Powering Ahead: An Annual Review of Energy Markets and Company Highlights in 2023
As we reflect on the dynamic landscape of 2023 and anticipate the trends shaping the energy industry in the coming years, APPI Energy takes you through a comprehensive journey in our annual review. Let’s delve into the highlights that defined this transformative year and what lies ahead in 2024.
Where the Energy Markets Started
In 2023, there was a significant transformation in the energy landscape. From regulatory changes to advancements in energy procurement and innovative energy solutions, APPI Energy maintained its unwavering expertise in the field. Let’s dissect the landscape where the year commenced.
As you may recall, in 2022, there was a substantial increase in energy prices, largely linked to the conflict in Ukraine. This situation prompted European nations to explore alternatives to their previously predominant Russian-sourced natural gas supplies. Fortunately, the winter of 2022/2023 was relatively mild in both the United States and Europe, avoiding a devastating energy crisis during the first full winter post-invasion. Looking back at some key market drivers, working natural gas in storage levels in the U.S. exceeded the five-year average by 1% in January but surged to a 22% surplus by the end of Q1. Despite declining natural gas prices and a falling rig count, production of natural gas stayed strong throughout the year, hitting a record of 103 Bcf/day in March, only to set a new record of over 106 Bcf/day in November.
Liquefied natural gas (LNG) prices worldwide saw a substantial decline from the record levels of 2022. Despite this trend, U.S. LNG export terminals persisted in operating close to their maximum capacity. Freeport, the country’s second largest export terminal, fully returned to service in February after a fire shut in nearly 2 Bcf/day for the second half of 2022, helping the U.S. become the world’s largest exporter of LNG in the world for the first half of this year. Currently, Global LNG prices are in the $15/MMBtu range and continue to provide a premium to prices in the U.S., attracting a steady flow of potential buyers.
The effects of the Inflation Reduction Act of 2022 began to manifest this year, as tax credits and incentives aimed at promoting clean energy initiatives and facilitating the shift to renewables spurred additional investments and rendered projects more economically viable. Solar-powered generation is expected to surpass annual hydropower by 14% this year for the first time, as more than 125 gigawatts of new solar-powered capacity was added to the grid during the first 8 months of the year. Offshore wind projects in many states look to increase the amount of carbon-free electricity generation, but several have run into difficulties related to inflationary pressures and supply chain issues. Notably, projects off the coasts of New York and New Jersey faced cancellations when regulators declined to permit cost increases.
Where the Energy Markets are Now
Turning our attention to the present, the anticipation of a robust El Niño weather pattern suggests warmer-than-average temperatures in the northern tier of the United States this winter, exerting bearish pressure on near-term pricing. As of December 8, NYMEX prompt-month pricing is currently significantly below $3/MMBtu, while forward pricing curves for 2024 hover just under $3, and the years 2025 to 2030 are all trading in the $3.85 to $4 range.The U.S. began the winter season with the most natural gas in storage since 2020, 5% above the five-year average, as U.S. storage facilities were 90% full at the end of October, marking the traditional end of injection season. Gas storage levels in Europe were estimated to be over 97% full heading into winter, but a lack of redundancy and back-up sources in the event of a supply disruption will keep a high demand for U.S LNG for years to come.
The momentum of renewable energy transition will continue into next year as the nation strives to reach a carbon-free power sector by 2035. In 2024, electricity generated from solar and wind power is anticipated to surpass coal-fired sources, with solar photovoltaic generation expecting a 39% growth and wind power projected to increase by 6% from 2023 levels. The Securities Exchange Commission is poised to unveil long-awaited final rules in April 2024, mandating companies to disclose climate-related risks, encompassing scope 1, 2, and 3 emissions, along with their risk management practices. Given that over half of the nation’s transmission lines and transformers were installed prior to 1970, transmission upgrades and expansion will be a focus as it is needed to move new renewable generation to major population centers and keep the grid safe and reliable.
How APPI Energy Started 2023 – Leveraging our Association Platform and Robust Energy Management Team
APPI Energy’s roots trace back to 1996, making us pioneers in the deregulated energy industry. Our association platform, endorsed by the American Society of Association Executives (ASAE) since 1999, uniquely positions us to provide tailored energy management solutions. Explore our vetted supplier relationships and the dedicated in-house team that sets APPI Energy apart.
Where APPI Energy is Now – Merging with Environ Energy
In May 2023, APPI Energy welcomed a new dimension by merging with Environ Energy. Environ, a leading energy management firm, brings enhanced capabilities, including an internal engineering and design team and a full scope ESG strategy team. Discover the added benefits this merger brings to both solutions and procurement.
A Glimpse into the Future
As we close the chapter on 2023, APPI Energy looks forward to a future shaped by sustainability, innovation, and a continued commitment to our clients. With 26 years of experience, we stand ready to navigate the evolving energy landscape, providing better services and solutions.
Excited for the next chapter, we invite you to connect with us as we embark on this journey together. Contact an APPI Energy consultant for a complimentary assessment, and let’s turn carbon reduction into a lasting legacy.
