Our Electric system Is In A Full Scale Severe Economic Depression

‘Gas apocalypse’ looms amid power plant boom

By: Bloomberg News May 24, 2017 12:09 pm 0

The glut of cheap natural gas from a single, gigantic, shale basin that straddles the Northeast, mid-Atlantic and Midwest has sparked a massive construction boom of power plants. Dozens have been built in the past two years alone.
There’s just one problem: There isn’t nearly enough electricity demand to support all the new capacity. And as wholesale electricity prices plunge, industry experts are anticipating a fire sale of scores of plants in the region. Many, in fact, have already been sold along the PJM Interconnection LLC grid, the nation’s largest, encompassing 13 states from Virginia to Illinois.
“Everything in fossil fuels is for sale,” said Ted Brandt, chief executive officer at Marathon Capital LLC, a mergers-and-acquisitions adviser in Chicago. “People are bleeding.”
Drawing from abundant, cheap and nearby natural gas in the country’s most prolific shale field, the new plants are adding a gigantic amount of power generation — more than 20 gigawatts — to a region that arguably has more than it needs. The new gas-fired plants are also coming online at a time of market turmoil, buffeted by Obama administration efficiency policies that have helped tamp down demand and by the Trump administration’s determination to keep old coal-fired plants going.
Spot wholesale prices at PJM’s benchmark Western hub slumped to an average of $28.79 per megawatt-hour last year, falling by more than half since 2008 as the shale boom took hold. Many players are exiting the market.  Calpine Corp. — the highly leveraged Houston-based independent power producer with a more than $4 billion market value and 17 plants in the PJM grid — is exploring a sale of its facilities. The company has attracted interest from private-equity firms, Bloomberg reported this month. And FirstEnergy Corp. and American Electric Power Co. took more than a combined $11 billion in 2016 charges for plants. They’re exiting production to focus on buying and distributing electricity. Dynegy Inc. has also been reported as a takeover target.
“It’s a gas-driven apocalypse in the power market,” said Toby Shea, a New York-based analyst at Moody’s Investors Service.
As prices slip, some see a buying opportunity. Blackstone Group LP and ArcLight Capital Partners LLC bought four Midwest plants from American Electric for $2.17 billion in September. That implies an average sale price of $417 a kilowatt, a fraction of the $1,000 a kilowatt cost to build a new gas plant.
“It suddenly becomes a buyer’s market if the summer disappoints,” said Paul Pace, who heads KeyCorp’s energy lending team.
Contributing to the glut is the slowdown in coal-plant closures resulting from more favorable policies under the Trump administration. Some of the country’s smartest investors, including Blackstone, are buying these facilities at discounts, betting that a few hot or cold days each year will yield enough money to justify keeping them operating.
Patches of extreme weather are also a motive for the building boom. The polar vortex sidelined a fifth of PJM’s power plants in the game-changing winter of 2014, when frigid weather forced some plants to suspend production. This resulted in a huge, if temporary, spike in electricity rates for consumers. Preventing another such shutdown is a primary focus for PJM: Now, power plants must be both efficient and reliable in extreme weather or face steep penalties.
Finally, advances in efficiency, reducing demand for electricity, are converging with the gas glut to further depress the industry. Everything from the advent of LED light bulbs to Energy Star-certified refrigerators and appliances prompted PJM to slash its long-term growth forecasts to just 0.2 percent a year from 1 percent in 2014. Add in wind and solar, which are providing ever more energy to the grid, and the demand for new power plants looks even shakier.
Given lackluster demand for energy, it’s surprising that power-plant valuations haven’t fallen more, said Ravina Advani, a New York-based managing director at BNP Paribas SA. One reason: Developers continue to attract new investors, including from Japan and Korea. Still, it’s just a matter of time before prices break lower, said Dean Murphy, a Cambridge, Massachusetts-based principal at the Brattle Group.
“It’s like the housing market that is oversupplied and it takes longer to move your house,” he said. “Buyers have tons and tons of options.”

...The NEISO electric prices has been in steep decline for the last few years. It really has never translated into lower prices for the ratepayers. The PJM is a huge system. It is a bellwether indicator for electric prices in the nation.

In other words, the system is indicating wholesale electric prices will decline 25% in three years. How much will it decline this year, next year and year two?

This is very very bad news for the nukes and indicates safety is gravely compromised...

Another nuclear plant, Quad Cities in Illinois, also failed to clear PJM's capacity auction. In a written statement, Dominguez said Exelon "remains fully committed to keeping the Quad Cities plant open."

Power prices fall in 2020, PJM annual three-yearauction indicates

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Updated on May 24, 2017 at 8:42 AM Posted on May 24, 2017 at 8:00 AM

PJM Interconnection's annual auction to determine which power plants will best be able to serve customers three years from the auction date shows that coal and nuclear plants continue to have problems competing against gas turbine plants but that the pace of new gas plants entering the market is slowing.(PJM)

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By John Funk, The Plain Dealer

CLEVELAND, Ohio -- Add another monkey wrench to Ohio's debates about saving nuclear reactors and big coal-fired power plants from the growing fleet of gas turbine plants and wind farms.

PJM Interconnection's annual auction to guarantee there will be enough power plants in business three years from now to provide electricity to customers in Ohio, 12 other states and the District of Columbia has wrapped up with a healthy reserve committed to generate in June 2020.

The auction showed a reserve generating capacity margin of more than 23 percent higher than what PJM projects the demand will be from June 2020 through May 2021.

And perhaps the best news for consumers, the auction closing prices -- what PJM will pay power plants that commit to be operating in three years -- are lower than expected, about 25 percent lower over most of the PJM territory.

"The results show that PJM markets continue to achieve what they were originally intended to accomplish, ensuring reliability at the lowest reasonable cost," said Andrew L. Ott, PJM president and CEO, in a prepared release. 

There are exceptions in parts of the East Coast where demand is high and transmission capability constricted.

The one exception in Ohio is the Greater Cincinnati area served by Duke Energy, where power prices are expected to be significantly higher because there is a chance of plant closings and power imports, said Adam Keech, executive director of PJM market operations, in a news conference.

The auction capacity charges are not a complete guarantee of future prices, however, because they account for only about 10 percent of the final price of power. Fuel prices, competition and unexpected declines or increases in demand also play a role…