Infinity Insights - Volume 14, Issue 10
MONTHLY UPDATE - NOVEMBER 2024 EDITION
NATURAL GAS
NYMEX Natural Gas has settled around the $2.90 range. Natural gas prices have firmed slightly since the November 5th elections. President Elect Trump has emphasized fossil fuels as a key strategy in what he calls “American energy dominance.” Trump’s push for domestic energy independence suggests a slowdown in new renewable deployment. Additionally, with a more pro-business administration, economists are expecting growth in domestic manufacturing, putting upward pressure on future contracts.
The most recent EIA Natural Gas Inventory Report for week ending 11/8 showed a net injection of 42 Bcf. It is rare we see net injections this time of year as we approach the winter months and the withdraw season beings. Winter withdraw season has been delayed and inventories remain robust as the majority of the continental US has experienced hotter than normal temperatures. For week ending 11/7 on a population weighted basis the US observed 80 heating degree days, whereas the norm for this time of year is 111 heating degree days. So far we have experienced a very mild fall. Winter officially beings 12/21/2024.
Inventories stand at 4% above the year-ago mark and 7% above the 5-year average.
Spot month natural gas has support at $2.40 with resistance at $3.00.
Calendar year 2024 finds support at $2.08 with resistance at $2.81. Calendar year 2025 has support at $2.70 with resistance at $3.91, a very slight increase across the board versus prior month.
EIA’s Short-Term Energy Outlook published 11/13 states the Henry Hub price is expected to remain around the $2.80/MMBtu mark through this winter season and average around $2.90/MMBtu in calendar year 2025 as demand for LNG (liquefied natural gas) continues to grow. The EIA’s forecasted price for 2025 has dropped slightly since their last Short-Term Energy Outlook.
Global natural gas prices ($/MMBtu):
Henry Hub (USA): $2.82
NBP (UK): $14.84
TTF (Dutch) $14.85
JKM (Japan/Korea) $13.58
International natural gas prices have ticked up too since our last publication. Also worth noting, both Asia and Europe are expecting mild winters – much like the US. Increases in European and Asian natural gas prices point to logistical issues with importing natural gas as geopolitical tension remains high in both Russia and the Middle East.
WEATHER
NOAA’s forecasts are showing above normal temperatures for both short and long-term forecasts. Current drought monitor shows few regions with mild drought conditions and precipitation forecasts are close to normal.
Polar Vortex
The polar vortex remains strong, where it should be for this time of year. According to Atmospheric and Environmental Research, the AO (Arctic Oscillation) is generally forecasted to strengthen, except for a region near Greenland where blocking is causing some disruption to the oscillation. Disruption to the oscillation could make conditions favorable for temperatures to fall in northern North America (mainly Canada) and Northern Europe. All that being said, forecasts are showing mild winters for North America, Europe and Asia.
Atlantic Activity
Remnants of Tropical Strom Sara remain near the Yucatan Peninsula and pose little threat to the region. Hurricane season officially ends November 30, 2024. We can reasonably say we don’t anticipate any further major storms emerging from the Atlantic this season.
2024 hurricane season was relatively mild compared to forecasts for the season. To-date we have had 18 named systems, two category 5 and two category 4 hurricanes, far less than what was forecasted prior to the 2024 hurricane season.
Atlantic Ocean heat content remains high, approximately in-line with what was observed in November 2023, far above the 20-year average.
MARKET NEWS
The US economy remains strong. October CPI reading was .2%, the same mark as the prior 3 month readings. The trailing 12 month CPI rate is at 2.6%. The unemployment rate remains unchanged at a healthy 4.1%. The Fed continues cutting the cost of borrowing. In September the Fed cut rates by 50 bps. and 25 bps. in November. The Consumer Sentiment Index has ticked up steadily since July 2024. Equities remain near all-time-highs with the SP500 up 24% year-to-date.
The Election’s Impact on Power
Little is known about specific energy policies when Present Elect Trump takes office in January. In the following article we are inferring on what may develop based on Trump’s past policies and statements made during his campaign.
Firstly, Trump has stated he is committed to “American energy dominance”. This likely means more domestic production of oil, gas and coal. In the short-term, abundant oil, gas and coal should put downward pressure on commodity prices. This should immediately put downward pricing pressure on utilities that are heavily dependent on fossil fuels.
Conversely, as fossil fuels become more discounted, it is likely we see a slowdown in the renewables transition. Renewable power such as wind and solar serves as a substitute for traditional fossil fuels. Renewable projects are less attractive when a cheap substitute is available. The slowdown in the renewable transition will likely be compounded by import tariffs. Trump’s touted import tariffs will increase the cost of imported components needed, specifically for solar, wind, and battery projects.
In a macroeconomic sense we expect fossil fuel generators to benefit from a Trump administration, while renewable generators face some obstacles. The impact will depend on the generating source for each region on the country.
Another aspect of a Trump administration will be a reduction in regulation. We are likely to see a rolling back of environmental and energy regulation and federal incentives for renewable deployment. A reduction on environmental and energy regulation would put downward pressure on pricing as compliance is rolled back, also, while a reduction in renewable incentives would increase renewable project costs. State legislatures dictate programs such as Renewable Portfolio Standards (RPS), where renewable generation goals are set and certain percentages of generation are required by the states. RPS should not be materially impacted by federal power policies. Between state regulation and a proven corporate appetite for a renewable transition, we are optimistic that the renewable transition will continue.
In summary, power prices will definitely be impacted by a new presidency, regions dominated by fossil fuel generation will likely see a reduction in cost while regions dependent on renewables will likely see a slowdown in renewable deployment.
Dockworker Strike
Dockworkers started walking the picket lines early Tuesday, October 1 as the existing contract between the United States Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) expired at midnight. The strike had halted operations in 36 major US ports from Maine to Houston. The ILA’s main points of contention are the record profits realized by the USMX members while ILA’s compensation remained stagnant, and secondly, fear of jobs being eliminated through port automation. The ILA requested a 77% pay raise over a six year contract while the USMX offered a 50% pay raise over the term of the contract and keeping the existing limitations on automations.
Reuters has estimated the strike cost the US economy $5 billion per day. Thursday, October 3 the strike was suspended and ports resumed operation when a tentative deal was reached, which includes a 62% wage increase over the six year contract term while limitations on automation remains. Contract negotiations have been extended until January 15, 2025. Strikes could resume January 16 if an agreement is not finalized.
It appears the 3 day strike did not cause major supply chain issues. Many importers overstocked and rerouted vessels in anticipation of disruptions caused by the contract expiration. A longer lasting strike would have caused issues impacting almost every industry from retail & consumer goods to agriculture, manufacturing and healthcare. The ILA finds itself in a powerful position as supply chain interruptions would be highly inflationary and further delay an already hampered recovery effort in the wake of Hurricane Helene.
ERCOT News
CenterPoint Energy Faces PUC Audit
November 14th the Texas Public Utility Commission (TPUC) voted to appoint a third-party auditor to evaluate CenterPoint Energy’s response to the May Derecho and Hurricane Beryl which caused widespread outages for Greater Houston. The audit will be investigating costs passed on to ratepayers and how those funds were used, namely vegetation management and the $800M used to lease 20 mobile generators that were never used in the aftermath of the May Derecho and Hurricane Beryl.
Before the May Derecho and Hurricane Beryl CenterPoint had requested the PUC’s approval of a $60M in rate increase. This request was met by strong opposition from city leaders in CenterPoint’s service area. November 8th CenterPoint withdrew its request to delay the review of the $60M rate increase, leaving CenterPoint in a position where it will negotiate with cities within its service area and present a proposal to the PUC for approval. Separately, CenterPoint is requesting $450M in rate increases to recover funds deployed to restore services after the May Derecho.
The audit seeks to explain how funds are utilized to ensure grid resilience. Through public hearings it’s been revealed that only 20% of CenterPoint poles and lines receive appropriate vegetation management annually and that the 20 unused mobile generators are extremely cumbersome and take days to move.
University of Houston Energy Fellow Ed Hirs said “the fact that they’ve asked for an audit means that they don’t know what the heck is going on. And that reflects very poorly on the Public Utilities Commission. There is a lot to be done”, Hirs went on to say “you shouldn’t really expect too much from this audit, this is more of the government approach of simply forming a committee and investigating”. As Ed Hirs noted, Hurricane Beryl, a category 1 hurricane, caused the same level of power disruptions as Hurricane Alicia, a category 3 hurricane in 1983.
Our Take: an independent audit of CenterPoint’s maintenance and emergency recover programs is welcomed. We would love to see more pressure on the utility to maintain and update outdated equipment and provide accountability for their disastrous responses. But this is in an environment where CenterPoint holds a monopoly and maintains close ties to the governing bureaucracy. Unfortunately, the likelihood of meaningful changes are slim.
Oncor System Resiliency Plan
Last year Texas legislatures passed a bill allowing state utilities to submit proposals to the PUC aimed at improving grid reliability. Thursday, November 14th the Public Utility of Texas approved the first submission of this type, Oncor’s $3B system resiliency plan.
The system resiliency plan is outlined to include:
• Modernizing poles and crossarms
• Switchgear automation
• New ties which will optimize distribution and capacity with intelligent switches
• Investment in the utility’s digital infrastructure, mitigating cybersecurity risk
Oncor said it “analyzed more than two decades of past weather, damage and location data and their impact on customers, using the information to identify the priorities and investments needed across its service area. This includes the plan’s substantial increase in vegetation management near Oncor power lines”
Oncor CEO Allen Nye said “we will start implementing our SRP (system resiliency plan) immediately and will keep customers informed of our progress in their communities.”
Explaining REC’s
REC’s, or Renewable Energy Certificates are market-based instruments that represent proof that a given amount of electricity was generated from a renewable source such as wind, solar, geothermal, or hydro. REC’s are a key part of the renewable energy industry, allowing organizations and individuals to deliberately support renewable energy development. Ratepayers are able to claim the use of renewable energy, even if the physical energy consumed is not renewable, because the REC’s track and verify the equivalent power was sourced from a renewable generating source.
The bulk of REC’s are used by states who have adopted Renewable Portfolio Standards (RPS). The purpose of RPS is to mandate that a certain amount of a state’s electricity is sourced through renewables. Currently, 30 states plus Washington, D.C. have mandatory RPS policies.
This month ENGIE North American and RTX (formerly Raytheon Technologies) announced an agreement where ENGIE North America would energize RTX’s Texas facilities with renewable power. The power is sourced from the Priddy Wind Project, located in Mills County, Texas. The project is expected to provide 1.5 million MWh of renewable energy over the next 10 years. The project is expected to come online in early 2025.
Contact Infinity Power Partners for your renewable energy procurement solutions.
CUSTOMER SPOTLIGHT - METRONATIONAL
MetroNational is a multi-generational and privately held real estate investment, development, and management company whose 70-year legacy in placemaking is inspired by its purpose statement – to Building Better Lives. At the heart of everything we do, people come first. Whether we're investing in philanthropic efforts, fostering a stronger community or delivering exceptional service, our focus is always on building better lives. We are committed to fostering relationships built on trust, respect and a shared vision for a better community.
Our support for the Memorial and Spring Branch communities spans numerous philanthropic and educational initiatives. We proudly partner with a number of nonprofit organizations, including Kids' Meals, Spring Branch Educational Foundation and Spring Spirit, as well as area elementary schools, including Shadow Oaks, Hollibrook, Edgewood and Terrace. Through those partnerships, we’re able to lend our time and resources to these groups that are tirelessly working to make a difference in our community. MetroNational believes in the power of coming together to build a stronger community by supporting those who need it most.
This commitment is exemplified in our anchor mixed-use development, Memorial City. An ever-evolving "city within a city," Memorial City offers a dynamic mix of office, residential, amenities, retail and entertainment that make it a prime business and leisure destination. MetroNational is forward-thinking and constantly seeks new ways to build better lives for residents, tenants, visitors and the surrounding communities of Memorial City.
One of our signature projects includes the groundbreaking, $25 million renovation of Memorial City Plazas. This comprehensive upgrade, designed by Houston-based architecture firm Zeigler Cooper, demonstrates our dedication to innovative design, incorporating multi-functional spaces and curated art installations by local Texas artists. With LEED Gold-certification and a WELL health-safety rating, the Memorial City Plazas highlight our commitment to sustainability, health, and technological integration, ensuring spaces that promote wellness and facilitate a safe, forward-thinking environment.