Dive Brief:

• Gas prices remained low all summer and storage levels are likely to finish the injection season at a record high, leading the Federal Energy Regulatory Commission (FERC) to predict grid operators and power markets would have a relatively easy time meeting demand over what is projected to be a mild winter, Utility Markets Today reports. 
• FERC's 2015-2016 Winter Energy Market Assessment predicts electricity prices will largely track gas levels, easing the winter burden on consumers, but warned renewable integration could cause price volatility in Western markets.
• Natural gas storage could finish at 4 trillion cubic feet – potentially a new record – thanks to a strong spring and summer production. 

Dive Insight:

FERC's winter market assessment is packed with the usual caveats of challenges, regional differences and the difficulty in predicting the weather, but the upshot is low commodity prices that will likely translate into cheaper power.

"Power futures prices have followed natural gas futures downward, reflecting the growing reliance of power generation on natural gas," FERC said in the recently-released report. "Traders are likely recognizing the ample supply of natural gas expected for the coming winter as well as the expanded natural gas pipeline delivery system."

The report finds the U.S. natural gas market is "well supplied, with ample production and storage," and says new gas pipeline expansions and projects to reverse flows have improved transportation capacity. However, "no capacity additions have been made in New England," an area where heavy gas constraints can raise power prices. Necessary infrastructure built in that region could lower prices. 

"The assumption in that chart is based on whether or not additional infrastructure and capacity is brought into those regions of the country," FERC Chairman Norman Bay informed reporters after the meeting, according to Utility Markets Today. "So there's an important assumption if that capacity is enhanced, if it's increased, then one would start to see a narrowing of the price spread."

And while temperatures are expected to be moderate, or warmer than usual, in the northern regions, the South is still expected to see a colder-than-normal winter.

While strong natural gas supplies should temper weather concerns, FERC also said that deliverability, scarcity, and record price spikes witnessed two years ago "have largely been addressed for other heating and electric generating fuels," indicating strong market preparation for the upcoming winter season. Propane storage at the wholesale level is above the five-year average, and coal stockpiles and deliveries are have been bolstered by capital improvements to railroad tracks and locomotives.

While most regional grid operators have told the commission they are prepared for this winter, FERC's report said ISO-NE and NYISO "were more cautious." To ensure reliability, those ROTs working on seasonal reliability assessments, gas electric coordination, winterization testing and improved situational awareness.

Changes to demand ramps in the winter months can also cause headaches for grid operators, but in California the difficulty will be compounded by large amounts of renewable generation. Utility-scale solar capacity has grown to 6,912 MW, FERC said, as the California ISO has added almost 600 MW so far in 2015. Additionally, behind-the-meter solar has reached an estimated 3,000 MW.

"This is a particular challenge in the winter when the sun sets well before the evening peak load," FERC noted.  The system's three-hour ramp requirement climbed to a maximum of 9,131 MW last year, up from 6,247 MW in the 2011-12 winter. And this season could be the highest ever on the CAISO system, FERC said. 

"This ramp requires other generators to be online and available as needed. Renewable generation remains insensitive to market prices and is not dispatchable in CAISO," the report noted. "Together, the need for gas-fired generation and the lack of dispatchable renewable generation increases the likelihood of price volatility and possible over or under generation conditions."