Natural Gas, Oil Will Revolutionize Energy Consumption And Electric Energy Generation Into 2040
My current day job involves the inner workings of the electric utility industry in the Midwest region. I work with a number of electric utilities and regional power generating partners. With this knowledge, I have centered my portfolio around natural gas, a recovery in oil prices and have a slight exposure to coal. This article aims to examine the future of electric generation in the U.S. and the rest of the developing world and some possibilities to capture value at current markets prices.
Brief Insight into the Electric Industry Operation
The electric industry is very complex and those outside of the industry at best understand where their power comes from and how it gets to them. I will even admit I don’t fully understand all the fine points and details about the electric industry because I have only been involved for the past five years. However, the past five years have given me a very good understanding of how the system works.
On any given day, in most regions, the Regional Transmission Operator (RTO) has to balance all load on the grid for the controlling area. The RTO works to decide which generators run and which do not based on the clearing price for the day and/or if they use a day ahead market (too complex to explain further). Now adding renewables into the mix complicates things further because renewables are so intermittent that the RTO must balance those constantly, which involves ramping up and ramping down other generation depending on the load analysis for the given time. Now if the RTO wasn’t expecting as warm or cold a day energy demand spikes which leads to severe strain on the region and price for electricity soars because extra generation has to be brought online to meet demand.
