September 2017

Did You Know - What is a kilowatt hour (kWh)? It is a common misconception that a kilowatt hour (kWh) is a measure of how many kilowatts you are using per hour. Rather, a kWh is a measure of how much energy you are consuming overall. More specifically, 1 kWh is the amount of energy you would use if a 1 kW (1,000 watt) appliance would run for 1 hour. 

Let's say that you would purchase a 100 watt light bulb and screw it into the socket. Should you leave it on for 10 hours you would have consumed 1 kWh of electricity. Likewise, if you turned on a 2 kW appliance you would use 1 kWh in 30 minutes, and if it were a 5 kW device, you would use 1 kWh in 12 minutes.
As a final example, if you were to use a laptop computer using 25 watts, it would take 40 hours to consume 1 kWh.

Do not confuse kilowatt hour with kilowatt which is a measure of power, not energy. 

Hurricane Update

With the damage caused by Hurricane Harvey still fresh on everyone’s mind, the southern part of the United States is still experiencing destruction from Hurricane Irma.  The losses to infrastructure are still being evaluated, and areas like Puerto Rico and the Virgin Islands will likely be without power for months.  

Despite this widespread devastation, natural gas futures prices on the NYMEX have not risen dramatically. The primary reasons for this are as follows: 
  1. Supply and storage levels are ample for this time of year.
  2. September and October are shoulder months and historically are not subject to great volatility.
  3. The geographic diversification of our gas supply system. A great deal of natural gas production occurs outside of Texas, in shale fields around the country, most notably in the northeast.  
Prospect Resources hopes that all affected by these Hurricanes are safe, and our best wishes are with you.

For more detail on this topic from Forbes, click here.

Solar Energy Production and the Solar Eclipse

For most Americans, the recent total solar eclipse was a once-in-a-lifetime experience. Much has changed since 1918, the last time that type of totality occurred.  One area of interest for many onlookers was how the eclipse would impact the generation of solar energy.

California is a very progressive state with regard to solar energy generation, and has enough big solar facilities to generate up to 9.8 gigawatts of electricity, depending on sun exposure. This is about equal to the power generated by 10 nuclear reactors. Officials expected a drop of 4,300 megawatts (MWs) of generation during the eclipse, enough electricity to power between 3.2 and 4.3 million homes. In reality, the state experienced a 3,400 MW drop.

For a graphic showing the drop in generation resulting from the eclipse, click here.

Natural Gas and NAFTA

The debate over NAFTA is again a hot topic in political spheres. President Trump has repeatedly intimated that he wants the accord to be renegotiated. While there is no doubt that the US has reaped major benefits from the free trade accord in certain markets, there are other areas where America appears to have been left with the short end of the stick.

A big winner for the U.S. has been the natural gas markets. Mexico is the largest customer of the U.S.'s natural gas producers, and export volumes are growing. Bloomberg reports that through May of this year, exports have been averaging 4.04 billion cubic feet per day, up from an average of 3.78 billion in 2016. This has been a primary driver in the U.S.'s $11 billion energy trade surplus with Mexico.

For more on this story from Bloomberg, click here.

Worldwide Coal Markets

In the U.S., coal production has been steadily declining. Two primary reasons contribute to this drop. The first is legislation related to environmental concerns. The second driver is the conversion of power plants to natural gas, which has become abundant and has driven down generation prices.

Surprisingly, demand for coal in China has risen and is expected to remain high in the short term. Coupled with a reduced domestic supply, the resultant spot price for coal imported from Australia has risen dramatically to over $100 per ton. Other supply / demand mechanics in these two markets will likely push prices up even further.

Coal producers are looking to maximize their revenues and profits in the coming months, until the market cools down again.

For more details about this story, click here.

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.  

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