Natural Gas Prices Spike, Solar and Wind Buildout Continues

By Published On: October 21, 2021

Meteorologists are forecasting a warmer winter across much of the United States, which often leads to slack demand for natural gas. But this year, increased exports of liquefied natural gas are driving up the price of the fuel, according to Federal Energy Regulatory Commission staff.

Gas prices are escalating largely because of increased global demand for LNG exports—a 21% increase compared to last winter, according to a winter assessment released Oct. 21. As of Oct. 13, futures prices at Henry Hub, the national benchmark in Louisiana, averaged $5.63 per million British Thermal Units for Nov. 2021-Feb. 2022, a 103% increase compared to last winter. This coming winter, future prices at the SoCal Citygate are $8/MMBtu, the second highest in the country. Prices at the Algonquin Citygate hub, outside Boston, soared to $18.18/MMBtu, the highest price across the eight major hubs.

FERC staff pointed out that higher winter temperatures usually “imply lower than average demand for electricity and natural gas, but severe cold weather events that drive up energy demand may still occur.” The Pacific Northwest, however, is expected to be colder this winter than last.

Staff also concluded that in spite of higher gas prices, there will be more than enough resources to satisfy electricity reserve margins in the territory of the California Independent System Operator and other balancing authorities, with a total of 34 GW of new resources coming online—much of it solar and wind. CAISO is expected to see an additional 4.5 GW, all of it new solar and battery capacity. The Electric Reliability Council of Texas, ERCOT, is expected to add 14 GW of new resources, most of it wind and solar.

FERC Chair Rich Click warned, however, that strong reserves do not guarantee reliable operations in the face of extreme weather,  as experienced in Texas last February.

The staff assessment also predicts that the share of electricity generated from natural gas will decline across several regions encompassing CAISO, ERCOT, the Southwest Power Pool, and the Midcontinent Independent System Operator or MISO.

In related news, FERC nominee Willie Phillips was put to the test by the Senate Energy and Natural Resources Committee on Oct. 19.

Committee Chair Joe Manchin (D-W.VA) asked him his views on protecting fossil fuels, and whether oil and gas independence is important. Phillips said as a FERC member he would not play favorites in fuel choices, and that he believed in an “all of the above” energy strategy. He added that the country was in the midst of an energy transition and in response he would push for innovation as a commissioner.

Phillips told the committee his three top goals are “reliability, affordability, and sustainability.” He pointed out that was based on growing up in rural Alabama, attending the University of Montevallo, studying law at Howard University, and working in the energy industry for 20 years. Most recently, Phillips, who is 43 years old, was the DC Public Service Commission Chair.

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