"The majority of the wind resources west of the Mississippi were less than 80 percent of what would be deemed normal conditions," NRG Chief Executive Officer David Crane said on the company’s Aug. 4 earnings call. "We never anticipated a drop off in the wind resource as we have witnessed over the past six months."
While conventional power plants produce electricity continually, wind power is intermittent, dependent on air flows.
While utilities have gotten better at predicting when the wind will blow, it’s not yet an exact science. One theory is that El Nino is responsible. That’s a condition when the surface of the equatorial Pacific Ocean warms and the atmosphere reacts, changing weather patterns around the world.
NextEra, the biggest wind-power producer in North America, agrees El Nino may be playing a role. While posting a profit of $1.59 a share in the second quarter, light winds cost the company 14 cents a share.
“Although we cannot draw any firm numerical conclusions, we do know the strong El Nino cycle that we are now in tends to be correlated with below-average continental wind resource,” NextEra Chief Financial Officer Moray Dewhurst said on an Aug. 3 earnings call.
Todd Crawford, a meteorologist with WSI in Andover, Massachusetts, said he can see evidence for that in the lack of wind.
“The anomalies are pretty small,” Crawford said. “But the pattern of anomalies does have the fingerprints of an El Nino signal.”
There may be more at play than just El Nino, said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland.
High pressure dominated the weather maps from April through June, which meant fewer cold fronts and less variability in pressure, Rogers said. Such conditions mean less wind.
Whatever the reason, turbines aren’t turning as much as their owners would like. Companies that own wind get federal tax credits based on power production, so lower speeds mean reduced benefits.
For NRG Yield, formed by NRG Energy Inc. to hold renewable and conventional power plants, light breezes were one reason that it cut the forecast for 2015 earnings before interest, taxes, depreciation and amortization by $30 million.
From Bloomberg Business
Wind-Power Producers Find Profits as Elusive as a Summer Breeze
by Jim Polson
Power producers who invested billions in turbines are finding that making money off the wind can be as unpredictable as the energy source itself.
NextEra Energy Inc., NRG Yield Inc. and Duke Energy Corp. all said a lack of sufficiently windy days cut into second-quarter sales. And neither power generators nor forecasters seem to know exactly why.
“There was a definite trend with several utilities talking about weak wind resources,” said Shahriar Pourreza, a New York-based analyst for Guggenheim Partners LLC. “This isn’t something that has been major in the past so definitely a phenomena worth following to see if it’s sustainable or an anomaly.”
Wind, once a marginal resource for power suppliers, has begun to matter. Installations surged sevenfold in the U.S. last year, making it the largest market for the technology worldwide after China, according to Bloomberg New Energy Finance. Spurred by tax incentives and state clean energy standards, wind accounted for 4.4 percent of U.S. power generation in 2014, up from 1.9 percent five years ago, the Energy Department said.
Tax credits for wind production are expected to more than double to $2.4 billion in the fiscal year ending Sept. 30, according to an August 2014 estimate, the latest available from Congress’s Joint Committee on Taxation. Wind credits may reach $3.6 billion annually by the fiscal year ending in 2018, the committee reported.
Developers have been installing turbines in the gusty plains of the Midwest and Texas as well along mountain passes in California and other western states. Wind provided nearly 10 percent of electricity production in Texas and 7 percent in California last year.
Modern turbines range in size from 80-foot structures that power a single home to utility-scale units that stand up to 325 feet tall.
Mr. kilduff appeared again on the CNBC - PBS Nightly Business Report show. His interview starts at the 6:50 mark. Transcript will be available tomorrow on the website. I thought tonight's interview wasn't anything special. however he was on for a few minutes.
Harold, I heard yesterday a big reason oil spiked up was short covering... the feel is oil prices will go back down and perhaps retest the lows. today's drop shows this may be probable.
a number of weeks ago I thought TRGP would drop below the previous 52-week low of $82/share, but I will admit I was surprised by the new low established of $58/share... so do you think TRGP will retest the new low of $58, it closed today at $63.76?
I think WMB will be broken into pieces....I don't think one company will swallow it whole.... I think WMB management might be able to derive more value to sell it by the piece....
North Dakota, the nation's No. 2 oil producer behind Texas, produces about 1.2 million barrels daily. The state also produces a record 1.6 million cubic feet of natural gas daily that comes when an oil well is drilled.
MDU projects its natural gas investment in the state will be $212 million by year end, a 15 percent increase from 2014.
The utility is a subsidiary of MDU Resources Group Inc. of Bismarck, whose holdings include natural gas pipelines, electric and gas utilities, and production of oil, gas and construction materials.
North Dakota regulators mull utility's gas rate increase
BYLINE: By JAMES MacPHERSON, Associated Press
BISMARCK, N.D. (AP) - Montana-Dakota Utilities Co. wants a $2.6 million increase in its natural gas rates to help cover the cost of its increased investment in natural gas facilities in North Dakota.
The Bismarck-based utility, which serves more than 107,000 North Dakota customers in 74 communities, is asking the state Public Service Commission to grant the increase that would raise residential natural gas bills about 2 percent. Home customers would pay about $24 more annually, though large industrial natural gas users would not see an increase, the company said.
The commission began a two-day public hearing on the proposed hike on Monday at the state Capitol. Commission Chairwoman Julie Fedorchak told reporters that she expects a decision on the rate hike in about a month.
MDU originally sought a 3.4 percent overall rate increase, which would have raised $4.3 million annually, or about $3.50 a month for an average residential customer. The utility reached a settlement with interveners in the case, including AARP North Dakota.
John Coffman, a St. Louis, Missouri-based lawyer for AARP, said the group approves of the 2 percent rate hike but that it should be spread among all rate payers.
"The proposal is a little bit heavy on the residential customer class," he said. "We are concerned about the smallest users that scrimp and save and do the best they can to keep their bills affordable."
Nicole Kivisto, MDU's president and CEO, told the three-member regulatory panel that the company conducted a study that found residential customers are subsidized by larger ratepayers.
Home customers are "not meeting the rate of return," she said.
About 85 percent of MDU's customers are residential, the company said.
VEAâ#$%$™s fixed-rate power purchase agreement with Nevada Valley Solar Solutions I, LLC, another indirect subsidiary of MDU -- which will operate the solar plant and sell the energy to VEA -- provides the cooperative with one of the lowest-priced solar energy contracts in the nation.
This is a solar project that truly stands alone,â#$%$ said Thomas Husted, CEO of VEA. â#$%$œAt VEA, we value innovation and member service. Our status as a member-owned electric cooperative allows us to develop opportunities that promote local economic development while strengthening Nevadaâ#$%$™s renewable energy industry. We are committed to positioning Nevada as a leader in the national renewable energy market, and we hope this innovative endeavor serves as a benchmark for future community solar projects across the country.
Bo Balzar of Bombard echoed Hustedâ#$%$™s sentiments. â#$%$œBombard has been involved in Nevadaâ#$%$™s renewable energy industry since the beginning, and we are proud to be working with VEA. This project proves it is possible to develop renewable energy economically while at the same time safeguarding the environment.
As a result of the project, VEAâ#$%$™s member-owners in southwestern Nevada will have the opportunity to participate in a new community solar program at no additional cost. The output of the project will be available for all VEA members at a lower price than their current electric rates. The program will allow VEA consumers to experience the benefits of renewable energy without significant investments or long-term leases. Additional details about the community solar program will be released in the coming months.
We are developing this community solar program to meet the growing demand for alternatives to rooftop photovoltaic systems in our communities,â#$%$ said Chris Brooks, VEAâ#$%$™s executive vice president of energy services. We look forward to providing our member-owners with a new, cost-effective option that can immediately reduce their energy expenses.
From Energy Monitor Worldwide
VEA and Bombard Electric Announce 15-Megawatt Solar Energy Project in Pahrump, Nevada
Valley Electric Association, Inc. (VEA), a nonprofit, member-owned electric cooperative, announced detailed information about the plan to begin construction this year on a 15-megawatt solar energy generation project in Pahrump, Nevada. Utilizing Nevada union workers and American-made materials, this solar project will generate affordable renewable energy while creating new jobs and tax revenue within the Silver State.
The solar project is expected to begin delivering energy on July 1, 2016. Bombard Renewable Energy, a division of Bombard Electric, LLC (Bombard), an indirect, wholly owned subsidiary of MDU Resources Group, Inc. (MDU), a well-established, Nevada-based company, will handle engineering, procurement and construction for the project, which will include the installation of 54,000 photovoltaic panels across an 80-acre project site. The project will use American-made photovoltaic panels, inverters and steel throughout the solar field. The project will also include the construction of a 2,640-foot, 24.9-kilovolt distribution line.
This community-focused solar project will utilize union labor and provide an estimated 200 jobs throughout the construction process. In addition, VEA and Bombard are working closely alongside state and federal agencies to protect the Mojave Desert tortoises at the project site. This involves a number of unique design and construction elements, including the creation of a large temporary habitat for desert tortoises. VEA will also facilitate and fund in-depth research and monitoring studies in partnership with government agencies and regional researchers to evaluate the impact of solar panel configurations on local vegetation, the tortoise population and birds.
Big Flat Field - Cane Creek Shale Formation
Fidelity Exploration and Production Company completed 4 wells in 2013 and another 6 in 2014 all in the Big Flat Field. Below is a table of some of the recent wells and their cumulative oil production. Big Flat Field has a cumulative production of 4,578,985 bbls of oil and 3,144,095 MCF gas. Fidelity has estimated that their new drill wells will recover 250,000 to 1,000,000 bbls of oil per well. Based on the performance of these recent wells, the mid case reserves using the Big Flat Field as an analogy is: 250,000 bbls of oil and the low case is 125,000 bbls of oil. //st Well Name Date 1st Production Cum. Oil Production Kane Springs Fed 10-1 1992 656,413 Cane Creek Unit 26-2 2012 216,146 Cane Creek Unit 12-1 2012 827,839 Cane Creek Unit 18-1 2012 412,000 Cane Creek Unit 26-3 2013 316,578 Cane Creek Unit 36-1 2013 531,157
Fidelity Exploration Company is keeping much of their technical data confidential for competitive reasons. From the UGS study that is to be completed in fall of 2015, there were published values for porosity, reservoir pressure gradient, gas to oil ratio and net thickness. Values for water saturation and recovery factor were taken from other well established shale plays.
"Our team is focused on leveraging our collective resources to assist our customers with increasing revenue, minimizing life-cycle costs and ensuring safety and environmental compliance at all times," King said. "These goals are only realized by being readily accessible with expert service and responsiveness to every customer’s need."
Services, equipment and employees from the Accelerated facilities in Devine and Victoria will be moved to the new building in Pleasanton where they will operate from a centralized location within the Eagle Ford shale.
"The expansion of our shared facility in Pleasanton aids us in accomplishing this task," King said. "We are passionate about our commitments and excited about the future.”
Building permit records show that Fredericksburg-based KB Phoenix Construction LLC is the general contractor on the project while Merriman Pitt/Anderson, Inc. are serving as the engineering and design firms.
Dover Artificial Lift expands facility, services in Pleasanton
Eagle Ford Shale Insight
by Sergio Chapa Reporter - San Antonio Business Journal
Dover Artificial Lift is expanding its facilities and services at its Eagle Ford shop in Pleasanton at a time when other companies are cutting back on their operations.
The company has started construction on a new building at its existing facility off Shale Road just south of town.
Representing $450,000 in new construction, the new building is expected to be completed in the fourth quarter and will house Accelerated Companies LLC, a Dover-owned company that specializes in jet pump/hydraulic lift, ESP, surface pumps and other services.
Dover has spent the last few years buying up a number of services companies to beef up its artificial lift group. The acquisitions include Harbison-Fischer, Norris, Theta, Spirit, PCS Ferguson, Pro-Rod, Upco, OilLift and Accelerated, which specialize in sucker rods, pumps, automation, services and accessories to artificial lift solutions.
The new building in Pleasanton will allow Dover Artificial Lift to provide a variety of products and services from a single facility that will include combined products and services by Harbison-Fischer, Norris, Spirit Energy Solutions, Pro-Rod, UPCO and now, Accelerated.
The move comes amid six-year low crude oil prices that have prompted many companies to tighten their belts and consolidate their operations to cut costs and increase efficiency.
Dover Artificial Lift Director of Business Development Stephen King said clients will benefit from the new building in Pleasanton through reduced downtime and lower operating costs.
final hour of trading today will be interesting. this is when all the computers and algorithms kick in....market will probably move big one way or the other on big volume...... I will continue to sit on the sideline..
we haven't done anything since August of last year... prices in some of the industrials I watch are still over $100/share... if China implodes these stocks prices have to fall....
we are long both GAS and SO. from the little i've seen GAS is going to be bought out for cash ($66/share) and not stock.
are you long GAS or SO?
we are still waiting for the cash/completion of SIAL getting bought out. WMB is up for auction. have ton's of splits that are becoming worthless with stock sell-off. maybe just holding the cash is the best thing for now?
I’ve always felt China is a house of cards. I only will be surprised it China’s economy is real and growing. The communists are in charge and the system is very corrupt and inefficient. With Obama ‘s policies the U.S. is moving in this direction.
I don’t believe the U.S. economy is as strong as the economic numbers the U.S. government puts out. Google “A Fine Fed Mess”, it is the lead editorial in today’s WSJ. I have been completely against the artificially low interest rates. The piece has an excellent chart of economic growth with this policy in place. The unwinding of this will be a disaster. I have part of my portfolio set in interest rate sensitive stocks (utilities/REIT’s). Although in ’15 they have been down, every time uncertainty or volatility hits the markets, the money moves into these companies. The Fed is really in a bad spot, if they don’t raise rates in September this will be a sign of weakness.
Mr. Kilduff’s $25 barrel price is not good for the energy sector. You never want to chase yield so DNR’s current yield of 7% and TRGP’s 5.5% current yield can’t be maintained if oil keeps dropping and stays low. When will these companies start cutting dividends? When dividend cuts start that would be another sign that these lower prices will be around for a while.
I respect your analysis, but only would comment that production/output has to be strong since these companies fixed costs have to be matched by revenue brought in, no matter what the current barrel is going at……don’t sell oil have no income coming in…. also one thing I want to know is how fast can producers ramp up production going forward? If capital investment/drilling is lower for an extended period due to the low prices what will be the impact when the markets need more product?
Mr. Kilduff was on last night's CNBC PBS Nightly Business Report. It was an excellent interview. The transcript won't be available until Monday so I can't copy his comments. However you may want to go to the Nightly Business Report website since last night's show is available to view. Mr. Kilduff comes on at the 7:20 mark.
Today's wall street journal print edition in the MoneyBeat section has a small comment on why gas prices haven't fallen as fast as oil prices. The headline of the section is Dow Theory Sell Signal. Sorry, I can't locate the information online to copy it here.
It also has reached an agreement in principle with an unnamed utility in MISO - referred to in the complaint as "the PPA off-taker" - to purchase the full output from the wind farm, the developer said.
"In short, Merricourt has a definitive plan to complete the operational readiness of its 150-MW wind farm by [Dec.] 31, 2016," according to the complaint. "Merricourt, (and third parties including the PPA off-taker), however, cannot go forward without knowing that the project will have interconnection service."
Moreover, Merricourt reported that MDU Resources Group Inc. subsidiary MDU - the interconnecting transmission owner - supports extending the commercial operation date. The developer further noted that the project stands to lose its qualification for the production tax credit if it does not achieve commercial operations by the end of 2016 unless Congress extends the credit beyond that year. That deadline cannot be met unless the coordinated plan for development is initiated immediately, the complaint said.
Merricourt said it has already spent over $20 million developing the project and is "ready to commit another $20 million in the next few months," with only MISO's inaction standing in the way. The grid operator has granted commercial operation date extensions to similarly-situated projects, and therefore its failure to do so here is "unnecessarily obstructionist, unjust and unreasonable and unduly discriminatory and preferential," Merricourt said.
FERC accordingly was asked to direct MISO to amend the generator interconnection agreement to extend the commercial operation date to Dec. 31, 2016. Because the window for meeting that deadline "is achievable, but limited," Merricourt requested that the commission initiate fast-track processing and rule on the complaint by Sept. 30. (EL15-90)
From SNL Power Daily with Market Report
Developer's dispute with MISO over commercial operation date jeopardizes future of ND wind farm
BYLINE: Marcy Crane
The Midcontinent Independent System Operator Inc.'s refusal to confirm that it will not terminate the generator interconnection agreement for Merricourt Power Partners' planned wind farm on Dec. 1 is putting the future of the facility at risk, the project's developer told FERC in an Aug. 17 complaint.
MISO insists the time is not right to address the issue because the project's deadline for achieving commercial operations under the agreement has not yet passed, according to Merricourt, a subsidiary of EDF Renewable Energy. But that deadline clearly will not be met, and the developer therefore said it "cannot prudently initiate construction" until the grid operator has provided assurances that "continued interconnection service will be available to the project as of and after [Dec.] 31, 2016."
"Merricourt is poised to put all the pieces in place to finish its generating facility and bring 150-MW to the MISO region by the end of next year," the complaint said. "MISO alone, in its position of transmission provider, has the key to make this happen, but it refuses."
The interconnection agreement for the proposed 150-MW Merricourt wind project to be built in southeastern North Dakota was executed in October 2011 by MISO, Montana-Dakota Utilities Co. and EDF Renewable subsidiary enXco Development Corp., but has since been transferred to Merricourt. That agreement established a commercial operation date of Dec. 1, 2012, and provides that MISO may terminate the agreement if the project has not achieved commercial operations within three years of that date.
But Merricourt said it has purchased the project's turbines, "lined up the equipment, contractors and corporate funding to complete the generating facility," and paid for and built all needed network upgrades and interconnection facilities.
Mr. Glionna even thinks the sector could hold up if and when rates rise. “Our historical review shows that performance is resilient [when rates rise],” he wrote. “On fundamentals…utilities are stable. Valuation is not an impediment to a rebound.”
Even if utilities fare better than the rest of the market over the next few weeks, that’s no guarantee the sector will book positive returns. The major indexes have hit a rough patch with the S&P 500 down 5.8% over the past five sessions. Utilities were the best performing sector this week, but they too finished in the red, down 1.2%.
One Trade That Is Working: Utilities
By Kristen Scholer
Boring is back.
As the S&P 500 has fallen 7.5% from its May 21 high, one sector is a bright spot: Utilities.
The sector closed down 1.2% Friday, while the S&P 500 lost 3.2%. But, since the S&P peaked three months ago, the utilities sector is the only one that’s up, rising 0.9% during that time. Amid fears about global growth, uncertainty about what lies ahead and continued low rates, market participants have taken a liking to the group.
Utilities are considered a defensive, or less-risky, trade. Most offer high dividend yields with the sector as a whole yielding nearly 3.7% versus about 2.2% for the S&P 500. The sector has been a beneficiary of easy monetary policy and last year it was the best performing sector, climbing 24%.
After China surprisingly devalued its currency last week, Bank of America Merrill Lynch equity strategist Savita Subramanian said the continued lack of clarity emanating from the world’s second-largest economy could continue to push investors into safe-haven trades for the rest of the summer.
RBC Capital Markets strategist Jonathan Golub also struck a bullish tone on the group last week, saying utilities stand to prosper if weaker growth results in more gradual policy normalization.
Tuesday Jonathan Glionna added his name to the list of strategists saying utilities may benefit. “The decoupling of high dividend yielding stocks and interest rates presents a buying opportunity,” he wrote in a note to clients.
While utilities have outperformed lately, they are the fourth worst performing sector this year, down 5.2% in 2015. The sector lagged during the first half of the year amid expectations rates would rise.
But as the Federal Reserve has yet to have increased rates, the U.S. 10-year Treasury yield has tumbled 13% since the end of June and concerns about growth have permeated across the market, a favorable environment has brewed for utilities.