Wednesday, April 11, 2012

ENERGY REALITY CHECK: EXPORT MARKET SATURATED

"Plummeting natural-gas prices are pushing U.S. industries into virgin terrain, even beginning to dislodge cheap Western coal from its once-untouchable perch as the nation's favorite fuel for power production...The shock wave for industry could intensify this summer because the U.S. is running out of room to store the glut of natural gas, which could drive gas prices down to sustained lows not seen in decades...The natural-gas surplus has implications for a variety of industries. Energy companies that produce gas are seeing revenue shrink and are searching for more lucrative oil. Cheap gas is stealing power-generation markets from coal, spreading gloom across a mining industry that is being spurned by its most important customer. Railroads, whose single largest source of revenue is typically hauling coal, are hurting. The economics of building a nuclear plant, wind farm or solar-power installation look shakier than ever." 

Russell Gold, Rebecca Smith, and Daniel Gilbert 
 The Wall Street Journal.

4 comments:

Cyril Rogers said...

Or a hydro dam. This is a crazy time to be investing so much money into such a questionable project.

The government and NAlCOR are rejecting the reality of energy surpluses only to saddle us with the most expensive project that could be conceived.

Muskrat Falls power would be prohibitively expensive and will never be able to penetrate other markets. Why, then, should we tie our hands forever with this extremely expensive source of energy?

Anonymous said...

Today the price of natural gas went below 2$. This is approximately 30% of what the price was when the latest version of the Lower Churchill project started.

The importance of this should not be overlooked as the price of gas is directly related to the price of electricity in the North East United States. Energy prices in New England (ISO Website) was $25 MWhr today. This is almost an order of manitude less than what MF energy will cost delivered to the Avalon Peninsula, and to the Maritime Link.

This market price will lower any potential revenue from additional power sales from Muskrat Falls.

However it also lowers the rate at which Hydro Quebec get for Upper Churchill Power. If gas stays in this range it is very reasonable to assume that we could buy energy from Hydro Quebec in the 3-5 cents per kwhr range. This is 50% what Muskrat Falls cost to generate, with much less risk.

As the government are now reviewing wind, and natural gas, why not look at energy purchases from Hydro Quebec? At these rates the overall cost has to be lower than either option reviewed by the PUB.

I would also be interested in knowing what Nalcor receive for energy sold under the GWAC agreement. At these final sales rates HQ must be nearly at a loss on GWAC energy. This energy, combined with RECALL would allow us to meet our requirements for a long time.

Buying Labrador power from Hydro Quebec may not be a very palatable option; but it should be offered to the people of the province. I am not sure if you will ever hear a politician ask for this option to be reviewed... This is unfortunate.

Peter L. Whittle said...

Tis the point I have been trying to make for a few months now. It is incredible how much the energy market has shifted over the past two years. Reality has to set in.

Peter L. Whittle said...

Tis the point I have been trying to make for a few months now. It is incredible how much the energy market has shifted over the past two years. Reality has to set in.