This summer season, the sweltering heat has been a serious and at times a dangerous matter across our nation, driving record energy consumption while adding significant stress on power grids. Grid operators have kept a close eye on systems so far this summer, regularly advising energy consumers to reduce their consumption during high demand periods to keep any blackouts from occurring.
In Texas, power use is predicted to break records again this week as people try to escape yet another heatwave. Texas’ grid, ERCOT, reports that is has enough capacity to meet the demand of more than 26 million end-users that they serve. Extreme weather like this is a reminder of the February 2021 freeze, where millions of Texans were left without power, water, and heat for days. Precautions have since been implemented by ERCOT to prevent future blackouts.
The largest grid region by population covering portions of the eastern United States, known as PJM Interconnection, approached its forecasted peak summer demand early in July, but that geographic area continues to have sufficient generation to meet the demand. PJM has also been able to support other grid regions by exporting electricity to other ISOs during extreme temperatures.
Extreme temperatures across the globe coupled with natural gas holding at some of the highest levels we’ve seen since 2008, has led to extreme volatility in electricity and natural gas markets. Markets are expected to remain volatile well into 2023 as natural gas storage currently holds well below the 5-year average and due to national heatwaves and greater demand for natural gas for generation, injection numbers continue to fall short.
The concern is that we will enter the winter of 2022/2023 at a significant natural gas storage shortfall at a time when demand for natural gas is at the seasonal high. This will add significant upward pressure on both the natural gas and electricity markets which is why analysts believe both electricity and natural gas prices will remain high and most likely be even higher through early and mid-2023. Looking forward at future energy markets, 2024-2026 still holds significant value and buying opportunities for both electricity and natural gas. However, as we move through the remainder of 2022 and into 2023, the extreme market volatility will begin to directly affect futures markets and we will see buying opportunities begin to diminish.
With energy markets being as volatile as they are, consultant knowledge, experience and expertise make all the difference. EnerConnex provides weekly market intel reports with the latest data and insight on what is going on in energy markets. Episode 2 of our webinar series, “Connecting with EnerConnex” will also be featuring some of our very own industry veterans where they will be sharing market updates and reviewing their strategies for navigating current market conditions. Join us if you are able on Wednesday, August 10th at 10:00am EST. Register here!