US POWER TRACKER: Southeast September forwards up on persistent heat risk

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Southeast power forwards for September -- down sharply from 2022 -- have been edging upward amid repeated heat waves, but increased hurricane risk spawned by record-warm sea surface temperatures could couple with growing nuclear and solar capacity to calm wholesale power prices.

The National Oceanic and Atmospheric Administration on Aug. 14 reported that July was the earth's hottest on record in 174 years, and the fourth-consecutive month of the global ocean surface temperature at record highs.

The situation is similar at a more regional and short-term level. Population-weighted average temperatures in Florida, Georgia and North Carolina in July were 85.3 degrees F, 82.2 F and 81.3 F, respectively, CustomWeather data shows. CustomWeather has similar data going back to 2017, and July 2023's average temperatures were higher than all of those, which averaged 83.5 F, 80.5 F and 80.4 F, respectively, for the six years.

But loads – which depend on several factors, especially economic activity and energy efficiency – were mixed in July.

In the North American Electric Reliability Corporation's SERC region, formerly known as the Southeast Electric Reliability Council, the load levels averaged 83.7 GW in July, down 6.1% from July 2022's 89.1 GW, according to S&P Global Commodity Insights data.

In contrast, NERC's Florida Reliability Coordinating Council load levels averaged almost 37 GW in July, up 11.7% from July 2022's 33.1 GW.

On Aug. 10, NOAA released an updated 2023 Atlantic hurricane outlook to raise their prediction from a near-normal level of activity to above normal., with 14-21 named storms and 6-11 becoming hurricanes, of which two to five could become major hurricanes. The previous forecast was for 12-17 named storms and five to nine hurricanes, of which one to four could become major hurricanes.

In recent years, hurricane landfalls have coincided with steep declines in power demand and slumping power prices, as transmission and distribution damage cuts grid access for customers.

SERC region loads to surge

S&P Global's North American Electricity Short-Term forecast indicates the SERC region should have an average load level of 84.1 GW in September, up 8.8% from the 77.2 GW actual load level in September 2022.

Natural gas is likely to provide an increasing share of that load, as the forecast calls for SERC's fleet to be producing at an average level of 34.6 GW in September, up 4.8 GW from the 29.8 GW load level seen in September 2022.

Despite the July 31 startup of Georgia Power's new 1.1-GW Vogtle Unit 3 nuclear generator, S&P Global forecast's SERC's nuclear fleet to be operating in September at a 23.2-GW level, down slightly from September 2022's 24.1-GW level.

In contrast, SERC's solar fleet is forecast to produce at an average level of 2.6 GW in September, up from September 2022's 2.2 GW.

The forecast for the FRCC is for a load level of 32.9 GW in September, flat with September 2022.

Pricing impacts

Into Southern September on-peak power packages averaged about $41.50/MWh in July, up 2.2% from $40.60/MWh in June, but down 59.5% from the $102.50/MWh that Into Southern September 2022 packages averaged in July 2022. During August, September 2023 on-peak power has edged up to about $41.65/MWh.

Florida September on-peak power averaged about $39.25/MWh in July, up 3.1% from $38.05/MWh in June but down 57.1% from the $91.55/MWh that September 2022 packages averaged in July 2022. During August, September 2023 on-peak power has edged up to about $39.55/MWh.

Steadily growing natural gas strength may be feeding power market bulls in SERC, but not necessarily in Florida.

At the Transco Zone 4 gas price point, which is important for most Southeast power prices, September gas averaged $2.774/MMBtu in July, up 2.5% from June's $2.706/MMBtu but down 68.6% from the $8.836/MMBtu that September 2022 gas averaged in July 2022. During August, Transco Zone 4 September power has edged up to about $2.80/MMBtu.

At the Florida Gas Zone 3 pipeline, September gas averaged $3.159/MMBtu in July, up 5.5% from June's $2.994/MMBtu but down almost 66% from the $9.283/MMBtu that September 2022 gas averaged in July 2022. During August, Florida Gas Zone 3 September packages have stayed fairly flat at $3.132/MMBtu.

Reviewing July bilaterals' performance, day-ahead on-peak indexes averaged in the mid $40s/MWh in July, up from the low $30s/MWh in June but down sharply from averages around $135/MWh in July 2022.

Transco Zone 4 spot gas averaged $2.796/MMBtu in July, up 26.2% from June's $2.216/MMBtu but down 76.4% from July 2022's $10.145/MMBtu. Florida Gas Zone 3 spot gas averaged $3.206/MMBtu in July, up 30.2% from June's $2.462/MMBtu but down 69.9% from July 2022's $10.664/MMBtu.