Renewable power retailer Clean Currents will no longer provide electricity to its 15,000+ customers, as it had reliably done since 2005. Co-founders Gary Skulnik and Charlie Segerman announced on Friday that the company has shut its doors forever. Why? In a blog post to its customers, the duo explains that the recent severe cold weather is to blame:
“[T]he recent extreme weather, which sent the wholesale electricity market into unchartered (sic) territories, has fatally compromised our ability to continue to serve customers.”
Their reasoning piqued my curiosity. (And I’m not the only one—the Washington Post followed up with the firm's co-founders yesterday.) What does it mean for the wholesale electricity market to go “into uncharted territories”? Could a few days of record prices put the entire company out of business?
On January 6th and 7th, wholesale winter (November 1st to the end of February) power prices on the PJM West Pennsylvania Interconnection (from which Clean Currents bought power) were the highest ever since the company turned on the lights in 2005. That is, until the wholesale market was slammed again on January 22nd, when prices hit $857.39 per megawatt hour (not shown in chart, EIA will publish data for the week including January 22nd on February 6th). Significant unplanned and/or emergency generation outages as well as high natural gas prices contributed to the electricity price spikes.
PJM spokeswoman Paula DuPont-Kidd said that “Going into the evening of Jan. 7, PJM was seeing about 36,600 MW of forced generation outages, or about 20% of its installed capacity”
One reason for the large number of outages was that “the gas system [was] stressed with the extreme cold weather.” Natural gas-fired power generation has increased dramatically since the shale-gas revolution brought prices down significantly. While many see this is as good news for climate, power generators’ increased reliance on natural gas homogenizes our nation’s fuel mix as natural gas is also heavily relied on for heating homes and businesses. In times of extreme cold, and in the presence of limited distribution capacity, shortages are not impossible. Indeed, PJM Executive Vice President of Operations Mike Kormos noted that PJM “had some fuel interruption on the natural gas system where units [were] not … able to get fuel.”
Natural gas prices (at least for deliveries in Transco Zone 6 NY) spiked to $56.59 per one million MMBtu on January 6th and to an outrageous $121.68 on January 21, up from $4.64 a week prior. (WSJ & Natural Gas Intelligence) These huge jumps played an outsized role in roiling the wholesale electricity markets last month.
One of Clean Currents’ selling points was the option to lock in a fixed price, “which can protect you from rate increases in the market.” However, it seems the company was unable to protect itself. I recently signed a contract with Clean Currents at a price of 8.7¢ per kilowatt hour (kWh). A few friends of mine locked in around 10¢ a few years ago. Even if the company collected the higher 10¢/kWh on all contracts, Clean Currents would still be losing as much as 20¢ per kWh ($200 per MWh) early last month and an astonishing 75¢/kWh ($750 per MWh) toward the end—that’s no chump change. This is because, even though Clean Currents is delivering renewable-generated rather than natural-gas generated electricity, there is only one wholesale market for kWh—renewable generators can command the same high price that gas generators are forced to charge. As a small company with only 19 employees, it is not too surprising that they did not have deep enough coffers to cover steep short-term losses, as large utilities like Pepco or BGE most certainly do.
The takeaway is that this is not a problem with renewable energy endeavors, but a reminder that small start-ups and companies, with less access to capital, can get hit hard by unexpected market events, including energy price swings—something that we may see more of as electric power generators compete with heating needs for natural gas supplies. As an avid supporter of both renewable energy and local business, I am sorry to see Clean Currents go.
