Energy Policy Issues and the 2016 Presidential Race

election-2016

This year’s two mainstream presidential candidates are divided on nearly every issue, energy being one of them.  In one case, there could be significant changes to the focus of the nation’s energy policies and research.  And in the other case, the U.S. could see many current policies continued and expanded and little change to the administration’s core principals related to energy.  There are five categories that energy related commentary from Hillary Clinton and Donald Trump tend to encompass.

Coal

It’s been said that Trump will have a pro-coal policy.  He has committed to reviewing all anti-coal regulations and has vowed to remove the moratorium on new coal leases on federal land.  Meanwhile, Clinton is determined to regulate fossil fuels by phasing out their subsidies and eventually eliminate their use altogether.  Trump claims that Clinton’s policies will put coal miners out of work but she has addressed this with a plant to invest $300 million in job creation in communities who current depend heavily on the coal industry.

Natural Gas

Clinton has referred to natural gas as a bridge fuel, implying we should only be relying on it temporarily for the bulk of our energy needs while we develop and expand renewable energy options.  She has not indicated, however, the length of the bridge.  Her policies could limit natural gas production as she has shown opposition to hydraulic fracturing and building new pipelines.  Trump has promised growth to the natural gas industry just as he has to coal.  However, considering they are each other’s closest competitors, it’s hard to see how both could strengthen simultaneously.

Renewable Energy

Renewable energy is not a focus of Trump’s campaign one way or the other, but he has been critical of wind power’s impact on wildlife.  This topic comes up a lot with Clinton, though.  She wants to invest significantly in renewable energy development including installation of 500 million solar panels in the U.S. in her first term and increase tax credits for renewable energy sources.

Global Warming

Clinton’s position on climate change tracks closely with that of President Obama.  She supports the Clean Power Plan and wants the U.S. to continue to act as a leader in fighting climate change.  Although he denied it in the second presidential debate, Trump was credited with saying that global warming is a conspiracy put forth by China.  Today, he acknowledges its existence but does not agree with the position that it is man-made.  He wants to roll back regulations meant to protect the environment and end both the Clean Power Plan and the Climate Action Plan.

International Perspective

Trump is firm on his stance for United States energy independence, but has not given details on what would become of the international energy trading that already takes place today.  On the other hand, Clinton hopes to modernize the nation’s electric grid and in the third presidential debate said she wants that grid to cross international borders.  She emphasized the importance of trading energy with neighbors of the U.S. but at the same time does not want the country dependent upon the Middle East to meet energy needs.

Natural Gas Curtailment: It could happen to You!

By Neal Shaw, September 20, 2016

The winter of 2013-14 was one of the worst on record for the United States. Last winter, 2015-16 was characterized as the winter that wasn’t.  When extreme cold weather does show up, the natural gas industry gets hit the hardest.  Prices can rise due to the high level of demand that comes along with below zero temperatures and diminishing supply.

With extremely cold temperatures, the interstate pipelines work hard to keep the gas flowing at maximum capacity in order to meet the high energy demands of its pipeline’s customers. Almost nothing in the pipeline can fail without causing some fluctuation in price or supply at one or more points in the delivery chain.

In 2014, TransCanada Pipeline (TCPL) experienced a fire on the Emerson lateral on Jan. 25 which caused prices for natural gas to skyrocket in the upper Midwest. Many natural gas customers were curtailed, facing a reduction of gas deliveries for hours and even days due to a shortage of supply as demand for service exceeded capacity.

Some plants and facilities were prepared with emergency plans in place and access to alternative fuels; others were not. As a commercial or industrial natural gas customer, it is important to know how to prepare for curtailment and the necessary plans to engage during curtailment. The following are some important points on how industrial/commercial facilities can do just that, rather than be caught off guard when curtailment occurs:

Expect Curtailment

There are two major reasons for curtailment. The first is what several major natural gas pipelines experienced in January, when the cold was so widespread from coast to coast and border to border that pipelines were unable to deliver adequate supplies. On these extended cold days, the pipeline does not have a chance to recover. The natural gas stored during the warmer months is often very low late in the winter due to heavy withdrawals and the lack of opportunities for replenishing storage volumes.

The other type of winter curtailment is caused by a rupture which can be an extremely severe issue. When a rupture occurs, pipelines are unable to meet load demand, so loads are cut drastically. Prices tend to follow supply and demand rules: As demand gets tight, prices rise.

Ruptures can result in serious price increases, which is exactly what happened in the Midwest last January. The explosion in Canada affected deliveries to the middle of the heartland, which resulted in gas prices soaring into the $40-80/Dth range, plus penalties of as much as $113/Dth for taking more gas than originally nominated. This price spike represented an extremely expensive departure from the normal price range of $3-$5/Dth.

Weighing Cost-Benefit of back-up fuel

Municipalities and some industrial/commercial facilities need an alternate fuel source such as propane or Liquefied Natural Gas (LNG). The costs of a standby fuel system can pay for itself in the long run if health and safety are involved of your plant’s production line cannot be interrupted without significant expense.  While backup options, such as propane air systems and backup generators can be expensive to purchase and maintain and may be rarely used, their value in an energy crisis is unquestionable.

Any backup system needs to be tested on a regular basis to ensure that it will be ready for operation at any moment. This means ensuring that plant and backup facility operators have tested all the elements of the backup system without using natural gas. To avoid critical production issues, testing of backup fuel sources should happen at the beginning of each winter to ensure they are ready to perform.

Staying On Top Of Weather

A natural gas pipeline distribution system is built to serve the coldest hour of the coldest day of the year for all of its firm service customers.  It’s difficult to predict when this extreme cold will hit, the level of severity or how long the cold snap will last. Having access to accurate and clear weather forecasts, including how long a cold snap is predicted to last and the severity of the weather event, will allow a company to make informed decisions before a curtailment hits.

Know Pricing

Curtailment can be expensive. If a company chooses to continue operations during curtailment, fines can be extremely high. Make sure to weigh the costs of stopping or cutting back operations against continuing operations with a penalty. This means calling the pipeline, utility or an energy management services provider to fully understand if continuing to run production is even a possibility, and if so, what the cost will be. Figuring out how much it will cost to shut down operations completely or rely on an alternative fuel source during curtailment will allow a company to make informed decisions based on cost-benefit analysis.

Even if it’s never happened before, it’s important to remember that curtailment can happen  – whether for a couple of hours or for days at a time – and companies should have a plan in place before it does. No facility is immune to events such as the TransCanada pipeline rupture.

According to the Office of Electricity Delivery and Energy Reliability of the U.S Department of Energy, ten unique energy events (7 are natural gas related) were identified as Major Events in 2015, compared with 12 events in 2014.  The figure below maps these events:

energy-events-2015

One Step Ahead

As we continue to experience extremely severe and volatile winter weather in the United States, it will become more important for all commercial/industrial end users to know what to do when faced with curtailment how much the financial implications will be associated with that curtailment. A company should always have the appropriate knowledge to consider what options make the most sense.

 

Natural Gas Supply: Owning Capacity or Buying Delivered Supply

Author: Brian Ford, Account Manager, U.S. Energy Services

Around our homes and around the office, much of what we do revolves around food.  We all need food for survival.  It is pretty straight forward.  When we are hungry, we want to eat, we want to know what time we are going to eat and we always like food to be available.  Large volume natural gas customer needs are also pretty straight forward.  They want their natural gas on time, at a specified point, and available to meet their demand.

While the options available to us when it comes to dietary choices seem endless, the options of how we purchase natural gas are not quite as lengthy.  There are however, options available and choices that need to be made.  Most options can be categorized into two groups:  Customers who own capacity on a pipeline and customers who purchase delivered supply from a natural gas marketer.

When a customer owns their own natural gas pipeline capacity, they are committing to an “a la carte” way of buying natural gas.  Just like going to an up-scale restaurant, you are purchasing each piece of your meal separately to complete the experience.  Buying natural gas supply from a marketer is more like buying a combo meal from any of the local fast-food restaurants.  Most everything is provided for you in an all-inclusive price and in a nice little pre-decided package.  The results of each are the same; you are now less hungry and you have received natural gas at your facility.  Everything else just depends on what your needs are at a given point of time.

We can all relate to why we may choose a nice steakhouse over a combo meal, so let’s leave the food analogy behind for just a moment.  Let’s consider the reasons you may choose between owning capacity and buying from a marketer.  Owning capacity on a pipeline means you are committed to a receipt and delivery point at a specified price for the length of the agreed upon term.  The terms of the agreement are very specific on how the natural gas flows and can be 10 to 15 year contracts.

Customers may elect to own capacity for any of the following reasons:

  • They have constructed their own pipeline attached to a major inter/intrastate pipeline;
  • Their business plan and subsequent production schedule certainty extends far into the future;
  • Their facility is located in a constrained area;
  • Or their operation cannot be interrupted for any reason.

Owning capacity gives a great deal of control to the customer.  Along with this control comes the responsibility of managing the capacity or contracting with a third party to manage it for you. When buying from a marketer, you agree to a price, delivery point and level of management you require for the natural gas.  Because a marketer potentially owns multiple pieces of capacity, there is flexibility within the terms of the agreement as to how the natural gas may flow to the delivery point.  Marketers may also have specialized products they have developed that offer benefits to customers based on a geographic, utility or pipeline dynamic.

Capacity and marketer choices available in the region around your facility can be overwhelming.  Sorting through the options and offering solutions is where U.S. Energy can help.  We are here to assist your teams through the entire procurement process.  We can help you identify options in the natural gas world that you are not aware of.  Give U.S. Energy a call and allow us to assist your team.

The Drilling Rig Count is Not Necessarily Indicative of Future Gas Production

Author: Kurt Garst, Account Manager, U.S. Energy Services

For many years the number of active drilling rigs has been used as a general indicator of future gas production. This premise was never perfect and developments over the past few years have continued to break down this indicator relationship.

Chart 1 below shows oil and gas drilling activity since 2008. From 2009 through 2014 oil prices were generally increasing and natural gas prices were declining. Oil and gas drillers reacted to this pricing environment by shifting drilling resources from gas to oil. However during this time of decreased drilling of gas wells, gas production increased substantially as shown in Chart 2. Clearly the decreased gas drilling count did not lead to lower gas production during this period.

oil-gas-chart1

Chart1.

gas-prod-chart2

Chart 2.

The drilling rig count is an enumeration of how many rigs are drilling wells, not how many wells are producing gas or oil. Also the number of rigs actively drilling doesn’t necessarily indicate how much gas the new wells being drilled will produce. Further, a well that has been drilled isn’t ready to produce gas until it has been completed and connected to a gas pipeline. Delays can occur between drilling and connection. There can be several reasons for delays. For instance, gas prices may have dropped too low to justify completing and connecting the well. Another reason can be that a pipeline connection is not immediately available or there is not sufficient capacity in the connecting pipeline to transport gas to market. Also, crews may not be available to finish the well completion work.

The past ten years have seen remarkable advancements in drilling oil and gas wells. This has further strained the relationship between the count of active drilling rigs and gas production.

  • Drillers are better at knowing where to drill for oil and gas than in the past. Technological advancements provide better indications of what is below the earth’s surface. This increases the success rate of drilling wells which in turn reduces the number of rigs needed to drill wells that successfully produce gas and oil.
  • Advancements in fracking and horizontal drilling methods have allowed drillers to successfully produce gas from less permeable rock formations (shale) than ever before. Better fracking techniques rupture rock formations and create better paths for gas and oil to reach the well. Improved horizontal drilling allows drillers to bore a well better following the oil and gas producing zone rather than previous techniques that only punctured zones perpendicularly. This exposes the well to more productive areas of the oil and gas reservoir and increases gas flow. Fewer rigs are needed to drill wells into productive areas than before.
  • Many of these shale formations containing oil and gas are relatively shallow. Wells drilled into these producing areas can be drilled quicker because drillers don’t have to penetrate as far into the earth as the wells being drilled prior to the availability of fracking and horizontal techniques. This decreases the drilling time and costs which decreases the number of rigs needed to drill wells.
  • Multiple wells can be drilled from the same location using directional and horizontal drilling. This means drilling rigs don’t have to be shut down, relocated and set back up before drilling a new well. A single rig can drill more wells faster.

Another important change over the last decade is that it is no longer as easy to designate a well as an oil or gas well. Many more wells are producing both oil and gas. Therefore looking at a count of the rigs drilling for gas can underestimate the future number of wells that will be producing gas.

In conclusion, the number of rigs drilling for gas is related to future gas production, but cannot be used as a primary indicator without consideration being given to other important factors.

Going Underground: A Focus on Natural Gas Storage

Author: Doug Allen, Account Manager, U.S. Energy Services

U.S. Energy Information Administration (EIA) is an agency within the U.S. Department of Energy that collects and analyzes energy-related data and statistics.  The EIA was created in the 1970’s to provide lawmakers, industry and the public with unbiased and independent energy related information for the purpose of promoting sound policy, ensuring efficient markets, and helping the public understand energy and its relationship to the economy and the environment.

Each week the EIA releases data on the levels of natural gas in storage in the United States.  This closely watched indicator can have a significant impact on the natural gas prices, often moving the market sharply within moments of the release.   Since the U.S. must rely on natural gas from storage to meet winter demand, reports that show levels that are lower than anticipated or that might portend insufficient storage levels in the future tend to push prices higher.   If the expectations are that storage levels may become too high, and thus create a natural gas glut, the market may have a more bearish price reaction.

Natural gas is primarily stored underground in depleted oil and gas fields, natural aquifers converted to storage facilities and salt caverns.  There are about 400 underground facilities currently in use with a cumulative working gas capacity of 4.659 tcf (trillion cubic feet).   The total U.S. consumption of natural gas was about 27.47 tcf in 2015.

nt-gas-storage-facilities

While 126 operating entities own these facilities, the actual storage capacity is contracted to many customers.  Data from the EIA website shows us that the 20% of all storage operators manage nearly 70% of the storage in the lower 48 states.  Most of these are interstate pipelines and utility companies.  A deeper dive into the index of the pipeline customers shows that they contract out most of their storage to natural gas and electric utility companies.  Ultimately, utilities control the bulk of U.S. natural gas storage.

storage-facility-operators

To collect the data for the Weekly Natural Gas Storage Report, storage companies that are “statistically selected by the EIA from a listing of all underground natural gas storage operators in the United States” must complete and submit a form detailing their natural gas storage levels.  The EIA estimates the total natural gas storage level based on this sample.

The EIA’s Weekly Natural Gas Storage Report is released each Thursday at 10:30 a.m. Eastern and can be found at this website: http://ir.eia.gov/ngs/ngs.html.  The website also includes historical data, reporting methodologies and any changes to the report release schedule for holidays.   The Weekly Natural Gas Storage Report is a key component of the EIA’s Natural Gas Weekly Update.

Sources: http://www.eia.gov/

Atlantic Coast Pipeline

Author: Kelly Zabel, Account Manager, U.S. Energy Services

Despite abundant natural gas supplies in the Marcellus shale play, lack of pipeline capacity and infrastructure to get this natural gas supply to the growing demand of Virginia and North Carolina has contributed to residents and companies not being able to reap the benefits of the bountiful harvest that has been occurring there for a few years now.  To remedy this situation, four companies – Dominion, Duke Energy, Piedmont Natural Gas, and AGL Resources – have teamed up in a joint venture to build and own the Atlantic Coast Pipeline (ACP).  Some of the benefits of this new pipeline include increased electric generation from a cleaner fuel source (vs. coal), improved service reliability, and room for further customer growth and economic development.  The need for this new pipeline is so heavily felt and widespread that 96% of the capacity is already spoken for under various purchase agreements.

The proposed route is approximately 550 miles long, originating in Harrison County, West Virginia, stretching southeast to Greensville County, Virginia, and then continuing to southern North Carolina.  This includes an almost 70 mile long eastern lateral to Hampton Roads.

acp-project-map

Currently, the ACP Team is in the middle of surveying along the proposed route and about 90% of landowners have granted permission for their land to be surveyed.  However, this pipeline is facing strong opposition from rural landowners, especially in Virginia.  Governors of Virginia, West Virginia, and North Carolina are behind the project, stating that this will boost their economies, help their communities, and bring more manufacturing business to their areas.  Yet dozens of landowners are refusing to allow the ACP Team to survey on their land, resulting in numerous lawsuits with more to come.  Opposition groups state a decrease in tourism and damage to the environment and economy as some of the reasons for their reluctance to cooperate.

The ACP Team has also been busy with FERC, submitting the necessary filings to keep this major project moving.  Below is the estimated timeline of the Atlantic Coast Pipeline Project.

project-timing

Underwater Pipelines

Author: Sandy Zoulek, Account Manager, U.S. Energy Services

Did you know there is an oil pipeline crossing under the water at the five-mile stretch between the Upper and Lower Peninsula of Michigan, where Lake Michigan and Lake Huron meet? The area between the two Great Lakes is called the Straits of Mackinac.  The pipeline, called “Line 5” by its owners, Enbridge Energy, is part of an extensive system which transports oil and liquefied natural gas throughout the Midwest and Canada.

Mackinac Bridge, spanning 5 miles, and connecting the Lower and Upper Peninsula

Mackinac Bridge, spanning 5 miles, and connecting the Lower and Upper Peninsula

Built in 1953, Line 5 is a 30” diameter pipeline that runs 645 miles, originating in Wisconsin, running under the Straits of Mackinac, and ending in Sarnia, Canada.  When underwater, the pipeline consists of two side by side 20” diameter pipes which span the distance shore to shore of approximately 5 miles.  The pipes range in depth, up to 270 feet underwater and 20 million gallons of light crude oil and natural gas fluids pass through them each day.

map-pipeline


Did you also know that “The Great Lakes and their connecting channels contain more than 90% of the freshwater of the United States and 20% of the world’s supply of fresh surface water?” National Wildlife Federation 2012


With this fact, and since the pipeline is 63 years old (some consider 50 years the ‘life expectancy’), many activist groups (Patagonia commissioned a Documentary:  Great Lakes, Bad Lines) and Michigan Counties are calling for its retirement.  Reasons range from the obvious risk of a spill, to failure to comply with easement rules, poor safety record by the pipeline’s owner, and the example of the spill on the Kalamazoo River (MI) in 2010 from Line 6B of the Enbridge portfolio. (The Kalamazoo River spill is the largest inland oil spill in US history, releasing one million gallons of heavy crude oil.)

Due to the impending risk of a spill, some Michigan legislators have filed suit to have the pipeline be re-categorized as an off shore pipeline.  Under the Oil Pollution Act, the liability for cleanup costs for owners or operators of onshore facilities is capped at $634 million, whereas companies operating pipelines classified as offshore facilities are required to demonstrate they have sufficient resources to pay for all cleanup costs.

In March of 2016, David Schwab, PH.D., of the University of Michigan Water Center, conducted a study of what he determined was the “worst possible place for an oil spill”. (Statistical Analysis of Straits of Mackinac Line 5: Worst Case Spill Scenarios)  The study, complete with animation to determine to potential flow of the spill, shows that 700 miles of shoreline would be affected by a spill in the Straits.  The Straits are subject to wide and varying factors including constantly changing currents, wind, and ice that would contribute to the complexity of a spill.

Enbridge is fighting back stating that the U of M Water Center modeling study was based on unrealistic assumptions.  Additionally, they have  “introduced new measures to help ensure the line continues to safely transport light crude oil and natural gas liquids……” further stating that “It does not and will not, carry heavy oil.” (heavy oil includes bitumen which was a key factor in the spill cleanup issues at Kalamazoo) Enbridge also states that the line is being operated at less than 25% of its maximum pressure capacity for enhanced safety.

Since the Kalamazoo spill, Enbridge has changed the way it operates, implementing numerous enhancements to operating and safety procedures.  They have established a Pipeline Control System and Leak Detection (PCSLD) department to better focus on maintenance needs. The response time for a spill is listed as 3 minutes in their many online brochures about Line 5.

Enbridge carries out hundreds of safety drills each year, but also embarked in a mock oil spill drill in 2015 specifically in the Straits of Mackinac to show their commitment to the safety of the Straits, Lake Michigan, Lake Huron, and the lakeshore.

This pipeline, as are all 2 million+ miles of pipeline, is governed by the Pipeline Hazardous Material Safety Administration (PHMSA) who is carefully monitoring the safety practices of Enbridge and Line 5. PHMSA’s focus is on public and environmental safety, holding Enbridge and all other pipeline owners and operators accountable for proper maintenance and safe operations.

Emails from Enbridge spokesperson, Ryan Duffy, state that “Line 5, while not perfect, is in very good condition and meets or exceeds today’s standards for new pipelines.”

Everyone, including Enbridge, agrees that an oil spill in the pristine waters of the Straits of Mackinac would be catastrophic.

 

Capacity Cost in the American Midcontinent

Author: Carl Doten, Account Manager, U.S. Energy Services

The 4th Midcontinent Independent System Operator (MISO) capacity auction was held earlier this month and the results of the auction have now been published (MISO Resource Adequacy Auction Results). The recently published prices offer insight into both expected energy costs for the coming delivery year of June 1, 2016 through May 31, 2017, and trends within the capacity supply/demand balance of each respective zone.

miso-territoryA map of MISO’s territory by zone is shown to the right. Electric consumers located in any of these zones, are likely to be impacted by the auction results either through potential cost changes in base rates in fully regulated service territories or cost changes in the capacity line item component in deregulated service territories.

The extent to which a consumer is impacted by the auction depends on a number of factors including:

  1. Which zone a consumer is located in (unit cost)
  2. Assigned capacity requirement (kW units)
  3. Energy contract structure (exposure)

The auction results (shown in $/Megawatt Day) by zone are shown in the table below along with the results of prior years.

auction-results-table

A review of the results with an understanding of the wider context prompts a few observations:

  1. All regions will be adequately supplied with capacity for the coming delivery year.
  2. Six of ten zones within the MISO will see higher capacity prices, while Zone 4 will find welcome relief from the prices of the last delivery year.
  3. The results indicate a shrinking in the available pool of capacity offerings. Most notable was the approximate 2,000 MW of capacity at the price taker point (bid in around $0/MW-day), and 3,000 MW of capacity this last year at the $160/MW-day price point. These losses represent approximately 5% of the bid capacity within the region.
  4. Regional capacity varied only slightly from what was expected, with much of the differential attributed to Reciprocating Internal Combustion Engine (RICE) regulations causing early retirements.

Finally, it should be acknowledged that within the MISO territory, the price set by the auction is only one approach to setting the cost to end users for the capacity component of pricing, and therefore should be looked at more as a price trend indicator than a specific unit cost.

From a higher level, the variability of pricing year over year, and from zone to zone provides a reasonable defense for the efforts that are underway to revise the capacity auction framework in MISO zones that rely on competitive markets to satisfy capacity needs (currently limited to Zone 4 as proposed).  The proposed shift to an annual auction covering the coming 3 delivery years (similar to PJM) would allow end users to better forecast costs, and would allow generators to finance and plan their generation resources based on a longer term view.

For Risk Averse Fuel Consumers, Now May Be A Good Time To Forward Purchase Your Diesel And Gasoline Supplies.

Author: Craig Petter, Account Manager, U.S. Energy Services

Diesel fuel retail price falls below $2.00 per gallon for first time since 2005

weekly-retail-diesel-prices

Click Graph for Full Article

Source: U.S. Energy Information Administration

In mid-February the weekly diesel price survey showed an average retail price for on-highway diesel fuel at $1.98 per gallon. This is the first time the price for diesel has fallen below $2.00 per gallon since February 2005. These lower prices are a reflection of lower per-barrel crude prices and significant storage inventories.

 

Fundamentals Driving Low Prices

Increases in production               

na-oil-production

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Source: U.S. Energy Information Administration

 

Increases in national storage inventories

distillate-fuel

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  • EIA data showed a 9.4 million barrel increase in domestic stockpiles.
    • Inventory levels have risen by over 50 million barrels since the start of the year and sit at the highest level since 1930.
  • Global crude market remains bearish amid oversupply and tepid demand.
  • Crude market traded at significant bottom in February, but fundamental reasons surrounding the price collapse are still very much in place.
  • With a shrinking wholesale market, consumers are benefiting from lower supplier markup.

 

Bullish signals

Exploratory rig counts dropping

oil-gas-rig-count-spill

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Source: U.S. Energy Information Administration

 

Petroleum exports continue to rise

us-petro-exports

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Source: U.S. Energy Information Administration

  • Rigs searching for new production sources are at historic lows.
  • The cost to produce supplies is greater than the current market for many suppliers.
  • Suppliers are capping off already drilled wells in anticipation of higher per barrel pricing in the future.
  • Smaller suppliers being pushed out due to bankruptcy or acquisition.

 

Consumer Options

With the significant decline in diesel and gasoline pricing over the past few years, many end users are taking advantage of these low prices and developing a Price Risk Management Program (aka Hedging). This is a program where the consumer can forward purchase fuel supplies at a known price.  Locking in all or a percentage of your future fuel costs (hedging) is a powerful tool to mitigate the volatility of an unpredictable market.

Some of the benefits of a disciplined Price Risk Management Plan are:

  • Allows you to “fix” your future diesel and gasoline costs today
  • Reduces market price volatility
  • Increases price certainty
  • Allows you to budget diesel and gasoline costs more accurately
  • Current market conditions are approximately $.45/gallon less than last year

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info@usenergyservices.com

763-543-4600

Congress Extends Tax Credits for Solar & Wind

The week before Christmas Congress passed a pair of budget bills that contained multi-year extensions of tax credits to encourage solar and wind energy development. The extensions were part of a package deal that included extensions for other renewable energy sources such as geothermal, landfill gas, and hydro in exchange for lifting the 1970s ban on the export of crude oil.

The solar energy Investment Tax Credit (ITC) was set to decline from 30% to 10% at the end of 2016. The legislation extends the tax credit at the 30% level through the end of 2019, after which it will decline annually until it hits 10% in 2022. The extension will help the solar industry avoid the boom and bust cycles that have plagued the wind industry due to chronic uncertainty around the production tax credit.

The wind Production Tax Credit (PTC) was extended at the $0.023/kWh level through 2016. The PTC will then decline 20% per year from 2017 through 2020.

The extension of the ITC will help solar to continue its rapid growth trajectory. GTM research attributes a 30% increase in solar investment through 2020, more than $40 billion, to the extension of the ITC. Overall, GTM is predicting that nearly 100 gigawatts of installations, representing $130 billion in investments by 2020. Though a net positive, Bloomberg New Energy Finance (BNEF) is predicting that the extension of the ITC will reduce the amount of solar installed in 2016 as developers no longer have to rush to meet the ITC expiration deadline at the end of 2016. Overall, BNEF predicts the total solar installations in 2016 will be down about 2.8 gigawatts, but the 2017 increase will more than make up for this reduction.