and potentially a carbon tax that could be used to pay for it. “While I strongly support the Clean Energy Payment Program, it’s important to note that the overwhelming majority of emissions reductions come from the energy tax overhaul in our Clean Energy for America Act,” Senator Ron Wyden, an Oregon Democrat, said in a statement Saturday. “The Clean Energy for America Act is the linchpin of our climate package, and I will continue working with my colleagues to get it across the finish line,” he added.
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