News & Updates

New Developments in Natural Gas Storage Solutions

Aug 12, 2019

This year we've seen continued growth in the Liquefied Natural Gas (LNG) distribution out of the US. Currently there is approximately 7% of the total US dry gas production being shipped by way of transport tanker to Europe and Asian markets. New research has created a really interesting technology that may change the way natural gas is stored and shipped.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New research has emerged in the field of Absorbed Natural Gas (ANG). ANG is an alternative to Compressed or Liquified Natural Gas (CNG and LNG), which may include a process that is both more financially feasible and safer to handle than the two current options.

Currently, natural gas requires either a very high pressure (CNG) or a very low temperature (LNG) to convert it into a format for easy storage or transportation at sizable volumes of the commodity. Two researchers from Texas A&M University have created a polymer, plastic-based material that can absorb natural gas at relatively low pressures, and unload once pressure is released, to release the natural gas later on, much like a sponge.

While the field of ANG is not a brand new one, it has been plagued with issues like materials heating up upon absorption, as well as adsorbent capacity, which was dramatically increased “well above the target for materials in order to considered [commercially] feasible, which is determined by U.S. Department of Energy”. Adding to this the fact that it apparently has a very cheap production cost, relative to current options, makes it an even more attractive format to store natural gas.

The new ANG solution has been tested not only in a controlled, lab environment, but also in more realistic application scenarios. In a real-world test where pressurized gas was transferred to a cylinder full of the absorbent, the material topped current records by over 20%.

This research is exceptional, not only for storage solutions but also for transportation. While natural gas burns approximately 30% cleaner than oil and over 40% cleaner than coal, methane released by gas leaks in transport may offset much of the benefit to the climate. Incorporating a solid-state absorption method may help create a much more stable medium for transportation and storage than what is currently being used. If this method is also more economically feasible, then we should be expecting to see this technology being rapidly and widely adopted over the next decade.

 

Source: techxplore.com

Carbon Pricing in Ontario Begins August 2019

Jul 8, 2019

Over the past month, large moves have been made on the fate of the Federal carbon pricing backstop in Ontario. Companies will be seeing a new line item on their Enbridge bills beginning next month, with a $0.0391/m3 charge being added and back-billed to include all gas consumed from April 1st onward.

 

The Ontario Court of Appeal ruled on the challenge presented by Premier Doug Ford on Friday, June 28th. The challenge, alleging that the Federal Government’s carbon pricing backstop was an unlawful tax, intruding on provincial jurisdiction was rejected by 4 of the 5 judges, forming a majority decision.

 

Following the decision of the Court of Appeal judiciary panel, the Ontario Energy Board (OEB) released a memo on Thursday, July 4th. The document stated that it had reached a decision on Enbridge Gas/Union Gas’ proposal to add the carbon price on natural gas to its August 2019 bills. The OEB has ordered Enbridge to add a carbon price of $0.0391/m3 of natural gas as a separate line item on their bills, beginning next month. For the month of August, the line item will be back-billed to April 2019.

 

The Federal carbon pricing backstop was implemented after Doug Ford’s administration scrapped the Cap & Trade program introduced by the previous Wynne-led Government. As a part of their climate change plan, the Federal Government introduced a backstop measure after Ontario was left with no price on carbon, to begin in April 2019. The backstop pricing is expected to remain in effect until at least the beginning of November. With Federal elections taking place in late October, there is the possibility of a new Government coming in, that will repeal or replace the pricing backstop that the current Government has in place. Another possibility is that the decision made by the Ontario Court of Appeal will be challenged and overruled at the Federal level in the Supreme Court of Canada.

 

For more information on the carbon pricing, how it will affect your business, and what steps you can take to mitigate the cost increase, reach out to us at lclimenhage@ces-energy.com.

 

Trans Mountain Pipeline Expansion

Jun 19, 2019

Trans Mountain Pipeline Expansion

Earlier this week the Trudeau government announced the approval of the Trans Mountain Pipeline expansion project. This constantly delayed project has been years in the making and has been foiled many times by legal appeals and resistance from the BC government.

What this means for Canadian Oil and Gas Producers:

With the pipeline expansion Alberta will finally see a cost-effective route to the BC which will open the door to Asia, Russia and the Pacific coast. Alberta oil has been

Oil rigs have been declining for years and we’re now at a 20-year low in rig production in Canada. Given the opportunity for new demand on the west coast we should see an increase in production out of the Alberta sector.

Pricing has been heavily dependent on the US market as well as the Canadian market. Given the overall dip in cost per barrel over the past few years, the new markets in Asia and the Pacific should create a much higher profit portal for Canadian producers.

What this means for Gas pipelines in Canada:

Given the Premier’s position on Climate Change and the Liberal Government reluctance to rock the boat prior to the election, the outlook should look promising for pipeline construction. The Premier noted that this is a key step in “bridging the gap” between the low carbon future we want and the current carbon marketplace. To create the investment money in Green Technology we need “money to pay for it”.

It’s promising to see the Premier understand that our natural resource will provide Canada with the means to fund the low carbon technology we are needing as we move forward!

As always, we are more than happy to help answer any questions you may have regarding your energy budgeting and spending. We are in tune with all the markets and how these Government decisions will affect your business. From Carbon taxes, to audit incentives our team has the tools you need to make the best decisions in your energy budgeting.

 
 

source: https://nationalpost.com/opinion/john-ivison-trans-mountain-approval-a-high-wire-act-on-which-trudeau-is-staking-his-future

 

Should Canada Introduce More Pipelines?

Mar 5, 2019

Natural gas is nearly universally accepted as the bridge resource between emissions-heavy fossil fuels and the green-tech movement. It is the ideal commodity to do the job, especially in North America, where the introduction of new drilling techniques in the mid 2000’s allowed access to enough natural gas to power the continent for decades to come. The big benefit of natural gas over other fossil fuels, from an environmental perspective is that, when combusted, it produces far less CO2 than other fuel sources. The idea is that natural gas will help shift energy demand away from coal, and “fill in the gaps” of cleaner energy sources like wind and solar, which are currently unable to provide 24-hour energy.

 

As the cost of renewable and green technologies drop, and energy costs associated with these technologies continue to drop, a looming question emerges: Should we continue to invest in expanding the infrastructure for a “bridge energy source”?

 

This question is especially pertinent in Canada, where the lack of pipelines to take away the natural gas produced in Alberta has led to a bottoming out of natural gas prices. Prices peaked several times in the early and late 2000’s, before advanced drilling techniques created more supply than could be taken away by the existing infrastructure. Since then, prices have plummeted to record lows.

 

Introducing more pipelines to take away this commodity will allow for prices to rise, as the takeaway capabilities rise to match the supply levels. Other factors, like building liquid natural gas (LNG) plants on the costs of Canada could allow for natural gas producers to sell their product for more, as foreign markets crave the energy source. Both Asian and European markets offer opportunities for lucrative long-term gas purchasing contracts, bringing with them economic viability for decades to come. The argument has transformed into a debate over whether the economic benefits or environmental impact of natural gas are more important.

 

Since the case has been stated for the economic benefits of natural gas, let’s look at the environmental implications of further expanding natural gas infrastructure through new pipelines. There are several avenues that must be looked at when considering the impacts that new pipelines will have: short-term and long-term.

 

The short-term impacts include the potential of leaks, explosions (as we saw in November with Fortis BC) and intrusions on local ecosystems as more space is carved out for pipelines. Canada has some of the highest standards in the world for pipeline regulations. Current alternatives to pipelines include trucking the gas, and transporting it via rail, both options are less regulated and require fuel to transport.

 

The long-term impact of introducing new infrastructure is that these multi-million to multi-billion-dollar projects often have payback periods that stretch decades into the future. With a majority of environmental experts agreeing that humanity needs to become carbon neutral by mid-century, investing in the future of natural gas is opposing these observations. While natural gas is a cleaner burning energy source than most other fossil fuels, it is not carbon neutral.

 

Recent events involving pipeline explosions across North America, with the most notable Canadian incident involving the explosion of one of two FortisBC pipelines feeding the lower region of British Columbia have increased the tensions surrounding the subject of future pipelines. The recent pipeline failures have caused prices in some markets to skyrocket as supply becomes incredibly limited. Utility costs in both BC, as well as Ontario have increased as costs of maintaining and repairing pipelines jump. As utility costs soar and are expected to remain high for Q2 and Q3 of 2019, the door opens for independent natural gas marketers, like Canadian Energy Strategies, to source gas through non-traditional pipelines. The flexibility of independent marketers means that companies like ours are not tethered to one region or supplier to source natural gas. When Trans Canada Pipeline costs are too high, CESi can bring gas through the Vector pipeline to serve the Ontario and Quebec demand of our client base.

 

Canadian Energy Strategies benefits from lower transport costs and transfers those savings to our customers. For more information about how our active management has proven superior year after year, and how to take advantage of our natural gas sourcing program, please reach out to us at lclimenhage@ces-energy.com.

 

Winter Natural Gas Spikes Will Have a Lasting Effect for Utilities

Jan 2, 2019

As expected, the 2018/2019 winter season has been full of volatility in the natural gas markets, both in North America and globally. Prices rose dramatically in November with cold weather forecasts. In much the same way, prices dropped significantly near the end of December among mild weather forecasts for the beginning of January.

 

Natural Gas Futures

 

With storage levels continuing to be at the bottom of the range for this time of the year in over a decade, expect to see these massive swings in pricing continue as weather forecasts change. With storage levels hovering between 18-20% below both last year and the 5 year average all winter, weather forecasts will be the primary driver for pricing.

 

Nat Gas Working

 

Businesses that have hedged their natural gas pricing are seeing significant savings this winter. Those businesses on the utility rate, however, would be wise to consider a switch to market rates for their natural gas in the coming months. Enbridge and Union Gas have been stuck selling gas at much lower rates than they have been purchasing it for, as they are required by the OEB to set 3 month pricing ahead of time. In order to recover from this cost difference, both of the two major Ontario natural gas providers are increasing their rates. Union Gas has increased their rate by 3¢, with Enbridge increasing their rate by 2.5¢ to a little over 18¢/m3 and 13¢/m3, respectively.

 

Nat Gas Rates

 

These rates will hold until at least April, although they will likely persist longer as the utilities recover lost profits from the winter months. If January and February turn out to be colder than currently forecasted, businesses sourcing their gas through a utility should expect to see high rates for all of 2019, with the potential for rates to increase further.

 

For more information, or to learn why right now is the perfect time for businesses purchasing natural gas at a utility rate to switch over to a market rate, please send me an email at lclimenhage@ces-energy.com and let’s start a conversation.

November Volatility

Nov 20, 2018

Expect High Volatility All Winter Long

Since the start of November, the natural gas futures index on the NYMEX has shown incredible volatility. Now up 60% YTD, the natural gas futures are having a rocky relationship with weather forecasts across North America.

The root cause behind these massive price swings up and down appears to be the looming shadow of a possible natural gas shortage this winter. On Thursday last week, the EIA released its weekly storage report, showing a net injection of 39 Bcf, which was higher than the estimated injection rate of 31Bcf. The report sent natural gas futures prices tumbling down from $4.70/MMBtu to around $4.00/MMBtu for just 2 days, before a cold weather forecast sent prices spiking back up to the previous levels. These pricing swings show the great tug-of-war currently underway in the market. One side points to record production levels for reasons why the price of natural gas is artificially inflated. The other side points to the terrifyingly low storage levels, sitting at 15 year lows for this time of the year. Those storage levels are made even more concerning going into the winter of a year that has seen highly unpredictable weather patterns.

 

 

Both sides of the debate will be using weather reports and storage reports to pull the prices in either direction on a daily basis all winter long. This makes it very difficult for anyone to determine where the market will end up when the warmer weather comes in. A mild winter will see prices dip back down toward the $3.80/MMBtu range, while a colder winter that draws much of the available storage could spike spot prices as high as $8/MMBtu, as seen in the winter of 2014, when the polar vortex drained natural gas storage to record lows.

 

Businesses that are on system supply with their local utility are not in the clear, either. While the utilities in Ontario only update their prices every quarter, they will be playing catch-up in early 2019 after they supply natural gas for a loss over the next few months, having locked in their prices in October. As always, they will incorporate the Gas Cost Adjustment to tweak their past prices, and cover their costs. In addition, we are forecasting that they will adjust their prices much higher in the New Year, as storage levels rebuild from extremely low levels, as seen following the winter of 2014. In 2014, Union Gas bumped their prices from 12.3 ¢/m3 of gas, up to 22.5 ¢/m3, with prices not recovering back to pre-2014 levels until April 2015.

 

Would you like to know what our market outlook is, and how we have prepared our client base for what we think will be an expensive winter? Are you on system supply with your local utility and want to know how to avoid a 2019 full of expensive gas? Send us an email at sales@ces-energy.com and we can start a conversation about how to best manage your natural gas portfolio for the upcoming year.

 

Sources: US EIA   Natural Gas Intel 1 2

Federal Carbon Tax Plan

Oct 26, 2018

The federal government has released its official plan for the carbon tax that is to be implemented beginning January 2019. This tax plan will be released to provinces that opt to use it over a provincial carbon tax, as well as those provinces that don’t have a carbon pricing plan.

 

As supporters and critics emerge to discuss the changes and implications of this national carbon tax, many businesses are wondering how to forecast how this pricing scheme will affect their 2019 budget. This article will help to clear the haze surrounding the costs that Canadian businesses should be expecting to pay.

 

Individuals will be taxed in this new plan primarily through an increase at the pump and rising natural gas prices: fuel in Ontario is forecasted to increase by 4.4 cents per litre in 2019, with natural gas rising 3.9 centres per cubic meter. The federal government, however, has indicated that individuals will actually gain more money than they spend in the form of an annual rebate. In Ontario, the average household (at 2.6 people) will pay $244, but be compensated $300 in 2019. Where is this extra money magically coming from? The excess will be paid by Canadian businesses.

 

The calculation for figuring out how much a business will be required to pay to this carbon tax is split in two. If your business creates over 50,000 tonnes of CO2 equivalent per year in emissions, then you will be billed on the Output-Based Pricing System (OBPS). This system also offers an optional opt-in for companies creating over 10,000 tonnes of CO2 eq per year, beginning in 2020. If your business is under this threshold, as all but 174 businesses in the 4 provinces that will have the federal plan imposed on them, you will be charged on a per-use basis of electricity, natural gas, and fuel CO2 equivalent emission amounts. Unlike individuals, however, businesses will not be receiving rebates to cover the increased costs.

 

Want to figure out what this carbon tax will cost your business, and how to budget accordingly? Canadian Energy Strategies has in-house energy experts, ready to assist you and your company with forecasting carbon tax related price increases, as well as strategies that you can implement in order to reduce your related costs. Email me today at lclimenhage@ces-energy.com.  

 

 

Articles and Websites Referenced:

Government of Canada 1  2

National Post

Repeal of the Green Energy Act

Oct 2, 2018

Ontario’s Government has introduced legislation to repeal the Green Energy Act. This initiative is in line with other actions it has taken to try and reign in electricity prices in Ontario. While this will not directly impact many businesses, it may have indirect implications. For businesses that currently participate in the Feed-In-Tariff (FIT) or were looking to participate, those incentives and contracts will be coming under increased scrutiny, with the Government already acting to cancel new energy projects under the Green Energy Act and FIT. For the average business in Ontario, this decision is promoted as necessary to ultimately achieve the Government’s goal of a 12 per cent reduction in hydro rates. Within the last few years the Government has committed to several long-term contracts for large scale energy projects including nuclear power.  The large scale power projects will contribute to the slow and steady increase of hydro rates.  Therefore, it is unclear as of yet how much this legislation will change current hydro rates as many contracts have 20-year terms, however by stopping future contracts the hydro rates may have been effectively frozen. 

Our outlook is that hydro rates will remain relatively flat for the short-term as the Government looks to reduce costs. We remain cautious about rates decreasing, as contracts that are already in place will likely remain and keep rates where they are today. Currently we are seeing slightly lower Global Adjustment (GA) rates compared to last year, however they are well within average GA rates for the past few years.

For more information on Ontario's hydro policy and our hydro management strategy you can reach us here.

 

Sources: Ontario Newsroom

Ontario Cap & Trade

Sep 12, 2018

Next month, Ontarians will see a change on their utility bills: no more Cap & Trade. The 3.3 ¢/m3 fee that has been applied to utility bills since January 2018 will be removed as of October 1st. The removal of the Cap & Trade program is good news for Canadian businesses. A medium sized company, using 1 million cubic meters a year of natural gas, will see a $33,000 decrease on their yearly costs.

The Auditor General, after conducting an audit of the program, indicated that the cap-and-trade system would have cost Ontario consumers and businesses $8 billion. She went on to say that the carbon pricing program would likely show reductions in emissions by the province of only 3% by 2020. This compared to the emissions reduction target of 15% below 1990 levels that has been set for 2 years from now.

The Federal government has indicated that if the province does not have its own carbon tax in place by September 1st, a date that has now passed by, it will implement its own carbon tax of $20/tonne CO2, effective January 1st, 2019. Premier Ford has indicated that he will fight Ottawa in court over the federally implemented tax. Manitoba, a province hoping to go the same route, has been told by independent legal counsel that the Supreme Court would likely side with the Feds on the ruling.

So what does this mean for Ontario businesses come 2019? Will a mandatory federal carbon tax be implemented, or will it have to pass through the court system first? For more information regarding how the ending of the Cap & Trade program will affect your business, please feel free to contact us.

 

Articles referenced in this post:

Ontario Newsroom 1 2  Global News CBC

The End of the Debt Retirement Charge

Mar 21, 2018

  The Debt Retirement Charge (DRC) on business and industrial hydro bills in Ontario will be ending after 16 long years. This charge came into effect in 2002 to combat stranded debt from the 1999 breakup of Ontario Hydro and is a flat rate of 0.70 cents/kWh. While there are several ways that the stranded debt is being paid down, electricity consumers have paid over 13 billion dollars as of 2016 through the DRC. The Ontario Government has committed to reduce electricity costs, and as part of that promise has decided to remove the DRC from hydro bills effective April 1st, 2018. While this is good news for consumers in the short-term, as their hydro bills will decrease, the future of electricity rates is still unclear. With the Government's intervention to cut and fix hydro rates, we will see debt continue to increase. While this new debt is not ‘stranded’, it will still need to be paid back at some point in the future.

 

Sources: Ministry of Finance & Ontario Electricity Financial Corporation