Infinity Insights - Volume 14, Issue 8
MONTHLY UPDATE - SEPTEMBER 2024 EDITION
NATURAL GAS
NYMEX Natural Gas has settled down to the $2.20 range with the most recent EIA Weekly Natural Gas Storage Report showing a net injection of 35 Bcf week over week, greater than consensus estimate at 33 Bcf. Inventory stand at 7% greater than the same period last year and 12% above the 5-yr average.
Spot month natural gas has support at $1.90 with resistance at $2.25.
Calendar year 2024 finds support at $2.04 with resistance at $3.07. Calendar year 2025 has support at $2.80 with resistance at $3.89, another decrease versus prior month.
Production remains strong at 109 Bcf/day, putting downward pressure on spot pricing. Natural gas rig count has fallen to 95, whereas the count stood at 120 in January.
Global natural gas prices ($/MMBtu):
Henry Hub (USA): $2.14
NBP (UK): $12.32
TTF (Dutch) $12.65
JKM (Japan/Korea) $14.01
WEATHER
Final August global temperatures are not available yet, but it appears August 2024 will be the hottest global August on record. The good news is we labored through the peak of summer and have fall awaiting us.
NOAA short-term (6-14 day) forecast shows above normal temperatures for most of the western US and close to normal or below normal temperatures for the eastern US and most of the south. The bulk of the country has none to minor drought conditions.
Atlantic Activity
There are currently 5 disturbances in the Atlantic. Disturbance 4 is producing disorganized showers and thunderstorms around the northwestern Caribbean Sea. There is a 30% chance of cyclone formation in the next 7 days as the system approaches the unusually hot Gulf of Mexico. Current projection forecasts the system moving across the Yucatan Peninsula. If the system makes landfall over the Yucatan we can expect weakening and further disruption for the system.
We will keep a close eye on this system and provide updates on LinkedIn.
Atlantic Hurricane Season
The Atlantic hurricane season has been surprisingly subdued so far. We have experienced only 5 named storms whereas experts were predicting more than 23 for the season. If the 5 disturbances in the Atlantic materialize we will be at 10 named storms (highly unlikely). Hurricane season peaks September 15th. We can get a good idea of what the next couple of weeks will bring us by looking east, focusing on the eastern Atlantic and further east towards northern Africa. Looking at the Sahara Desert, this is where most low pressure systems form then travel west and eventually become tropical storms. The Sahara Desert is experiencing an unusual amount of rain. The unusual rain is cooling the land surface temperature and suppressing the development of low pressure systems. If this pattern continues we will see far fewer systems traverse the Atlantic. A cooler and wetter Sahara helps explain why tropical formations have been scarce this hurricane season.
Additionally, new data suggests solar activity could correlate with a suppressed hurricane season. Research indicates the more solar flares during hurricane season result in less intense hurricanes. The hypothesis is that the sun produces energy rich flares which heats up earth’s ionosphere, reducing the temperature differential within the layers of the atmosphere which makes conditions less conducive for major cyclone formation. Some correlation has been noted and would help explain the highly active solar cycle in June and July and the relatively quiet hurricane season. This explanation needs more research.
Note: it only takes one bad hurricane to cause devastation, we are still in the midst of hurricane season.
Ocean heat content in the main development region remains hot, although appears to have plateaued in the last 10 days or so. Current heat content in the Main Development Zone is approximately what was observed in 2023 at about this time. This is a welcomed regression considering we started January at heat contenet value usually observed in August.
MARKET NEWS
NVIDIA AI Weather Modeling
NVIDIA has released Earth-2, an artificial intelligence based model that will be utilized to make climate change and local weather forecasts more accurately. Earth-2 is a digital twin of earth, meaning it is identical to actual earth based upon the available data with laws of physics applied. Using the digital twin and historical data Earth-2 is able to make far more accurate predictions than the two models available - European Center for Medium-Range Weather Forecasts commonly known as the European Model and the North American Mesoscale Forecast System commonly known as the American Model.
By using AI the platform is trained on past weather events, how they behaved and their impacts. Earth-2 then uses current conditions, compares conditions to past results and forecasts the weather with the greatest accuracy available at resolutions never seen before. Earth-2 boasts resolution 12 times greater than current models with forecasts produced 1,000 times faster, using 3,000 times less power than today’s models. At these speeds the AI is continually updating weather forecasts and continually improving forecast accuracy.
During the release event NVIDIA CEO Jensen Huang stated “in the near future we will have continuous weather prediction at every square kilometer on the planet”
Earth-2 is available in NVIDIA’s Omiverse Cloud - an open source, cloud based, collaborative digital environment.
There’s no telling what the impact of more precise forecast will lead to. The new technology shows a lot of promise and is definitely a major leap forward in weather and climate predictions.
Geothermal Power Generation Gaining Momentum
There are some significant geothermal projects in development in partnership with big tech companies. These projects highlight the growing need for electricity to power massive datacenters while technology companies stay committed to minimizing carbon emissions.
Sage Geosystems, a next generation geothermal startup company announced a partnership with Meta, parent company of Facebook, to provide 150 MW of carbon-free power. Sage has committed to building a geothermal facility “east of the Rocky Mountains”, but a final location is yet to be determined. Sage has a proven site at an abandoned gas well in San Isidro, Texas. Water is pumped into the well, naturally heated, causing the well to pressurize and can then be released to spin turbines at times of peak power demand. On August 13th Sage announced plans to develop a geo-pressured geothermal energy storage facility in Christine, Texas. The facility will be able to generate 3 MW for between 6 and 10 hours at first. Geothermal technology is highly scalable. According to Sage’s CEO, Cindy Taff “we are starting at 3 MW, but we can scale at this location up to 50 MW.”
Traditional geothermal projects have been viable in particular geological regions called hydrothermal formations or hot springs. The concept to bring water to a geothermal location, utilize geothermal heating and having the ability to store and dispatch the power is a huge improvement for the power source.
Another next generation geothermal company, Fervo Energy is implementing state of the art oil and gas drilling technology for geothermal energy. The technology includes precision drilling and horizontal drilling. The advantage of using horizontal drilling is multiple geothermal reservoirs can be accessed with a single well, which also reduces drilling risks. According to Sarah Jewett, Fervo Energy’s Vice President of strategy “horizontal drilling also facilitates greater access to geology that was previously challenging to reach, increasing the total resource potential for geothermal energy”.
Fervo Energy secured $244 million in new funding to continue operations at Cape Station, a generating facility in Beaver County, Utah. Cape Station is expected to come online in 2026 and reach full production in 2028, providing 400 MW of carbon-free, around the clock energy.
Currently, geothermal resources account for only .4% of US power generation. Big tech, innovation and the pursuit of de-carbonization could push geothermal power generation forward.
Texas Energy Fund In-ERCOT Loan Program
November 7, 2023 Texas voters approved a constitutional amendment allowing the Public Utility of Texas (PUCT) further authorization to enhance ERCOT’s resilience. The amendment resulted in providing the Texas Energy Fund with low interest business loans to dispatchable power generators through SB 2627 which was enacted in June 2023. The Texas Energy Fund In-ERCOT Loan Program allows for up to $7.2 billion in 20 year loans at an attractive 3% interest rate. Requirements allow for existing dispatchable power plants to utilize the funds to increase capacity by a minimum 100 MW, or for construction of new dispatchable power plants with at least 100 MW of capacity.
Thursday, 8/29 the TPUC announced the 17 recipients of the loans, noting they had received 72 applications. The 17 projects that will receive $5.38 billion loans for a total 9,781 MW of generation capacity. The loans were distributed to mostly simple cycle, internal combustion engine and lastly combined cycle generating plants. The PUCT said “the projects selected to advance today would provide dispatchable power generation and reliability benefits to multiple regions of the state”. Loans were awarded based on “applicant’s experience and strength of financing as well as the proposed project’s technical and financial attributes” along with five identified priorities which include diversity among applicant types, diversity in siting location, speed to market, ability to relieve transmission constraints, and diversity of generation resource type.
According to ERCOT the grid currently has 145,000 MW of generation capacity, meaning the additional 9,781 MW in new projects represents almost 7% in additional generating capacity for ERCOT. Distribution of loans are expected by the end of 2025. Generators are further incentivized to expedite development and connection by providing $120,000 per MW interconnected by 6/1/2026 or $80,000 per MW interconnected by 6/1/2029.
Our take: This is a great step for Texas’ growth and need for additional reliable power generation. We see additional benefits in the projects selected because of the various locations of the new generation sites with the intent on minimizing congestion and mitigates further risks associated with geographic location such as weather. Unfortunately, the approved projects are heavily dependent on natural gas, accounting for 71% of the generation capacity awarded. We recognize natural gas is a fantastic dispatchable fuel source for generation but believe there should be more fuel diversity in the awarded funds. Overall, we expect the Texas Energy Fund In-ERCOT Loan Program to prove to be money well spent.
CUSTOMER SPOTLIGHT - MOODY TONGUE
This month’s Customer Spotlight features a long-term Infinity Power Partners (IPP) client, Moody Tongue, a brewery and restaurant group with locations in Chicago and New York City.
Founded in 2014 in Chicago by cousins Jared Rouben and Jeremy Cohn, Chicago’s Moody Tongue Brewing Company is built on the philosophy of culinary brewing, appealing to those with a discerning palate - or as they describe, a “moody tongue.” In 2016, Moody Tongue expanded to open The Tasting Room within a 125-year-old glass warehouse in Chicago’s Pilsen neighborhood. The venue served a menu of both year-round and limited-release beers in an intimate mid-century modern space showcasing a library, which housed the largest collection of beer books in the country. The stylish space quickly garnered critical acclaim and three years later, The Tasting Room earned the 2019 Jean Banchet award for “Best Bar" in Chicago. Later in 2019, Moody Tongue moved its operations to a new 28,600 sq. ft. space in Chicago's South Loop neighborhood, immediately growing the brewery’s production capacity and housing two world class dining concepts — a casual, à la carte tasting room, The Bar at Moody Tongue, as well as upscale, intimate fine dining restaurant, The Dining Room at Moody Tongue. In 2023, the brewery expanded further into New York City with the opening of Moody Tongue Sushi, a restaurant in the West Village neighborhood showcasing beer and sushi pairings. In 2021, 2022 and 2023, Moody Tongue became the first wholesale brewery / restaurant in the world to receive an accolade from the MICHELIN Guide, earning Two Stars.
Moody Tongue works incredibly hard in both their restaurants and brewery to create a food and beverage experience which promotes sustainable practices and the long-term health of our ecosystem. The culinary team works with a variety of producers and growers to source ingredients such as organic vegetables, sustainably caught seafood and locally raised meats and poultry; and, the brewing team works to the same effect with local farmers and, on occasion, even working on-site to harvest fruits and produce which are ultimately incorporated into their beers. One of the most special opportunities Moody Tongue showcases, however, is the cross-utilization of ingredients between their kitchens and brewery to minimize waste. Ingredients which cannot be used by the restaurant can still be used in the brewery (such as unsightly ingredients which can still be used in brewing to showcase flavors and aromatics) and, conversely, the restaurants also incorporate byproducts from brewing (such as wort and spent grain) into their dining menus.
Keeping sustainability at the forefront of operations, Moody Tongue sought out a sustainable and cost effective solution to power their growing company. Shortly after formation, Infinity Power Partners (IPP) was approached by Moody Tongue ownership looking for a power contract that was competitive in pricing and green. The solution IPP provided was a program called Illinois Shines. This program, administered by Illinois, provides solar power to customers at a discounted fixed-rate. The Illinois Shines program guarantees renewable power at a savings of at least 10% versus the utility rate. Similar solutions are available across the country through Purchase Power Agreements (PPA) where a set capacity of solar generation is committed to customers at a certain rate.
Click here for more information on Moody Tongue. And if you’re in Chicago or New York pop in and let us know what you think!
Contact an IPP team member for more information on various green energy solutions.