White Papers

Polar Vortex Energy Pricing Implications

Categorized Under: Energy

 

 

This ICF International white paper discusses how a major weather event—the so-called polar vortex—has generated significant profits for generators, particularly in the eastern and southern United States. Wholesale power price increases were caused by many factors, notably high and fluctuating delivered natural gas pricing, generation supply shortages, and differing market structures. Changing weather patterns will accelerate the number and size of these opportunities for investors who understand the relationships among these factors. Discussion topics include:

  • Natural gas prices spike on demand, pipeline constraints
  • Generation supply and power demand
  • Price spike levels dictated by market structure
  • Predictability of the problems
  • Substitutability of demand response (DR—also referred to as contracted interruptible load) and generation
  • Federal Energy Regulatory Commission (FERC) and North American Electric Reliability Council (NERC) treatment of reliability

These weather patterns also reveal potential reliability risks to the current grid. To the outside observer, the grid performed adequately during the polar vortex. But a more detailed look shows that grid reliability is a growing problem in many areas. Resource levels and mix, market structure, and seasonal resource participation are creating inadvertent consequences that may undermine grid reliability. The shortages highlight the need for a forensic review of the regulatory structures to ensure reliable power grids and appropriate price signals and the potential need for new reliability-driven investments.

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Authored By

  • Judah Rose

    Senior Vice President and Managing DirectorICF International

    Judah Rose joined ICF International in 1982 and has 30 years of experience in the energy industry with clients such as electric utilities, financial institutions, law firms, government agencies, fuel companies, and independent power producers (IPPs). He is an ICF Distinguished Consultant, an honorary title given to three of ICF's 4,500+ employees. He has served on the ICF Board of Directors as the management shareholder representative.

    Mr. Rose has supported the financing of tens of billions of dollars of new and existing power plants and is a frequent counselor to the financial community. He provides expert testimony and litigation support, addressed approximately 100 major energy conferences, and authored numerous articles.

    Mr. Rose has a B.S. degree in Economics from Massachusetts Institute of Technology and an M.P.P. degree from the John F. Kennedy School of Government at Harvard University.

  • Shanthi Muthiah

    Vice PresidentICF International

    Shanthi Muthiah joined ICF International in 1995 and her power industry experience has spanned regional markets in North America, Europe, Australia, Asia, Latin America, and the Caribbean. Her transactional experience includes acquisition support for potential bidders, largely private equity and independent power producers (IPPs) and sellers of generation assets and portfolios; energy markets advisor in bankruptcy and restructuring processes; financing and development due diligence support for various IPPs and utilities; litigation and regulatory support to utilities; and advisor to power companies in contracting and asset optimization for new or existing power plants.

    Ms. Muthiah has an M.S. in Technology and Policy, an M.S. in Environmental Engineering, and a B.S. in Electrical Engineering, all from Massachusetts Institute of Technology (MIT).

  • Frank Brock

    Senior Energy Market SpecialistICF International

    Frank Brock has more than 17 years of experience in energy economics and modeling. His areas of expertise include the analysis and modeling of natural gas end-use demand, natural gas use for electric power generation, and renewable energy and energy efficiency technologies.

    At ICF International, Mr. Brock has participated in dozens of studies for both public and private sector clients on such topics such the valuation of energy infrastructure assets, the impacts of environmental policies on energy markets, and long-term trends in energy demand.

  • Senior AssociateICF International

    John Karp joined ICF International in 2007 and has helped provide power market valuations, cash-flow forecasts, and energy market forward price curves for various clients, including independent power producers (IPPs); investment firms; utilities; and state, federal, and local governments and regulators. Mr. Karp has significant experience using ICF's proprietary energy model, IPM, to deliver long-term energy price forecasts and power portfolio valuations.

    Mr. Karp has a B.S. and an M.S. in Systems Engineering and Operations Research from the George Washington University.

Insight Details

Published: Jan 13, 2014
Authors: , , , ,

Trisagni Sakya

Source: ICF International
 
Commercial Opportunities and System Reliability

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