FERC staff today released its 2022 summer assessment outlook for energy markets and electric reliability, noting that electric markets are expected to have sufficient capacity to maintain reliable operations this summer under normal conditions but that extreme weather events could pose operational challenges. In keeping with its responsibility under section 215 of the Federal Power Act, the Commission remains in close coordination with NERC, grid operators, and other partners to monitor and address potential issues.
“Today’s report forecasts an additional 30 GW of capacity this summer compared to last summer. But the challenges outlined in the summer assessment also demonstrate the urgent need for the Commission to meaningfully advance initiatives that will better ensure electricity markets are ready to meet reliability challenges head on,” Chairman Rich Glick said. “The Commission’s work to facilitate transmission infrastructure, modernize electricity markets, and safeguard our nation’s electric infrastructure from reliability threats has never been more important.”
Key findings in the assessment follow.
- Growing demand for natural gas, including liquefied natural gas (LNG) exports, is expected to outpace the growth in supply, with natural gas prices expected to be higher than last summer. Specifically, the Henry Hub futures contract price is averaging $7.06/MMBtu for June 2022 through September 2022. Total U.S. dry natural gas production is expected to rise this summer by 3.4% compared to summer 2021, while total natural gas demand is expected to rise 4.8%.
- Forecasted hotter temperatures, slightly increased electricity demand, and higher natural gas prices indicate higher prices in wholesale electric markets for the summer—with futures prices for major electricity trading hubs between 77% and 233% higher than last year.
- Despite higher demand, electric markets are expected to have sufficient capacity to maintain adequate reserve margins and electric grid reliability this summer during normal conditions.
- However, extreme operating conditions such as major heat waves, wildfires, hurricanes, and other severe weather events may stress operations. These risks are particularly acute in the West, Texas and parts of the Midwest.
- Effects of world events on U.S. energy prices, beyond those already internalized by the markets, will depend, in part, on how the war in the Ukraine progresses and how market participants adjust to supply and demand changes. For example, U.S. energy sector participants may continue to expand production and export supplies needed globally, such as LNG.
The 2022 Summer Energy Market and Reliability Assessment is a joint report from the Commission’s Office of Energy Policy and Innovation’s Division of Energy Market Assessments and the Office of Electric Reliability’s Division of Engineering and Logistics, with regional resource adequacy analyses from the North American Electric Reliability Corporation (NERC).