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Maryland Renewable Energy Portfolio Standard (RPS) – Veto Override

Last week, the Maryland House and Senate voted to override Governor Larry Hogan’s 2016 veto of the 2016 Clean Energy Jobs bill.  As a result, Maryland’s Renewable Energy Portfolio Standard (RPS) will increase from 20% in 2022 to 25% in 2020.  The graph below shows the effect of the original RPS rule in blue overlaid with the newly amended rule in red.

Maryland’s solar “carve out” will increase as well as shown below.

Regulatory guidance is that customers with executed retail electric contracts in place prior to the effective date of the override are grandfathered from the additional RPS costs until the expiration of the grandfathered contract.

This is a good time to consider extending your electricity supply contracts to year 2021.

The Avalon Advantage – Visit our website at www.AvalonEnergy.US, email us at info@avalonenergy.us, or call us at 888-484-8096.

Please feel free to share this article.  If you do, please email or post the web link.  Unauthorized copying, retransmission, or republication is prohibited.

Copyright 2017 by Avalon Energy® Services LLC

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These Are Days To Remember

Natural gas prices are really, really low in the wholesale market.

The graph above shows daily natural gas prices traded at the Henry Hub, in dollars per million British thermal units ($/mmBtu), from January 1997 to today.  Prices on the graph are in nominal dollars, not adjusted for inflation.  Natural gas prices have exhibited a great deal of volatility.  The average price over this period is $4.60 per mmBtu and the long-term trend is upward sloping as shown by the red line.  This fits well with the widespread perception that energy prices always go up.

This graph shows prices on a monthly basis, which smooths out some of the volatility, but not much.  Prices on this graph are in real dollars.  Specifically, they have been converted to today’s (2015) dollars.  After adjusting for inflation, the monthly average price is $5.53 per mmBtu and the long term trend is downward sloping.  In other words, in real dollars, natural gas prices have declined over this period of time.

Why have prices declined?  In a few words—the shale gas revolution.

Until 2008, the contribution of shale gas production to total US natural gas production was small (see green area above).  Since then, total natural gas production has risen dramatically.  Even more dramatic is shale gas’ contribution to total US natural gas production which today is greater than 56%.  The Energy Information Administration’s 2012 “Outlook” projected this level of contribution on the part of shale gas would not happen until 2035.  Twenty years sooner than predicted, here we are.

Using December 2008 as a demarcation point and splitting the data into two segments, we see two very different worlds.  From January 1997 to December 2008, natural gas prices rose by more than 19% per year.  Since then, they have fallen 5.7% per year.

Other commodities are experiencing declining prices recently.  Iron ore and copper prices, for example, have dropped dramatically, primarily because of declining demand in China.  Natural gas prices have declined in the face of rising demand.  This is truly astounding.

This frequency diagram shows how today’s prices compare to historical prices (all in real dollars). Natural gas prices are really, really low.

But, there is more to this story.  First some background.

During World War II, two pipelines (the Big Inch and the Little Inch) were built by the US government to transport crude oil from the Gulf Coast to refineries in New Jersey. The pipelines allowed the oil to be transported by land, rather than by sea tankers (which were exposed to German U-boats) as had been the practice.  After the war, these pipelines were sold to commercial enterprises and transformed to transport abundant and low cost Gulf Coast natural gas to Northeast industrial markets.  Subsequently, other pipelines were built to move low cost natural gas from the Southwest to the pricier Northeast and Midwest markets.

The difference between the prices of a commodity at two different delivery points is known as basis.  If Gulf Coast natural gas at the Henry Hub sells for $5.53 per mmBtu and sells for $6.53 in New Jersey, the basis differential is $1.00.  And this is the way it was for many decades—natural gas in Northeastern markets trading at a basis (compared to the Henry Hub price) of a dollar or more.  But things have changed.

Because of the immense increase in volume of natural gas being produced from the Marcellus Shale, natural gas for delivery in Pennsylvania and New York State, for example, sells for $1.50 or more below the Henry Hub price. This is a negative basis.  Today, with natural gas trading around $2.60 per mmBtu at the Henry Hub, natural gas can be purchased for a little over a dollar per mmBtu in Pennsylvania and New York.

For energy buyers, these are days to remember.  For natural gas producers, not so much.

Evelyn Teel contributed to this article.

 

The Avalon Advantage – Visit our website at www.AvalonEnergy.US, call us at 888-484-8096, or email us at jmcdonnell@avalonenergy.us.  Please feel free to share this article.  If you do, please email or post the web link.  Unauthorized copying, retransmission, or republication is prohibited.  Copyright 2015 by Avalon Energy® Services LLC

See these related articles:

Real Electricity Prices (Energy Prices Always Go Up, (Part 5)

Energy Price Always Go Up (Part 4)

Energy Prices Always Go Up (continued)

Energy Prices Always Go Up

Natural Gas Prices Continue to March Down

How Low Can They Go?

Natural Gas Prices – Get Real

 

 

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In The News – Avalon Energy Services

Avalon Energy Services recently completed an electricity procurement project for KBS Capital Advisors’ One Washingtonian Center property in Gaithersburg, MD.  Marc Deluca, Regional President of KBS, noted that “Electricity markets have exhibited extreme volatility.  The folks at Avalon Energy Services have deep expertise and an unsurpassed understanding of the energy markets and how they work.  With their advice and counsel, we were able to successfully navigate our way to a very positive outcome. “

Click here for the full story.

Avalon Energy Services also recently became licensed by the Pennsylvania Public Utility Commission to assist commercial, industrial and governmental natural gas customers in all of the natural gas distribution company service territories in the Commonwealth of Pennsylvania.  These are:

  • Columbia Gas of Pennsylvania
  • National Fuel Gas Distribution Corporation
  • PECO Energy Company
  • Peoples TWP LLC
  • Peoples Natural Gas Company, LLC
  • Peoples Natural Gas, LLC – Equitable Division
  • Philadelphia Gas Works
  • UGI Utilities, Inc.
  • UGI-Central Penn Gas
  • UGI-Penn Natural Gas
  • Valley Energy, Inc.

Avalon Energy Services is now licensed for electricity and natural gas in Maryland, Pennsylvania, New Jersey and the District of Columbia.

Copyright 2014 by Avalon Energy® Services LLC

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40% Reduction and Volatility Avoided

Our recent press release was picked up by numerous news outlets.  Click here to see how it was reported by the Wall Street Journal’s Market Watch.

In summary, Avalon Energy Services, LLC and our project partner, Ameresco, successfully completed a second natural gas procurement process for the District of Columbia Department of General Services (DC DGS). Under its initial supply contract, DC DGS experienced an estimated 40 percent reduction in the price it pays for natural gas supply.  This second round allowed the District of Columbia to avoid the extreme volatility in natural gas prices that occurred during this winter’s heating season.

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Market Update, November 6, 2013

For buyers, pricing in the wholesale natural gas market is attractive.

The graph below shows natural gas prices over the past ten years.  While we are not at the absolute low, we are near the bottom.

The next graph shows the 24 month forward curve for natural gas.  The line is upward sloping, meaning the market expects prices to rise in the future.

The story is similar with electricity as the two markets – natural gas and electricity – are highly correlated in the Mid-Atlantic.

It is a great time to be a buyer.

The Avalon Advantage – Visit our website at www.avalonenergy.us, call us at 888-484- 8096, or email us at jmcdonnell@avalonenergy.us.

Please feel free to share this article.  If you do, please email or post the web link.  Unauthorized copying, retransmission, or republication is prohibited.

Copyright 2013 by Avalon Energy® Services LLC

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Real Energy Cost Savings

Below are the results from a sampling of reverse auctions conducted for Avalon Energy Services’ customers, including customers of varying size, over the past few months.  The first graph shows the customer’s annual energy costs before competitive bidding (blue line) and after contracts were executed on accepted bids (red line).  Pre-auction annual energy costs ranged from $0.7 million to $9.6 million, while post-auction costs ranged from $0.5 million to $5.6 million.

This translates into savings from about $0.2 million to about $4.0 million per year, as shown on the graph below:

Annual savings on a percentage basis are presented in this third graph and range from 27% to more than 40%.

Of course, past performance is not necessarily an indicator of future results, but in our experience, a well-executed and carefully managed reverse auction will achieve the most advantageous results for a customer.  The key is to use a skilled energy consultant who can effectively analyze your needs, customize a solution, and successfully use competition among suppliers to bring about the optimal energy procurement outcome.

Evelyn Teel contributed to this article.

The Avalon Advantage – Visit our website at www.avalonenergy.us, call us at 888-484- 8096, or email us at jmcdonnell@avalonenergy.us.

Please feel free to share this blog.  If you do, please email or post the web link.  Unauthorized copying, retransmission, or republication is prohibited.

Copyright 2013 by Avalon Energy® Services LLC