To quickly access the page content, please click on the links below.
Theme |
Recommendations |
|||
Ensure inclusive processes |
|
|||
Streamline program access |
|
Streamline program access |
|
|||
Address emerging issues |
|
TRADE DATE |
HUB |
PRODUCT |
STRIP |
SETTLEMENT PRICE |
PERCENTAGE DIFFERENCE FROM DEC 22 |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-22 |
126.95000 |
100% |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-23 |
73.55000 |
58% |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-24 |
71.80000 |
57% |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-25 |
67.70000 |
53% |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-26 |
65.55000 |
53% |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-27 |
66.75000 |
53% |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-28 |
63.00000 |
50% |
5/31/22 |
NYISO J Off-Peak |
Off-Peak Futures (50 MW) |
Dec-29 |
58.40000 |
46% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-22 |
142.30000 |
100% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-23 |
96.55000 |
68% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-24 |
75.70000 |
53% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-25 |
85.55000 |
60% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-26 |
79.45000 |
56% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-27 |
82.80000 |
58% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-28 |
78.50000 |
55% |
5/31/22 |
NYISO J |
Peak Futures (1 MW) |
Dec-29 |
75.25000 |
53% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-22 |
107.60000 |
100% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-23 |
64.35000 |
60% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-24 |
48.40000 |
45% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-25 |
46.95000 |
44% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-26 |
51.20000 |
48% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-27 |
53.30000 |
50% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-28 |
53.70000 |
50% |
5/31/22 |
PJM PSEG Zone DA |
Peak Futures (1 MW) |
Dec-29 |
54.45000 |
51% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-22 |
82.50000 |
100% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-23 |
46.00000 |
56% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-24 |
40.45000 |
49% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-25 |
37.55000 |
46% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-26 |
41.30000 |
50% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-27 |
41.45000 |
50% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-28 |
42.05000 |
51% |
5/31/22 |
PJM PSEG Zone DA Off-Peak |
Off-Peak Futures (1 MW) |
Dec-29 |
42.80000 |
52% |
NYISO J Off-Peak: The curve from Dec -22 to Dec -26 remains is backwardated/flat. The market is currently not pricing in carbon fee as it did back in 2019/2020 and awaiting further signals from the state of NY before pricing in a Carbon Charge again.
PJM PSEG: Power Prices for Dec-24 to Dec-27 is lower than Dec-22 and Dec-23. The market is not pricing in any additional carbon (besides RGGI) as the CPSTF was sunsetted.
The New York Clean Fuel Standard is making progress. During a 10-minute hearing on May 9, the New York Senate Environmental Conservation Committee agreed to send the low-carbon fuel standard (LCFS) measure to the Senate floor with almost no discussion. The bill would usher in the kind of market-driven strategy to reducing transportation fuel carbon intensity that has swept across the US west coast. Proponents perceive the program as providing the necessary incentives to reduce the amount of petroleum transportation fuel supplied to New York. A state LCFS could inspire other US Atlantic coast states to follow suit, similar to how California's LCFS implementation ten years ago prompted comparable programs in Oregon and Washington. Opponents, on the other hand, argued that the initiative would instead increase the use of petroleum fuels and create pollution hotspots around more susceptible, lower-income populations. Last year, a state LCFS plan sponsored by state senator Kevin Parker and assemblywoman Carrie Woerner died without a committee vote, and budget negotiators withdrew the concept after the senate recommended inclusion in March. Parker's legislation now awaits full Senate review as a result of this Senate committee approval.
FERC approves sustainable energy-friendly rules in New York. The US Federal Energy Regulatory Commission (FERC) approved changes proposed by the New York Independent System Operator (NYISO) on May 10 to further open wholesale electricity markets to investment in battery storage, solar, and wind projects. The updates by NYISO will prevent certain resources, known as "excluded facilities," such as wind, solar, storage, and demand response systems, from being reviewed under the grid operator's buyer-side mitigation rules, or from being subject to an offer floor, in the state's capacity markets, as long as they serve the state's goal of reducing greenhouse gas emissions by 85 percent from a 1990 baseline by 2050. Buyer-side mitigation exists to prevent resources that receive extra-market subsidies, such as the renewable portfolio standard (RPS), from bidding at artificially low prices in the capacity auction, with their incentives potentially giving them an unfair advantage. FERC determined that the updated rules would reduce risks associated with the New York market's existing buyer-side mitigation rules, such as potential procurements of unnecessary capacity, inflated capacity market prices, and inefficient capacity market price signals. Buyer-side mitigation exemptions will also apply to resources with which New York has contracted or may contract to receive Tier 1 or Tier 4 renewable energy certificates (RECs). Tier 1 RECs are mostly from projects built after 2014, with a few exceptions, while Tier 4 credits are awarded to zero-carbon resources supplying power to New York City.
Building owners in New York City have filed a lawsuit to prevent GHG limits from being implemented. Property owners in New York City are challenging new municipal greenhouse gas (GHG) emissions standards for major buildings. In a complaint filed against the city, building owners argue the requirements, which are due to take effect in 2024, are "ill-conceived and unlawful." They are requesting that the New York Supreme Court invalidate Local Law 97, which sets a goal of decreasing GHG emissions from a 2005 baseline by 40% by 2030 and by 80% by 2050, and also requires most large structures to cut emissions or face a fine. The 2019 law applies to residential, commercial, and industrial buildings larger than 25,000ft2. Building owners can comply by improving energy efficiency, purchasing renewable energy credits (RECs) or carbon offsets, or paying a penalty to cover excess emissions. The plaintiffs, two Queens co-op owners and a Manhattan mixed-use building owner, contend that the emissions rules are arbitrary and unnecessarily harsh. They claim that the ordinance exceeds the city's authority to control emissions and is "unlawfully ambiguous," leaving property owners in the dark about how to comply. They also argue that basing regulations on emissions per square foot rather than energy efficiency places an unfair burden on owners of highly inhabited residential buildings or enterprises that must consume more energy, such as laundromats.
New RGGI expenditure in New York is being considered. New York state has proposed a new approach for allocating RGGI funds, paving the way for further investments in electric vehicles and energy efficiency. The New York State Energy Research and Development Authority (NYSERDA), the in charge for spending RGGI auction revenues, had already finalized a 2022 operational plan. The state's spending will be less constrained this year than in prior years, thanks in large part to a budget agreement reached last month that ends the long-standing practice of shifting some RGGI profits to other funds. NYSERDA officials also stated that the state had generated more revenue from RGGI auctions than projected, owing to recent increases in allowance pricing. With the proposed update, NYSERDA now aims to invest $642 million in RGGI revenues during the fiscal years 2022-25, a $36 million increase over the previous plan for the same time period. Even that figure is likely to climb further, since the agency's predictions assume an average allowance price of $8 per short ton (st) through 2025. The most recent RGGI auction cleared at a record price of $13.50/st, and the December 2022 contract has traded above $14/st this year on the secondary market. The increased revenue will primarily go toward extending programs already funded by NYSERDA. The plan includes an additional $45 million for electric vehicle incentives and charging infrastructure, an additional $39 million for energy efficiency initiatives that benefit low- and moderate-income households, and an additional $600,000 for climate equity research through 2025. NYSERDA is also seeking $20 million in new financing for energy storage during the fiscal year 2023-24.
In April, solar growth in New Jersey continued. According to New Jersey Clean Energy Program data released on May 25, the state installed about 41MW of new photovoltaic capacity in April, making it by far the greatest month for the state's solar sector in 2022. The result is more than double the 14.8MW posted in March, the prior year's inaugural high. The majority of the April additions, approximately 36MW, were fed into the state's transition solar incentive program, which provides transition renewable energy credits (TRECs) with a base value of $152/MWh for the first 15 years of a project's existence. TRECs must be purchased by New Jersey's four electrical distributors. The remaining 4.9MW were allocated to New Jersey's administratively determined incentive (ADI) program, which is the fixed-price component of the state's new SREC-II incentive program, which began in August. The strong April performance brings the state's solar development pace for 2022 to 27MW/month, nearly in line with the rate in 2020-21. However, all three years are significantly lower than the 37.8MW/month rate established in 2019, the strongest year on record for New Jersey solar.
RGGI CO2 emissions increased marginally in the first quarter. According to RGGI data, RGGI power plants emitted 25.3 million short tons of CO2 in the third quarter, a 1.2 percent increase over the same time in 2021. Power sector emissions in RGGI states are up by more than 64% compared to the first quarter of 2020. While emissions increased in eight of the eleven RGGI states, there was significant variance in how emissions changed from year to year across program participants. Maryland's power plant emissions decreased by 19% in the first quarter, owing partly to the closure of two coal-fired power plants last year, whereas Maine's emissions surged by 72%. Emissions subject to RGGI compliance in New Jersey climbed by more than 394,000 tons between the first and second quarters of last year. However, this is partly because the state exempted more than 357,000st of emissions from qualifying combined heat-and-power systems in the first quarter of last year, but it is unclear whether it has done so again this year based on the statistics.
RGGI hitting record prices. Earlier this year, RGGI allowances achieved an all-time high price of $14.45/st in the secondary market, and the most recent auction in March cleared at a then record price of $13.50/st. The June 1, RGGI auction cleared at $13.90 which set another record and was one penny shy of $13.91, which is the Cost Containment Reserve (CCR) Price in 2022. The CCR increases by 7% a year, so 2023 CCR will be $14.88 which may pull up prices next year.
Dominion takes action to halt RGGI-related rate hikes. Dominion Energy asked a Virginia regulator on May 5 to approve its intentions to defer a rate hike to recover costs associated with the Regional Greenhouse Gas Initiative (RGGI) and it was approved June15th. Dominion is made the request because it "expects the commonwealth to exit from RGGI as early as July 2022," according to a new filing with the Virginia State Corporation Commission. Since January 1, the average Virginia ratepayer has begun paying an explicit "Rider RGGI" charge of $2.39 per month on their electric bills. Virginia state law permits utilities to raise rates to meet environmental laws if the commission authorizes. Dominion asked the commission in December to approve a separate plan to raise rates even further to account for the escalating cost of RGGI CO2 allowances. The average ratepayer would have had to spend more than $52 per year in total RGGI-related charges. However, Dominion's plans changed when newly elected governor Glenn Youngkin stated his intention to withdraw from the initiative. Dominion dropped its request to raise rates further in a 10 January filing, saying it would reassess the costs of RGGI participation once the state's status in the program was clearer. In April, the commission granted that request. Dominion would stop enforcing its Rider RGGI tax on July 1 if its revised plan is approved. But the utility also plans to use its base rates to collect any outstanding RGGI-related expenditures accrued until July 31, totaling roughly $178 million. In other words, even if related charges are made less clear, RGGI may continue to have an impact on customers' bills.
Prices and activity in the RGGI market increased in 2021. Regional Greenhouse Gas Initiative (RGGI) allowances reached new highs in 2021 as market activity and auction interest surged. According to Potomac Economics' annual report, there was "wide involvement" in the market last year by both compliance firms and investors. The average clearance price over last year's four RGGI auctions was $9.61/short ton (st), up from $6.41/st in 2020. Price volatility in the secondary market was also "far higher than in 2020," with allowances starting the year between $8.00-$8.50/st before jumping dramatically as participation from investment firms rose later in the year. When allowances hit $13/st, the cost containment reserve price for 2021, price volatility began to subside near the end of the year. Market interest surged across the board in last year's auctions. The average number of bids submitted by compliance-oriented businesses climbed from 37 in 2020 to 44 last year, while the average number of participating investors increased from 11 to 17. Investors also played a bigger role in such auctions, purchasing 42 percent of the allowances auctioned last year, up from 28 percent in 2020. The secondary market has also seen an increase in activity. In 2021, the volume of futures trade was approximately 366 million st, a 61 percent increase over 2020. Investors who did not have compliance responsibilities owned a lower percentage of allowances at the end of the year in 2020 than they did at the start of the year. In 2021, that trend reversed, with those organizations holding 9 percent of all permits in circulation at the start of the year but finishing with 46 percent. These investors had 90 million allowances by the end of 2021, a more than 500 percent gain from the previous year, when they had only 14 million allowances at the end of the year. With the admission of Virginia to RGGI, the allowable cap jumped from 96.2 million tons in 2020 to 119.8 million tons last year. However, the bank of excess allowances — the amount of allowances in circulation less the compliance duties for which allowances have not been surrendered — fell last year.
RGGI trading increases in the first quarter of 2022. The volume of RGGI futures traded in the first quarter totaled 72 million allowances, a 16 million allowance rise from the same time period in 2021 and a 27 million allowance increase from the first quarter of 2020. According to the most current Potomac Economics analysis, much of the recent surge in activity is due to "increasing engagement of money managers and swap traders." This is still lower than the 169 million allowances exchanged in the fourth quarter of 2021. Trading volumes have historically been greater at the end of the year. Open interest in RGGI futures and options climbed this year as well, rising from fewer than 70 million allowances at the end of the first quarter of 2021 to 79 million allowances at the conclusion of the most recent quarter. According to the report, even as more investors enter the market, a bigger amount of permits in circulation are held for compliance purchases. As of the first quarter of this year, 46 percent of the 167 million allowances in circulation are thought to be held for compliance purposes, compared to 33 percent at the same period last year. While there were fewer option trades in the first quarter of 2022 than in the same period the previous year, the report indicates that volatility remained quite high. Option implied volatility averaged 49 percent in the first three months of 2022, matching the fourth quarter of 2021. Option transactions are used by some market participants to protect themselves against unexpectedly big changes in allowance prices. Increased secondary market activity has coincided with rising allowance prices. The average futures price for an RGGI allowance on the Intercontinental Exchange in the first quarter of this year was $13.56/short ton (st), a 75 percent increase from the previous quarter of 2021 and a $5.39 rise from the same time last year.
In 2020, RGGI states invested $196 million. In 2020, the Northeast states participating in the Regional Greenhouse Gas Initiative (RGGI) spent $196 million on projects to reduce CO2 emissions and energy use. According to a new RGGI analysis, those investments, which were funded by the program's quarterly auctions, will result in roughly 400,000 fewer short tons (st) of CO2 emissions each year and nearly $144 million in annual energy bill savings. RGGI investments have saved consumers over $2 billion in energy bills and averted the release of 6.7 million Mt of CO2 over the program's existence. The RGGI states spent 35% of their revenues on energy efficiency initiatives in 2020, down from 40% in 2019, but remained the greatest amount of program spending. Direct bill assistance is the next most common investment, with 19% support year on year. Programs that replace direct fossil fuel usage with electric power, known as "beneficial electrification," received 11 percent of the 2020 funds, a significant increase from 3 percent previously. The report only examines the RGGI proceeds that have already been spent; 15 percent of cumulative revenues have been earmarked for future investments but have not yet been spent, and 6 percent of funds have been transferred to states' general funds.
The RGGI injunction in Pennsylvania is still pending. Following the conclusion of a two-day hearing on May 11, Commonwealth Court of Pennsylvania Judge Michael Wojcik did not indicate whether he will approve opponents' request for a [preliminary injunction] on a regulation allowing the state to enter RGGI. Separately, Republican legislators and a coalition of coal-related companies requested the court to block the rule's implementation. While the court has not yet decided whether to formally combine the two lawsuits, Wojcik allowed lawyers from both cases to attend the injunction hearing. Wojcik has stated that his goal is to address the injunction issue swiftly before delving into detailed debates about the rule's validity later this year. He stated that the court would provide clarity about the injunction "as soon as we can." Any injunction would continue at least until the court performs a full argument session assessing the validity of the rule, which might happen in June or September. This year, the court will not hold argument sessions in July or August.
Questions? Contact our team for more information: environmental@aegis-hedging.com
CONFIDENTIAL – UNAUTHORIZED THIRD-PARTY DISTRIBUTION PROHIBITED