Featured Links in this Issue
Summer 2021 Market Update
By Howard Plante, Vice President of Procurement
By Sean Devine, Director of Natural Gas
By Carol Anne Watts, Director of Energy Sales
By Jack Martell, Renewable Program Manager
Annual System Peak Season Is Upon Us
Reduce Your Capacity Tag and Reduce Your Electricity Cost
ISO New England Update
By Howard Plante
Vice President of Procurement
As the Summer Season approaches, it is time to remind everyone of the reason for reducing electricity use during the Annual System Peak Hour in New England.
ISO-NE established the Forward Capacity Market to ensure that the New England power system would have sufficient resources to meet the future demand for electricity. Forward Capacity Auctions (FCAs) are held annually to set the Capacity Price (Net Regional Clearing Price) three years in advance of the operating period which runs from June 1st to the following May 31st. Resources participate in the auctions to supply capacity in exchange for a market-priced capacity payment. ‑ese payments help support the development of new resources, help to retain existing resources, and incentivize investment in technology or practices that help ensure strong performance. They also serve as a stable and much needed revenue stream for resources that help meet peak demand but do not run very often the rest of the year. Without the capacity payments, those resources would not be able to financially survive.
What is the Annual System Peak?
It is the single hour of the calendar year that is the highest total demand for electricity in New England. New England is a summer peaking region due to the increased electricity use for air conditioning, dehumidification, and cooling. The Peak is most likely to occur at some hour in June, July, or August on an extremely hot and humid day. In recent years, the Peak has shifted from predominantly hitting in the 2:00-3:00pm hour to later in the afternoon, with the last two years occurring at the 5:00-6:00pm hour. What changed? Solar Power. Over the past several years, the gradual increase in solar installations behind the meter have helped to reduce demand when they are at peak output in the middle of the afternoon, forcing the Peak later in the day.
What is a Capacity Tag?
Every electricity account has a Capacity Tag (Cap Tag) associated with it. ‑e Cap Tag is assigned to the account by the local distribution utility and is based on the account’s demand for electricity during the Annual System Peak. The Cap Tag becomes effective in June of the following year and remains in effect for 12 months.
The Net Regional Clearing Price sets the base Capacity Price. The Capacity Price is adjusted to reflect each year’s Annual System Peak to align with the amount of resources that cleared in the Auction. Your cost of capacity is a result of your account’s capacity tag multiplied by the adjusted Capacity Price. That cost gets included in your electricity rate by the Supplier or by the utility. Everyone pays for it, regardless of where you obtain your supply from. On average, the cost of capacity is 1.5 to 2 cents per kilowatt-hour and in most cases is the second highest component of the overall rate.
How can you Reduce your Capacity Cost?
If you have an interval account (the meter reads hourly usage data) and are able to curtail your electricity use during the Annual System Peak hour, your Cap Tag and Capacity Cost would be reduced. The more electricity use you reduce, the greater the cost reduction. If you have recently entered into a multi-year all-inclusive fixed price contract that does not have a provision for capacity reduction, curtailing this summer is likely not necessary, but you should con rm the details with your Freedom Energy advisor.
How will you know when to Curtail?
Freedom Energy sends notices each year when we believe the Annual System Peak will occur. By monitoring and analyzing grid conditions, weather forecasts and historical data, we try to predict when a particular day could result in the Peak. You will likely receive a notice 1 to 2 days in advance as a preliminary heads up, then a confirming notice the morning of the anticipated day. On average, we have sent 3 notifications each summer. There is no definitive means of precisely determining when the Peak will happen, but we do our best to inform you accordingly and with as few notices as possible. The first heat wave in June in most years has necessitated notification, which then sets a target Demand that must be exceeded for subsequent notices. In the past 20 years, the Peak has never happened in September and only twice in June. Stay tuned, nothing is guaranteed.
What is the Relationship Between Commodity Prices and Inflation?
Electricity & Natural Gas
By Sean Devine
Director of Natural Gas
Inflation is something impacting all goods across the globe and especially commodities. For the first time since 2008, the United States recorded an inflation rate of 4.2% for the last 12 months ending April 2021. An increase of 2.6% is something we are feeling at the grocery store, the gas pump, and in many other forms. The month of May came in at 5%, and the Fed is now talking about factoring higher inflation for their forward planned rate hikes. When we see inflation, commodities historically have risen along with the inflation gains. This causes a chain reaction of price increases for goods and services as the input costs to make these goods and perform the services rises. Here in the Northeast, we generate over 60% of our electricity with natural gas fired turbines. When commodities (Natural Gas) increase as an input cost, the cost of electricity supply rises as well. Whether it be WTI, Brent, Natural Gas or even Propane, these energy commodities rise as inflation heads north.
With the cost of commodities increasing, we will see the impacts in all aspects of our lives and notice that impact in our wallets. As the global economies continue to crawl out of the devastation of Covid 19 through vaccinations, demand for commodities, goods, and services will also rise. Take a look at the red hot used car & truck market, and you see demand like never before. A perfect scenario to see energy costs continue to march northward from the forward market bottoms seen in 2020.
How Can Your Energy Advisor Add Even More Value for Your Business?
Energy Advisory Services
By Carol Anne Watts
Director of Energy Sales
In today’s market, choosing an energy partner can be a daunting task. There are countless options, price points, and product offerings that make the decision seem impossible to quantify. For this reason, many businesses and municipal entities have opted to work with an Energy Advisory firm like Freedom Energy Logistics to help navigate procurement, sustainability, and energy services with a single point of contact.
An Energy Advisory can provide a scope of services not always found when businesses approach a broker or supplier directly. At Freedom Energy, our scope of services includes consultancy, commodity products, and green energy.
We view our role as an extension of your business. As such, we advocate for your needs with our supplier and vendor network. We can remain neutral in the negotiations of various products where many suppliers or supplier agents cannot. Our recommendations will directly align with your needs and are not limited by the product offerings of a single vendor. Working with Freedom Energy, you can benefit from the expertise of a team of industry experts and the products and services of more than 20 different suppliers and channel partners.
Power and gas commodity agreements are the cornerstone of our business. Executing agreements with over a dozen suppliers, Freedom Energy can find the best contract terms and products available in the marketplace. As markets change, it is important to note that not all providers or contracts are created equal. Suppliers are constantly looking for ways to sharpen the price of their offering and that can often come at the cost of important contract language. Our advisory clients trust us to make recommendations based on their risk tolerances and budgets, so they are not left with unexpected rate increases.
The world around us is getting “greener” and more sustainable. Businesses are looking for ways to work towards a greener future and whether that plan is already written, or your business needs help defining it, an Energy Advisory firm can help. Sustainability goals can be vastly different from one business to the next but there are nearly always several ways to achieve these goals. Green energy can be incorporated into the commodity procurement process, be done onsite, or virtually as on off taker. Freedom Energy can help ask the right questions to understand which actions and initiatives will help your business attain your goals with the lowest cost in mind.
In addition to these products and services, there are other benefits to working with an Energy Advisor. First and foremost, a single, responsive point of contact to help manage a handful of products can be invaluable when these products can have a direct impact on each other and your budget. For example(s), a power supply agreement may not have language that supports onsite solar or is not billed correctly to support virtual solar. Or a gas agreement may not support a CHP system and sway the ROI of the entire project (often in the millions of dollars). Secondly, an Energy Advisory can often source products that meet multiple objectives or even generate revenue. Because we operate on a holistic and agnostic platform, our recommended strategies often straddle multiple products or partners. If our client has made a commitment to use only green power, Freedom Energy can recommend suppliers with competitive supply rates that will meet those objectives, saving you time and money.
The role of an Energy Advisory is to explain the risks and benefits associated with the most effective energy supply management and renewable solutions in support of your unique business goals and sustainability objectives. As your commodity supplier, we provide ongoing comprehensive risk management assessments and review your energy strategy. In addition, whether your business is just beginning its journey with sustainability initiatives, or you have well-established sustainability goals, Freedom can assist you in supporting your ‘green’ requirements and achieving your sustainability goals.
Were you aware that Freedom Energy serves clients in restructured markets throughout the U.S.?
If your business has a national footprint, our Energy Advisors can work with you to provide energy advisory services for your offices throughout the country.
Expanding Community Solar: Pennsylvania
By Jack Martell
Renewable Program Manager
The community solar model has been successful across many states looking to rapidly increase their local renewable energy presence. Unlike traditional approaches to solar development, community solar is best known for improving access to clean solar energy, reducing end user cost, increasing system resiliency, and injecting significant investment into local economies. While initially intended for those unable to access solar energy through traditional means, community solar has in many instances outperformed traditional Power Purchase Agreement (PPA) models and is a no cost route for commercial and residential entities to take. Participating customers realize reduced utility spend while supporting the growth of local solar projects.
While adopted in many markets, there are still numerous states that have not yet endorsed community solar. Most recently, Pennsylvania proposed a bill endorsing the benefits that this model can offer to the user base in the Keystone State. Senate Bill 472, proposed in March with bipartisan support, would expand net metering and open a community solar market, allowing projects up to 5MW to virtually subscribe two or more users to each project and allowing for the allocation of monetary credits to participating utility accounts. The program would benefit farmers, businesses, ratepayers, and municipalities throughout PA, and is projected to inject over $1 billion into the economy. ‑is comes on the heels of Pennsylvania executing one of the largest commitments to renewable energy of any state government in the nation when Governor Wolf announced the state would be powering close to half of their government facilities with over 191MW of solar.
With a significant commercial, industrial, and municipal user base throughout the state, this program has the potential to rapidly expand clean energy access while lowering operating costs and supporting the local economy. PA has a number of shovel ready projects prepared to be built pending the legislative decision. A clear path forward is expected by the end of the initial 2021 legislative session, and Freedom Energy is keeping a close eye on the proceedings. Should this heavily supported initiative pass, Freedom Energy is prepared to assist PA energy users through the enrollment process. Our renewable energy team has assisted clients in multiple community solar markets and has a strong understanding of program logistics, contract negotiation, project viability, etc.
CLIENT SPOTLIGHT: Velocity Hospitality Group –
Velocity Wings, Social House & Kitchens, Locals Tacos & Tequila
Just as many restaurants and gathering establishments throughout the country felt the significant impact of strict guidelines, few patrons, and closures due to covid, James Speros, proprietor of the Velocity Hospitality Group of restaurants located throughout Northern Virginia, focused on ensuring all 12 of the eateries under his purview provided an ultra-safe environment.
While focused on providing the 5-star meals his guests had come to expect, safety also was clearly top of mind. In addition to embracing social distancing practices and the federally sanctioned face masks, they installed plexiglass partitions between booths, regularly sanitized the facilities, and invested in a clean air system called the Hydroxylator. This system kills airborne viruses including the covid virus with Ultra-Violet technology and is run every day continuously for 24 hours. At a time when restaurant patrons were nearly non-existent, the Velocity Hospitality Group invested heavily in-house safety measures and offered alternatives including curbside pick-up, delivery and take out.
Like many of our clients, Velocity Hospitality Group had to shift their business practices, make significant investments, and take extreme measures to support their clientele. As the country begins to reemerge, they are committed to doing everything they can to ensure a continued safe and pleasant experience in their restaurants going forward, and they finally were able to celebrate the Grand Opening of their 12th establishment in May.
We appreciate the dedicated hospitality sector that helped provide a bit of normalcy during the pandemic.
The Velocity Hospitality Group is a client of Freedom Energy Logistics. They have been working with their Freedom Energy Advisor since 2015 and are a fixed price client.