October
2016
Please
enjoy this edition of the
Prospect Resources
newsletter
Did
You Know - How
does Load Factor Affect
Electricity Pricing?
Many
consumers do not realize the
role that their "load
factor" plays in the price
that they pay for
electricity. In fact, it can
greatly impact the cost of
each kWh.
The
load factor can be loosely
defined as
the relationship
between how much power is
used across a time
period and the maximum
that would be used if
power were
consumed continuously
during a period of peak
demand.
Generally speaking, a high
load factor will result in
more favorable electricity
pricing. A very low
load factor results in high
pricing, as the maximum
demand will be distributed
across a relatively small
number of kWh.
There are strategies
available to improve a
property's load factor. On
the one hand, the property
can look to reduce demand by
distributing the load across
different periods. At the
same time, the property can
look for ways to optimize
power consumption while
keeping demand stable.
A
very basic description of
load factor and its
associated calculations can
be found here.
How
Much of a Premium Do We
Pay for Renewable
Energy?
The Institute for Energy
Research recently published a
study exploring the cost
of wind and solar
power. The study
found that the
electricity from these
renewable sources will
typically cost 2.5 to 5
times more than electricity
from existing coal and nuclear
power.
The study factors in the costs
incurred as a result of the
intermittent nature of these
energy sources, as well as the
resulting balancing
requirements that arise.
Consequently, as natural gas
makes power generation less
expensive, at least in the
short term, closure of
existing coal and nuclear
plants will be a contributing
factor to a rise in prices as
more renewables are added to
the grid system.
For more details about this
study, click here.
LNG
(Liquid Natural Gas)
Highlights for 2017
A huge development in 2016 for
the natural gas market is that
the U.S. has begun to export gas
via tanker in its liquid form.
This enables exports to most
parts of the world, wherever
economically viable. This part
of the U.S. gas industry is
still in its infancy but is set
to grow significantly in 2017.
The increase in natural gas
prices internationally leaves
the industry wondering how
prices will be impacted
domestically.
- In 2017, the United
States will be a net
exporter of natural gas.
- For natural gas to be
shipped by tanker, as
opposed to by pipeline, it
needs to be liquefied. That
is done by exposing it to
temperatures of
minus 260F.
- In 2017, the capacity
to export LNG is expected to
more than double, to
3.2 billion cubic feet per
day. Consequently, 8-10
percent of total U.S.
natural gas production could
be exported.
- Most of the tanker
shipments in 2017 will be
going to Central and
South America, but, due to
lower prices, shipments to
Asia can be expected to
begin as well.
- The newly expanded
Panama Canal, opened in
June, is now wide enough to
accommodate most LNG
tankers. This will
significantly lower trip
time and cost to potential
Asia customers like Japan
and China. This could
shorten each trip by up to
two weeks, saving millions
of dollars in transportation
costs.
- Turkey took a
shipment of U.S. gas in
September. This could heat
up competition in the
European markets. Currently
Russia provides 40% of
Europe's natural gas, and
Turkey is their third
largest customer.
Prospect
Resources Inc. (PRI) is
a firm that specializes in
managing energy procurement (gas
and electricity) for medium and
large commercial and industrial
clients.
The only constant in the energy
markets over the past 15 years
is price volatility. This
reality turns energy procurement
into a very risky business.
PRI's
Layered
Hedging
strategy is a proven
alternative.
Check out what we can do for
you!
|
