Denver—Record wind generation in the US Midcontinent is putting downward pressure on gas-fired power burns this month, posing an emerging risk to gas prices at some of the region's key supply hubs.
Month to date, wind has generated an average 381,000 MWh in the Southwest Power Pool and over 282,000 MWh in the Midwest Independent System Operator–both record-high monthly averages for the respective ISO territories, data from S&P Global Platts Analytics shows.Wind generation records across the central and plains states come as the National Weather Service issues red flag warnings across portions of Nebraska, eastern Colorado and Kansas. On April 8, the region was on alert for high wind speeds, low humidity and corresponding wildfire risk.
For Midwest gas and power markets, stronger wind speeds and milder temperatures this month have conspired to pressure total demand for baseload generation from fuels like gas, coal and nuclear.
As total generation also ebbs to its lowest since last spring, wind is capturing its largest average market share on record this month, accounting for some 60% of total generation in SPP and about 20% of total generation in MISO, Platts Analytics data shows.
Power Burn, pricesSince at least mid-March, rising wind generation and mild weather have put Midwest power burns under pressure.
Month to date, regional burns have averaged about 1.8 Bcf/d, making for the weakest start to April since 2017. Over the next two weeks, warming temperatures are expected to further depress Midwest power burn to an average 1.65 Bcf/d, according to current analytics forecasts.
As wintry weather across the Midwest continues to fade, reduced consumption from residential-commercial customers has also pressured the region's market balance, lowering total gas demand to an average 11.1 Bcf/d this month–its lowest since September 2020.
While not atypical for the shoulder season, the recent and precipitous drop in demand is already starting to pressure the cash market. After approaching to $2 level earlier this week, spot gas prices at NGPL Midcontinent, Southern Star and Panhandle Tx.-Okla. were up modestly April 8 to end trading at $2.26, $2.24 and $2.21/MMBtu, respectively, preliminary settlement data from S&P Global Platts showed.
OutlookOver the balance of April, forwards gas markets are anticipating prices at the three Kansas hub locations to remain roughly flat, to modestly lower with the balance-of-month contracts priced at $2.25 for NGPL Midcontinent, $2.28 for Southern Star and just $2.13/MMBtu for Panhandle Tx.-Okla.
From April to October this year, gas demand from the power generation sector still poses the biggest downside risk for the Midwest market. According to Platts Analytics, weather-normal power burn demand could decline by as much as 400 to 500 MMcf/d this summer compared to last, thanks in part to a recent wave of gas-to-coal switching.
According to a recently published long-lead forecast from the National Weather Service, states across the Midwest currently face a 40%-50% risk for above-average temperatures from June to August–a potentially mitigating factor for this summer's anticipated decline in power burn.
Assuming Midwest renewable generation remains at or even close to current levels, though, any incremental demand for summer cooling could be gone with the wind.
