Energy Markets Update 

Weekly natural gas inventories

The U.S. Energy Information Administration reported last week that natural gas in storage increased to 49 Bcf. There was an injection for the same week last year of 55 Bcf while the five-year average injection is 42 Bcf. Total U.S. natural gas in storage stood at 2,776 Bcf last week, 16.5% less than last year and 6.0% lower than the five-year average for this time of year.

Senate Passes $1 Trillion Infrastructure Bill

At a glance:

With a 69-30 vote, on August 10 the U.S. Senate passed the $1 trillion Infrastructure Investment and Jobs Ac. The bill ratifies a total of $550 billion government expenditure on renewing roads, bridges, and other infrastructure. Within the energy sector, the major allocations are for vehicle electrification, transmission reliability, and clean energy demonstration projects such as hydrogen and carbon capture. The bill reflects substantial compromise from the Biden Administration and is a scaled back version of what was originally proposed. Democrats are aiming to reflate some of their more lofty clean energy spending targets through the subsequent budget reconciliation process, which is ongoing.

Impact on transmission investment:

Transmission investment has become a key bipartisan policy focus that experts say can increase the share of renewables on the grid, lower costs and improve the grid's overall efficiency and reliability. The bill provides limited direct funds for transmission builds, instead most of the direct investment in the bill is aimed at improving short to mid-term reliability and resilience to meet Biden administration’s push to de-carbonization by 2035.

However the bill would provide FERC with broader transmission siting authority by clarifying that it may approve the construction of power lines in national interest, even in some instances when a state rejects or fails to act on an application. The bill would also allow the federal government to be an anchor tenant in new transmission projects before transferring its share of the power lines to private entities. Under current policy, transmission projects can take years to develop and are often stymied by ongoing legal challenges so this is generally regarded as a welcome change. 

Ultimately the bill does not free up much direct capital for new transmission buildouts. Transmission advocates are thus calling for further actions, via the budget reconciliation package, to incorporate tax-related incentives, such as investment tax credit for large transmission projects, to derive direct investment into the transmission grid. A recent study by Grid Strategies determined that a 30% ITC for transmission would add another 30 GW of renewable energy capacity across the country, with 22 transmission projects being potentially eligible for a targeted ITC, and transmission advocates are confident that this measure will help regional grid operators to update transmission planning procedures in competitive markets and reflect benefits that transmission could provide and drivers necessitating new investment.

Reviving nuclear plants:

The Senate bill also places focus on two clean energy technologies that currently aren't an economically viable investment for most utilities: (1) carbon capture and storage, and (2) nuclear power. It focuses less on renewables, though it does outline some provisions for solar, pumped hydropower storage and green hydrogen. On nuclear power, the legislative package targets aging power plants as well as planned small modular reactors. The struggling nuclear industry will received $6 billion investment for nuclear facilities that are under threat of being shut down due to economic factors and small modular reactors and advanced nuclear reactors respectively. Despite this, Exelon Corporation has already stated that the measures will not prevent its Byron and Dresden Nuclear Plants in Illinois from their scheduled shutdown this fall.

Natural Gas Storage Data

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