Power Forwards in PJM Trend Higher, RGGI CO2 Allowances Increase 5% | Energy Watch Blog

Published June 21, 2021 | energy-watch

June has brought about high temperatures and strong electricity demand to the PJM, NYISO, and ISO-NE power markets with elevated prices. Northeast power futures reacted quickly and are trading significantly higher. Despite this rally in prices, ESAI’s gas outlook is stable and believes the futures are overvalued.  

In this blog, we’ll provide a brief update on each of the ISO’s and an update on the RGGI Quarterly Auction (Auction 52).

Here is a brief update on each of the ISOs:

  • PJM – a 730 MW coal plant retirement has supported higher prices in a few zones and at PJM West Hub. A strong forward gas basis for the winter months and overvalued fall spark spreads have lifted the power forwards, but ESAI’s forward gas basis is around $0.25/MMBtu below the markets, resulting in a weaker forecast. Projected spark spreads moving into the fall seem to be overvalued.
  • ISO-New England – ESAI forecasts an increase in power prices in July, but still bearish to the New England futures. Mass Hub heat rates are likely to be lower than the Forward Curve Heat Rate, supporting ESAI’s bearish outlook.
  • NYISO – the recent retirement of Indian point 3 nuclear, in addition to the high temperatures and load levels support the uptick in futures prices. However, Transco Zone 6 (NY) natural gas forwards are higher than anticipated and trading overvalue in the market, which has also unnecessarily bolstered futures prices.

RGGI Quarterly Auction (Auction 52), was held on June 2, 2021.  The RGGI Auction saw bullish pricing with clearing prices settling almost 5 percent higher than last quarter. The warmer-than-normal weather and expected reductions to the program cap with new states joining RGGI pushed the clearing price up. Subscribers: Check out the full Energy Watch Report for a deep dive into CRRs and OTC Prices, as well as ESAI’s CO2 emission projections.

Look for PJM’s BRA Results and MOPR Reform analysis in our next publication of Energy Watch at the end of June. For more information and specific price data, check out ESAI’s Free Trial Service here: ESAI Power Free Trial.

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