Natural Gas Prices Rise & More Cold Fronts Expected, NYC Electric Grid Carbon Emission Factors Increase, and Weekly Reporting Updates

Weekly Energy Market Update:

Although there have not been any significant day-over-day changes, the natural gas market is much higher than prices from a week ago. The prompt month has moved nearly 50 cents higher since last week as natural gas pricing is trading at $2.81/MMBtu. Weather forecasts show a cold front moving in around the second week of March. The 81 Bcf withdrawal for the week ended February 24th, is lower than historical withdrawals and increases the inventory surplus to 19% above the 5-year average.

Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas fired generators as nuclear, coal, and oil generation is retired and mothballed. As the marginal unit of generation, gas prices are directly correlated to power pricing (more so in some regions such as NYC vs. others such as parts of PJM). We keep an eye on natural gas market fundamentals in order to provide insights into forward power pricing for our clients. Gas production has grown and surpassed any speculation that production would not be able to keep up with demand due to LNG and Mexican exports.

Sustainability

NYC Electric Grid Carbon Emissions Factor Increased 29%

Insights from WatchWire CEO, Andy Anderson, detail the unintended repercussions of a nuclear plant shutdown in 2020 on the eGRID emission factors. Despite assurances from multiple reputable sources and officials that this would not affect emission factors, recent EPA updates show unprecedented increases in their factors. If emissions factors change it can alter greenhouse gas inventories and accounting totals of firms significantly, which can have a big impact on climate related disclosures.

The latest EPA?eGRID?emissions factors,?eGRID?2021?released 1/30/23 , show NYC and Westchester’s?electric grid’s?(subregion NYCW)?CO2?emission rate (lbs/MWh)?increased 29%?year-over-year.??The US average?is up 4% vs.?eGRID?2020, with?7 regions down, 2?essentially flat,?and?18 up, but NYCW’s 29% increase?is?by far?the largest?(next is SRTV at 12% and SPSO at 11%).?NYCW’s CO2?emission rate of 816.76 lbs/MWh is the highest rate since eGRID 2004, which is concerning given NYC and the State of New York’s ambitious climate goals.?

Indian Point nuclear , which supplied about 25% of the NYCW load with zero-emission energy, shut down in April 2020 and April 2021. Leading up to the shutdown, legislators and anti-nuclear groups indicated it wouldn’t entirely be replaced by natural gas, but numbers don’t lie.

As we’re preparing annual ESG reports and carbon inventories for clients with assets in NYC, the YoY scope 2 emissions increase sticks out like a sore thumb.?No company is reducing electricity consumption at a rate that can offset this emissions factor increase, and it’s particularly concerning considering the push to electrify buildings over the coming years.?

Read More >>

Updates to Sustainability Reporting?Regulations?and Moves for?Consolidation?of Standards:

SEC

• SEC claims they will finalize the climate disclosure rule by the?end of April.

ISSB ?The?International Sustainability Standards Board

• NEW?Thirteen of fourteen members of ISSB’s board ?agreed to reference both the Global Reporting Initiative (GRI) and the European Sustainability Reporting Standard (ESRS) frameworks in sources of guidance for IFRS S1.
• ISSB has just decided that its initial IFRS Sustainability Disclosure Standards, S1 (general sustainability) and S2 (climate-specific), will?become?effective starting January 2024, meaning that businesses can start collecting sustainability-related disclosure information for the 2024 period to publish reports in 2025.
• ISSB will be releasing the finalized versions of the first global standards for sustainability and climate-related reporting (IFRS S1 and IFRS S2) in?June?of this year or end of Q2 2023?—?according to the IFRS head , Erikki Liikanen?

From ISSB head Emmanuel Faber:

• "Now, we will work with regulators around the world as they play their part, creating the conditions within their markets for adoption so that investors can use comparable information about sustainability-related risks and opportunities in their investment decisions without delay. We will also actively engage with the many preparers who are considering voluntary adoption of S1 and S2, to better answer their investor needs."

CSRD

• Europe’s three primary financial regulatory agencies, the European Supervisory Authorities (ESAs) each announced the?release of their opinions ?on the first set of draft European Sustainability Reporting Standards.
• The?European Commission?re-confirmed that it will publish its regulatory proposal on ESG ratings on?June 13, 2023.
• European Financial Reporting Advisory Group (EFRAG) published its?update for January 2023 , reporting on the work that has begun to develop the ESRS for listed small and medium enterprises (SME) and small and noncomplex financial institutions and captive insurances and re-insurances. CSRD and ESRS are aiming to bring smaller companies – both listed and private – into the fold, which is important to keep an eye on.

General?Corporate Reporting

SBTi ?(Science Based Targets Initiative)

• The SBTI has launched?new guidance ?for investors to support in identifying the overlaps of the SBTi Financial Institutions (FIs) framework, and Task Force on Climate-related Financial Disclosures (TCFD) recommendations. This will "support enhanced coordination between financial institutions science-based target setting and climate-related financial disclosures".
• A new change to?SBTis Commitment Compliance Policy ?states that if targets are not submitted within the 24-month commitment time frame, the commitment will be marked as ‘Removed’ on the SBTi Target Dashboard. This change will mean it is much easier to see which companies and financial institutions are sticking to their commitments and going on to set

SASB

• Future of the SASB Standards : What you need to know for 2023 disclosure. The ISSB recently made several decisions that further clarify the role and evolution of the SASB Standards. The ISSB confirmed that industry-specific disclosures are required and, in the absence of specific IFRS Sustainability Disclosure Standards, companies must consider the SASB Standards to identify sustainability-related risks, opportunities, and appropriate metrics.

Notable News

Articles

California: It’s time for all big businesses to report on climate , GreenBiz Proposed legislation would require disclosures of Scope 1, 2 and 3 emissions by both private and public companies with more than $1 billion in annual revenue that do business in California.

Wall Street titans confront ESG backlash as new financial risk , Financial Times. Wall Street’s largest asset managers, private equity firms and brokers have warned that a backlash against sustainable investing is now a material risk, in filings that show how acrimony over ESG principles has become a perceived threat to profits.

Interview with?Emmanuel Faber ... the chair of the?International Sustainability Standards Board (ISSB)?met?Corporate Disclosures?in Montreal on the margins of the?IFRS Sustainability Symposium?and discussed the big picture.

Senate overturns federal rule on ESG investments, Biden vows to veto , CNBC. The Senate has now voted to overturn a Labor Department rule permitting fiduciary retirement fund managers to consider environmental, social, and corporate governance (ESG), factors in their investment decisions.

Boston Consulting Group (BCG)? launches climate & sustainability policy and regulation center, ESG Today

The ESG Fight Has Come to this: Bankers Suing Lawyers , New York Times

There continues to be confusion around terms like?climate neutral?and?ne zero?and misrepresentation of climate goals as result. But, there are initiatives like the?Science Based Targets initiative ?who have set clear guidelines around net zero, Insider

A Tedious And Boring Analysis Of Two Items In ExxonMobil’s 2022 10-K , Forbes. Robert Eccles compares the 10 ESG issues?SASB Standards?has identified as material for the oil & gas exploration and production industry to the six pages in "Item 1. Business" and "Item 1A. Risk Factors" in?ExxonMobil?ExxonMobil's 172-page 2022 10K.?

Report by Bloomberg New Energy Finance (BNEF) on energy finance found that banks are still providing more financing to fossil fuels than to renewables as of 2021 (over $1TN vs ~$800BN).

Multiple US agencies launch offshore wind power development efforts , S&P Global

Insightful Reports

The State of Green Business 2023 , by GreenBiz

The Economic Impact of ESG Ratings , Massachusetts Institute of Technology (MIT)

CDPs latest?Non Disclosure Campaign: 2022 Results Report

Norton Rose Fulbright’s?2023 Annual Litigation Trends Survey ?indicates that environmental, social, and governance (ESG) concerns are growing.?

Energy and Technology Perspective 2023 report ?by the International Energy Agency (IEA) explores the tremendous growth needed in clean technologies to align with our climate goals.?

Electricity Market Report 2023, ?International Energy Agency (IEA): This year's report offers a deep analysis of recent policies, trends, and market developments, including forecasts through 2025 for electricity demand, supply, and CO2 emissions?

S&P Look Forward Report

The information contained herein has been obtained from sources which WatchWire Inc. believes to be reliable. WatchWire does not represent or warrant as to its accuracy or completeness. All representations and estimates included herein constitute WatchWire’s judgment as of the date of the presentation and may be subject to change without notice. This material has been prepared solely for informational purposes relating to our business as an energy management company. We are not providing advice regarding the value or advisability of trading in “commodity interests” as defined in the Commodity Exchange Act, 7 U.S.C. §§ 1-25, et seq., as amended (the “CEA”), including futures contracts, swaps or any other activity which would cause us or any of our affiliates to be considered a commodity trading advisor under the CEA. WatchWire does not make and expressly disclaims, any express or implied guarantee, representation, or warranty regarding any opinions or statements set forth herein. EnergyWatch shall not be responsible for any reliance upon any information, opinions, or statements contained herein or for any omission or error of fact. All prices referenced herein are indicative and informational. This material shall not be reproduced (in whole or in part) to any other person without the prior written approval of WatchWire. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved.?