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Report says unsubsidized wind will become cost-competitive; Exelon in talks to buy FitzPatrick nuke

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Essential Energy Insights - October 2021


Report says unsubsidized wind will become cost-competitive; Exelon in talks to buy FitzPatrick nuke

Top news

Windenergy in the U.S. will become competitive with natural gas and other forms ofelectricity generation — without subsidies — by the middle of the next decade,just after the federal production tax credit for wind expires, according to aJuly 11 analysis from Macquarie Research. "We believe the USis now the most attractive wind market in the world due to the increasedvisibility of demand in the long term," the Macquarie analysts wrote. "Webelieve it supplants China, which has dominated wind demand over the last fiveyears, and prior to that Europe, which was the key market a decade ago."

Investorsare buying into Plains All American Pipeline LP's messaging that itssimplification deal with general partner Plains GP Holdings LP and the relateddividend cuts are more good news than bad. Prices for both partnerships jumpedat the opening bell and ascended through Midday trading on July 12. Shortlyafter 1:15 p.m. ET, PAA units had increased more than 11% to $29.81, while PAGPunits were up more than 12.4% to $11.13.

FormerPeabody Energy Corp. executive Fred Palmer called for a stronger partnershipwith the U.S. government to ensure "21st century coal" in thepost-election landscape, during a talk July 12 sponsored by the American CoalCouncil. Palmer pushed for greater federal support for coal technologies thatwill allow lower emissions from power generation to ensure industry longevity.

Power

*Exelon Corp. hasconfirmed it is intalks acquire and operate the soon-to-be-retiredJames A. FitzPatricknuclear power plant in New York from EntergyCorp., according to an Exelon release. The acquisition is dependent on the approval ofa proposal that wouldsubsidize New York's upstate nuclear plants.

* Switch Ltd.is seeking $30 million in damages in a lawsuit that alleged the PublicUtilities Commission of Nevada unconstitutionally denied the data storagecompany's request to exit NVEnergy Inc. and purchase power from an alternative provider,the LasVegas Sun reports.

* Morgan Stanley Research North America upgraded to "equal-weight" with a price target of $47 per share on strongerutility earnings potential in 2017 and more balanced risk-reward following thestock's recent underperformance. In addition, Morgan Stanley said the company'spower business is well-positioned to benefit from strong capacityauction pricing results next year.

*The U.S. Senate voted July 12 tosend the chamber's sprawling energy bill to a formal bicameralconference committee amid signs that House lawmakers may drop some contentiousmeasures from the legislation. The Senate agreed by voice vote to move to aconference on S. 2012, or the Energy Policy Modernization Act.

*While Elon Musk is confident that pairingTesla Motors Inc.'sbattery storage with SolarCityCorp's rooftop solar would make economic sense, experts say thatthe whole plan is at odds with net metering, BloombergNews reports. Consumers benefit from net metering by selling rooftop solarpower back to the grid; however, under Musk's vision, the same electricitywould be stored in Tesla batteries which in itself have a limited demand andwould only be useful for backup power during a blackout.

Natural gas/midstream

*Devon Energy Corp. issaid to be nearing a deal to sell its 50%stake in the Access Pipeline in Canada to Wolf InfrastructureInc., Bloomberg News reports, citing anonymous sources. Thesale could fetch the company up to C$1.5 billion. Wolf Infrastructure is backedby Canada Pension Plan Investment Board.

*Valero Energy Corp.has become the 100% owner of Parkway Pipeline LLC after acquiring the remaining50% stake from Kinder Morgan Inc.for an undisclosed sum, Reuters reports. The 16-inch pipeline has an initialcapacity of 110,000 barrels per day, and it runs from Valero's refinery inNorco, La., to Kinder Morgan's Plantation pipeline system in Collins, Miss.

*Low oil and gas prices have driven another supermajor oil and gas company'scredit rating down,as S&P Global Ratings on July 12 dropped Royal Dutch Shell plc's long-term corporate credit ratingsto A from A+, reflecting anticipated below-level credit metrics anddiscretionary cash flow through 2017.

*Infraestructura Energética Nova SAB, or IEnova, restructured its deal toacquire Petróleos Mexicanos' 50% stake in the Gasoductos de Chihuahua in a bidto comply with antitrust requirements, The Wall Street Journal reports. The subsidiary willnow pay $1.11 billion to buy the stake, as opposed to plus about $170 million inassumed debt.

*Despite the shale gas boom to the south, New England continues to rely onimported LNG, with reasons varying from local opposition to new pipelines toregulatory roadblocks, BloombergNews reports.

Coal

*The owners of the 2,094-MW Colstripcoal-fired plant in Montana on July 12 reacheda proposed settlement with environmental group opponents that couldpave the way to the retirement of the two older units at the plant on or beforeJuly 2022.

*Environmentalists and utilities are keeping a close eye on a coal ash trial inVirginia, as they anticipate that the federal court's upcoming ruling on coalash pollution atDominion Virginia Power's Chesapeakepower plant "could have far-reaching effects" on future fights overthe controversial disposal practice, TheAssociated Press reports.

Commodities

*Amid rising natural gasprices, the U.S. government boosted its power-sector coal consumption outlookthrough 2017, but still kept itbelow 700 million tons annually. According to the U.S.Energy Information Administration's latest "Short-Term Energy Outlook,"delivered natural gas costs are expected to average $2.92/MMBtu in 2016, up5.6% versus the prior outlook but down 9.3% versus the 2015 average, beforeclimbing 21.3% to $3.55/MMBtu in 2017, down 1 cent from the prior outlook.

*Following a 3.2-cent advance to a finish at $2.734/MMBtu in the prior session,August natural gas futures extendedgains overnight ahead of the Wednesday, July 13, open, assupportive weather-driven demand and storage expectations in the near-term runcounter to bearish end-of-season inventory prospects. Holding near unchangedfor much of the overnight session, the front-month found some footing andturned to the upside, trading last 5 cents higher at $2.784/MMBtu.

* Powerprices for day-ahead delivery couldchop around Wednesday, July 13, as traders look to jumbled demandforecasts for the latter part of the workweek alongside indecisive activity atthe natural gas futures arena. Rising 3.2 cents in the previous session,front-month August natural gas futures were extending higher early Wednesdayahead of the opening bell. At last glance, the contract was up 3.9cents to $2.773/MMBtu on short covering ahead of the Thursday release of thelatest round of weekly storage data from the U.S. Energy InformationAdministration.

New from RRA

*On July 7, the UtahDivision of Public Utilities filedtestimony (Docket No. 16-057-01) recommending that the PublicService Commission of Utah impose several conditions upon 's proposedacquisition of Questar Gas Co.parent Questar Corp.

Quoted

"Thereis no realistic chance of it paying off. It's just a waste of money that hasvery little possibility of providing a positive outcome," Mark Cooper, seniorresearch fellow for economic analysis at Vermont Law School's Institute forEnergy and the Environment, saidof Dominion Resources Inc.'scontemplated third unit at its North Anna nuclear plant in Virginia.

The day ahead

*Early morning futures indicators pointed to a higher opening for the U.S.equity markets. To view more SNL equity market indexes, click here.To view more SNL Energy commodities prices, click here.