Thursday, November 21, 2013

FERC's 2012 State of the Market Report...Bad for RICL

My friend at Bill Howley Research pointed out this interesting report from FERC to me recently.  It’s FERC’s 2012 State of the Markets Report. It’s not the kind of reading I recommend a farmer take to Hawaii for the winter months but this shouldn’t be overlooked.  So light the fireplace, kickback in the recliner and read.

Chapter 4 starting on page 56 caught my attention.  This covers the trends in energy trading by the major banks and speculators, those who are “too big to fail”.  2008 was the peak in energy trading.  It has steadily fallen since then.  PJM is the major market for energy trading and the fall has even been greater.

I have always believed “Clean” Line Energy’s intention to create Rock Island Clean Line (RICL) project was to encourage physical energy trading and constantly play the MISO market off the PJM market.  I have also believed much of “Clean” Line’s economic and business modeling is based on pre2008 data. Outdated information from before 2008 helps “Clean” Line promote the myth that there is a growing need for more energy.  We are also learning it is a myth to think markets are going to rebound from the crash of 2008. 

It’s 2013.  Obamanomics has set in and economic recovery is more closely identified with stagnation.  FERC’s 2012 State of the Market gives us a much better idea where the market is trending.  One can easily see the trend line for less energy trading has not broken and will likely to continue to fall.

Why? Energy trading is not that different to corn or soybean trading at the Chicago Board of Trade.  Speculators like an active fluid market.   Today’s energy market is stagnant.  There is an overabundance of energy in many parts of PJM and the market is telling energy generators to quit producing so much.  Jimmy Glotfelty’s demands that PUCHA be abolished to allow more speculators into the transmission industry hasn’t helped Jimmy’s cause.  Energy trading is dying.

This is more proof RICL and grandiose transmission projects are advocating yesterday’s technology tomorrow.  The market is changing.  Technology is rapidly changing with energy storage and solar energy for consumers.  In the meantime Clean Line Energy continues to produce outdated studies with old data in an attempt to make consumers believe these projects are relevant rather than the dinosaurs of the last aerial sewer.

I wonder if the market would be seeing such a glut in energy if ObamaStimulus of 2008 didn't encourage new wind energy generation so much with huge incentives. 

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