Arctic Blast Wreaks Havoc on Energy Markets and Infrastructure
Energy markets are continuing to sort through the aftermath of last month’s significant arctic blast that brought temperatures well below historical averages across the US. The severity of the weather caused disruptions in both electricity and natural gas generation and distribution, which led to sky-high real-time energy prices and widespread power outages. This single event could very well have long-term effects on energy policies at the federal, state, and local levels.
What happened?
The central region of the US experienced a sustained arctic blast the week of February 14th, which wreaked havoc on energy markets and distribution infrastructure throughout the region and beyond. At one point, more than 70% of the continental US was covered in snow.
While many impacted states have dealt with periodic cold snaps before, the extreme cold that was sustained for nearly a week presented new and unique challenges for energy generation and distribution.
Natural gas utilities across the entire country issued Operational Flow Orders (OFOs) to encourage users to reduce consumption as demand reached critical levels.
Some natural gas suppliers were forced to declare Force Majeure in certain regions as they were unable to deliver natural gas according to their contracts due to frozen pipelines.
Texas, which has received the bulk of the media attention, experienced unexpected and immediate reductions in electric generation supply that resulted in massive price spikes – real-time electricity prices remained at or near the $9,000/MWh ($9/kWh) market cap throughout most of the event.
The grid operator for the majority of the state of Texas, ERCOT, initiated rolling blackouts beginning early on the morning of Monday, February 15th, in an effort to help alleviate record-setting demand on the grid. The intentional rolling blackouts were compounded by unintended power outages caused by the severe weather, leaving millions without power, gas, or water.
Who is impacted?
Real-time electricity and natural gas prices saw significant volatility from coast-to-coast (not just in Texas!) during the week of February 14th, with lingering effects still being seen two weeks later. End-users consumed energy at levels well above their historical averages in order to maintain comfort during the sustained cold.
The short-and-long-term impacts of this weather event still remain to be seen.
Natural gas in storage took a significant hit as demand reached near-record levels, which could have implications for months/years to come on energy prices.
We’re here to help.
While a weather event of this magnitude in terms of its impact on energy markets is unprecedented, Satori Energy has and will always remain committed to helping our clients navigate through their energy needs and these circumstances are no exception. We are continuing to closely monitor the situation to ensure our clients are in the best position possible given the circumstances.
