Europe’s energy market is weathering a storm of transformations. With natural gas inventory at peak levels thanks to a diversified supply chain and falling prices, traders and analysts face an evolving challenge unlike any other. Amid this flux, Enverus’s MarketView® emerges as a pivotal tool, tailored with 122 fresh gas, power and energy transition products for the European sector, enabling professionals to steer through the tumultuous market with finesse.
The Complexity of Supply Dynamics
Consider the present scenario where Europe’s gas storage brims at 59%, a figure set to rise. With MarketView, tracing past instances of similar storage peaks against market responses can arm traders with predictive insights, granting them a sharper edge in forecasting future trends. Fueled by insights from brokers, exchanges, transmission system operators (TSOs) and third-party sources, it is a veritable gold mine of information. Imagine being able to pull apart 10 years of hourly data for over 65,000 points or zoom into a single point of interest. For traders, this level of detail is not just beneficial – it’s essential.
Proactive Strategies in a Dynamic Market
As Europe diversifies its energy supply, moving away from Russian dependency towards Norwegian and U.S. imports, market waters become murkier. Here, MarketView shines by stitching together a nuanced picture of the market from its myriad data sources. Whether it’s pinpointing the impact of increased LNG imports on prices or dissecting the nuances of supply shifts, MarketView equips users with the clarity needed to navigate through these complexities.
Actionable Intelligence at Your Fingertips
In an environment where a surge in LNG imports might topple prices overnight, being the first to know can define market success. MarketView’s Actionable API sets it apart, transforming data into direct, actionable insights. This API doesn’t just update; it alerts, ensuring traders are always a step ahead, ready to pivot strategies in real time, amidst the market’s ebb and flow.
Navigating the European Energy Market With MarketView
Facing down the ongoing energy crisis, with its unpredictable supply dynamics and historically high gas storage figures, the importance of a robust, insightful platform becomes undeniably clear. MarketView stands out as this essential navigation tool, providing depth, agility and foresight in Europe’s unpredictable energy markets.
For traders and analysts who want to not just survive but thrive within the current energy landscape, incorporating MarketView into their strategy offers a way forward. It lights up pathways to sound decision-making and strategic advantage in the chaotic European market.
Questions around the relationship of data centers to energy demand are very quickly etching themselves onto the minds of industry and technology participants alike. Recent analysis from Enverus Intelligence® Research (EIR) forecasting Lower 48 and regional data center demand highlight some of the complexities of finding ideal traits such as connectivity to fiber networks, reliability and less critically, affordability of power supply. We see a growth floor near the fastest pre-AI period of deployment, while the dominant constraint is access to reliable power capacity.
Industry participants looking to build these facilities are running into a wall of regulated utilities who simply cannot guarantee the scale and reliability of supply they require. Hyperscale users are forming partnerships and making investments in the geothermal and advanced nuclear industries. Amazon, Microsoft and Google with are all leaning into these technologies and their ability to serve carbon free baseload electricity that meets the reliability requirements of their facilities. In the meantime, existing underutilized gas-fired and nuclear power plants will be targets for deployment opportunities.
Highlights From Energy Transition Research
(You must be an Enverus Intelligence® Research subscriber to access links below.)
About Enverus Intelligence®| Research Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.
The levelized cost of energy (LCOE) serves as a valuable measure for assessing the economic viability of a specific project or energy source. Put simply, a lower LCOE suggests that a project is more efficient in generating electricity. This metric is primarily influenced by three main factors: initial capital investment, ongoing operational expenses and the total electricity output throughout the asset’s lifespan. As depicted in Figure 1, most regions exhibit after-tax LCOEs ranging from $30 to $40 per megawatt-hour (MWh), with the exception of NYISO. In NYISO, LCOEs are comparatively less competitive due to higher expenses and reduced capacity factors, stemming from a lower-quality solar resource.
Highlights from Energy Transition Research
(You must be an Enverus Intelligence® Research subscriber to access links below.)
About Enverus Intelligence®| Research Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.
Over the last seven days, the Enverus Power and Renewables forecast has accurately predicted the 630__B constraint (KLNSW-HHSTH 138 kV with contingency DSALKLN5) in ERCOT. This major constraint near the town of Killeen, TX had the second highest total congestion shadow price, a major component of ERCOT prices, more than $13,000 in total congestion last week. While this congestion is fundamentally driven by high wind and solar generation, there were two transmission outages responsible for increasing flow on the constraint by 50%, while other longer term transmission outages also had a smaller impact on the same constraint.
In the screenshot below, the purple shading in the first chart reflects the P&R forecasted RT congestion, while the red shading represents the actual RT shadow prices. Data to the left of the middle gray dotted vertical line represents our RT MUSE constraint flow along with our forecasted constraint flow, while data to the right of that same vertical line represents the future forecast of constraints flows and forecasted shadow prices (purple).
While most of the predicted hours produced shadow prices on this constraint, the RT shadow prices came in below forecast on 4/13 as the transmission outage driving this congestion ended four days ahead of schedule during HE 21 on 4/12. The historical forecast shown on the screen for each operating day was created as of 4 a.m. of the prior day.
Monday and Tuesday (4/15 and 4/16) are currently not predicted to have any binding shadow prices of this constraint, however forecasted flows remain extremely close to the transmission limit. On Thursday, April 18, new outages similar to the prior week will begin at 7 a.m. and remain out for the following 10 days, with strong shadow prices forecast for Thursday (4/18), Friday morning (4/19), and Saturday midday (4/20). This constraint drives upside to the South Hub and Load Zone, as well as the AEN, CPS, and LCRA Load Zones, while adding downside pricing to the West Hub and Load Zone. (see shift factors below)
Please reach out if you have any questions or if you would like a demo of the ERCOT Power and Renewables Forecast and MUSE.
AUSTIN, Texas (April 15, 2024) — Enverus, the leading generative AI and energy-dedicated SaaS company, announced today that Andy McConn, director and head of Commercial Intelligence at Enverus Intelligence Research (EIR), will testify before the U.S. House of Representatives Natural Resources Subcommittee on Energy and Mineral Resources at 9:00 a.m. ET Thursday, April 18, 2024. The oversight hearing, titled “Assessing Solutions to Secure America’s Offshore Energy Future,” will take place in Longworth House Office Building 1324.
McConn will testify about domestic offshore energy development and provide a commercial perspective about the region and its role in the global energy market. EIR’s analysis suggests that U.S. offshore oil and gas production is unlikely to grow for the foreseeable future without a significant shift in incentives such as higher oil prices or opening new areas for exploration and development.
McConn’s full testimony is available upon request.
Hearing Details Date: April 18, 2024 Time: 9:00 a.m. ET Location: Longworth House Office Building 1324
About Andy McConn: Andy McConn leads the Commercial Intelligence team and deepens Enverus’ group of technical and financial specialists by contributing to company valuations and play modeling. Prior to joining Enverus Intelligence Research in 2019, Andy worked as an analyst for energy-analytics and E&P businesses for a decade. He holds a B.A. in Corporate Communication with a minor in Economics from the University of Houston and is based in Houston, Texas.
Enverus Intelligence ® | Research, Inc. Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, energy-dedicated SaaS platform, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 98% of U.S. energy producers, and more than 35,000 suppliers.
Being a supplier in the oil and gas business is hard. You must ride the cycle of boom and bust, differentiate yourself in an incredibly competitive market and make sure your financial fundamentals are sound. It’s not for the faint of heart, and there is no guarantee of success. More than half the suppliers that have transacted on the Enverus OpenInvoice network over the past 20 years are no longer in business.
Gain a competitive edge
So, suppliers need an edge. Something that can make an instant impact on operational efficiencies. Digitalization is a hot topic among organizations looking to cut costs and better prepare for future uncertainties in the market. And there certainly are opportunities if you can determine the right solution for your business. One area of focus for an increasing number of suppliers is the supply chain. As obtaining access to commodities such as steel and sand becomes more challenging, supporting the procurement process — from order to fulfillment — becomes more important. Ensuring the terms of negotiated contracts are leveraged becomes more critical as margins tighten. Supply chain efficiency has moved from being a luxury to a necessity, as it is now one of the levers that can be used to drive down costs and increase profitability.
A complete digital process
Enverus’ supply chain solution for suppliers supports the end-to-end order placement, receipt, invoicing and the fulfilment process. Leveraging a network of more than 40,000 active vendors, companies can completely digitalize a process that is typically manually intensive and unintegrated. Oilfield service companies can generate purchase orders or service orders that are supported by negotiated pricing, validate them against goods receipts or work tickets, then automatically approve invoices knowing that scope, quantity and pricing have all been digitally validated.
This provides oil and gas suppliers with immediate direct benefits. Time and effort spent managing invoices is reduced. Negotiated pricing is validated. Suppliers are notified of orders, short shipments are tracked, the status of any order at any time can be determined. As the company’s business grows, there is no longer a need to grow support staff with it. And monthly/quarterly forecasting and reporting are easier and far more accurate.
We went from processing invoices in weeks to real time. The ambiguity of payment status is now nonexistent, as vendors can now log in to the platform and track the approval status effortlessly. This transformation has not only streamlined our processes but also strengthened our relationships with vendors.
Tina Royal | Assistant Corporate Controller
This provides oil and gas suppliers with immediate direct benefits. Time and effort spent managing invoices is reduced. Negotiated pricing is validated. Suppliers are notified of orders, short shipments are tracked, the status of any order at any time can be determined. As the company’s business grows, there is no longer a need to grow support staff with it. And monthly/quarterly forecasting and reporting are easier and far more accurate.
Become an industry innovator
Many oilfield service companies have adopted the Enverus solution, the same technology their customers have been using for more than 20 years. Drilling contractors, OCTG suppliers, drilling fluids companies, chemical providers and others utilize the system. Operators and suppliers share virtually the same supply chain. Companies that have been transacting on the network for years for operators can do the same for suppliers.
So, as you look at ways to cut costs and make your processes more efficient, consider digitalization of the supply chain. It makes sense, it’s proven, and it can be implemented tomorrow.
Enverus Intelligence® Research (EIR) holds the position that global oil demand will not peak or decline before the end of this decade. EIR’s analysis offers a distinct and unbiased viewpoint, diverging from the two benchmarks forecasters; OPEC and the International Energy Agency (IEA). The IEA’s most optimistic scenario predicts that global oil demand will stabilize at around 105 million barrels per day by 2030, while scenarios aiming for net-zero emissions propose a significantly lower demand. In contrast, OPEC anticipates an increase to 112 million barrels per day by 2030. Currently sitting at roughly 103 million barrels per day, Enverus Intelligence® Research’s projection points towards a demand of 108 million barrels per day by 2030. This estimate finds a middle ground among the varying predictions, but not by coincidence or through compromise.
EIR has conducted a detailed bottoms-up analysis and found that fuel economy standards aren’t as effective as mandated, while factoring in current electric vehicle sales momentum. Lastly, EIR has adopted consensus estimates for the impact of single-use plastic bans on oil consumption to arrive at our result. Overall, both OPEC and IEA estimates require a significant change in consumption behavior or a reversal of off-oil measures over a short period. History is not in their favor. Our demand forecast results in a world where OPEC’s influence on oil price strengthens, supporting the group’s preference for prices of $85/bbl to $105/bbl. As for when peak demand will occur, we suspect it occurs between 2030 and 2035 as supply costs and availability may combine with off-oil measures to curb consumption in the first half of the next decade.
You must be an Enverus Intelligence® subscriber to access this report.
Why the Discrepancy?
The emerging difference in forecasts stems from varying assumptions about:
fuel economy standards effectiveness,
the predicted success of electric vehicle sales,
and the progression of economic growth to the end of the decade.
To address the conflict between the expected rise in oil demand and the shift towards environmentally friendly technologies and standards, EIR highlights the underwhelming enforcement of fuel economy standards and the slowing momentum towards the adoption of electric vehicles. From an environmental perspective, reaching our goals for net-zero emissions requires reducing oil consumption starting immediately. However, we project an increase in oil demand by 1.5 million barrels per day this year. Although there is a general desire to lower emissions, there appears to be limited willingness to bear the costs or change habits. Overall, current trends suggest that reducing emissions in the transportation sector might not be achievable soon, even with the introduction of recent fuel economy policies in the United States. Yet, future outcomes could be influenced by the leadership of upcoming US Presidents.
On The Persistence of Oil Demand Growth
Fuel economy standards have underwhelmed. Disparities between real-world performance and stated fuel efficiencies, along with a shift towards larger vehicles, have suppressed the gains in fuel efficiency. This discrepancy is likely due to people buying larger vehicles and the fact that the fuel efficiency advertised doesn’t match the actual performance on the road. While government regulations aimed to roughly double fuel efficiencies for new vehicles, their real-world fuel economy seems to fall short of these ambitious goals. Moreover, despite significant increases in electric vehicle (EV) sales in Europe and China, the growth rate in the U.S. has noticeably slowed, affecting its contribution to decreasing global oil demand. Initial enthusiasm around EV sales, driven by substantial growth rates especially in China and Europe, has waned in the U.S., prompting a reassessment of expectations. Current predictions now adjust the forecast for EV sales to account for roughly 25% of total Light-Duty Vehicle (LDV) sales by 2030, a percentage that is less than President Biden’s 50% target. The evidence of this deceleration is apparent in challenges faced by Tesla and Ford’s strategic pivot towards hybrids, which shed light on the U.S.’s diminished appetite for EVs. However, Europe and China continue to display robust momentum in adopting EVs.
Future Outlook of Economies Around the World
The revised prediction regarding the influence of electric vehicles (EVs) on oil demand , along with factors like economic growth and demographic changes, leads to the anticipation of ongoing oil demand. EIR does not predict the significant shifts in per-capita consumption or the decoupling of economic growth from oil consumption that would be necessary to see a peak in oil demand before 2030. To further explain, the well-documented aging populations in China, Japan, and Europe, coupled with the absence of a younger generation to propel economic activity, serve as barriers to increased consumption. However, this is counterbalanced by the demographic upsurge of younger populations in India, Southeast Asia, and Africa, which will shape the regional patterns of oil demand growth into the end of the decade.
EIR’s report author and director, Al Salazar, succinctly states, “Both OPEC and IEA global oil demand estimates require a significant change in consumption behavior or a reversal of off-oil measures over a short period. History is not in their favour. Instead, we believe the rate of demand growth will gradually slow but not peak. However, the regional dispersion of the growth changes dramatically.”
The Implication of Higher For Longer Oil Prices
Al Salazar suggests that EIR’s forecast bolsters OPEC’s sway over oil prices, reinforcing the organization’s preferred Brent crude price range of $85 to $105 per barrel. This scenario, combined with a possible lack of investment in the global oil supply, could set the stage for increases in oil prices, potentially leading to a peak in oil consumption in the early next decade.
While there is widespread agreement on the need to reduce emissions, this has not translated into a decrease in oil consumption. Current projections indicate that oil demand will remain strong at least until 2030. To achieve the environmental goals that have been set, it will be necessary to see significant changes in behavior and a greater readiness to invest in cleaner alternatives.
Authors:
Al Salazar – EIR Contributor*
Al Salazar is a seasoned member of the Enverus Intelligence team, bringing over 23 years of experience in the energy industry with a focus on fundamental analysis of oil, natural gas, and power. Throughout his career, Al has held key positions at EnCana/Cenovus and Suncor, where he honed his skills in forecasting, hedging, and corporate strategy. Al’s 15-year tenure at EnCana/Cenovus was particularly impactful, where he contributed significantly to the company’s success. AL earned his bachelor’s degree in Applied Energy Economics from the University of Calgary in 2000, followed by an MBA with honors from Syracuse University in 2007. Al’s academic background, coupled with his extensive professional experience, has equipped him with a deep understanding of the energy industry’s complexities and the necessary skills to navigate them effectively.
Christopher Griggs Product Marketing Manager at Enverus Intelligence® | Research (EIR) and Trading & Risk
Christopher Griggs Product Marketing Manager at Enverus Intelligence® | Research (EIR) and Trading & Risk
Christopher Griggs Product Marketing Manager at Enverus Intelligence® | Research (EIR) and Trading & Risk
Chris leads the development and communication of the value these products provide various industries, including oilfield services, investment funds, wealth management departments, banks, E&P oil and gas departments, and midstream operators. Chris helps provide customers across the energy ecosystem with the intelligent connections and actionable insights that allow them to uncover new opportunities and thrive.
About Enverus Intelligence Research Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, generative AI and energy-dedicated SaaS company, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 98% of U.S. energy producers, and more than 35,000 suppliers. Learn more at Enverus.com.
The Enverus Intelligence® Research (EIR) Subsurface Innovation Team attended AAPG’s CCUS 2024 conference in Houston March 11-13. The conference, which also brought together SPE and SEG membership, hyped up the need for CCUS to offset the demand for fossil fuels, which according to our forecast is expected to grow from 103 MMbbl/d in 2024 to 108 MMbbl/d by 2030.
The takeaways here were originally published by our Subsurface Innovation Team shortly after the AAPG conference. To gain early access to crucial insights in a rapidly changing industry, learn more from our EIR team’s daily insights with Enverus Energy Transition Research.
KEY POINTS
CCUS appeared to be summiting the hype curve at this year’s conference. As oil and gas will be needed for the foreseeable future, CCUS will be necessary to decarbonize. While major projects have yet to start injecting, small-scale pilots funded by governments are sharing results, which is contributing to the evolving knowledge base.
Despite this progress, large-scale implementation will come with challenges such as unpredictable reservoir behavior, well integrity issues, plume migration, pressure interference, regulatory, policy and public perception hurdles, and lack of a long-term global carbon price.
To reach proposed net-zero goals, a major focus is required to build new CO2 transportation infrastructure and to permit and drill hundreds of Class VI injection wells, highlighting the importance and need to accelerate CCUS initiatives.
There seemed to be less sharing and operators were more guarded with their information. We’ve gone from a collaborative space to a competitive one.
The acquisitions of XOM-DEN at $4.9 billion and OXY- Carbon Engineering at $1.1 billion bolster the CCUS industry’s legitimacy and underscore a trend toward enhanced vertical integration.
KEY THEMES GOING INTO 2024:
CCUS at Scale
We’re going to need more of everything – more pipelines (50,000-60,000 miles), more electricity (35% increase by 2050 in the Gulf Coast area), more water (5-25 tonnes of water per tonne of CO2).
Some 650 Class VI wells will be needed by 2050 to meet injection targets, up from just two active Class VI wells today.
The U.S. DOE will spend $2.25 billion in funding CarbonSAFE projects with 15 more planned announcements this year. Five mtpa of injection is expected from this program by 2025.
Community outreach and knowledge will be critical to advance CCUS projects at scale across the U.S.
It was expressed that no one wants to be the first large-scale injection project because of risk and uncertainty. However, to accelerate CCUS initiatives, operators and developers need to execute projects, learn from mistakes, share information, iterate and keep moving forward.
The upcoming U.S. election is raising concerns about the impact on CCUS projects, but the consensus is that this is a low risk due to the bipartisan support for most major U.S. funding.
The Cost of CCUS
Inflation is a problem. Projects cost 30% more and $85/tonne isn’t going to cut it anymore.
The industry acknowledges the benefits of hub-scale development to bring down costs.
Presentations on the cost of CCUS were the most well attended, showing a large desire by participants to understand the economics of all components of the CCUS value chain.
Policy and Regulation for Carbon
Not all Class VI permits are the same, but applications need to be thorough, clear and address any local differences.
Applications are getting better and more successful partially because the EPA is getting better, and the agency’s questions are becoming more targeted.
Some presentations from regulators implored applicants to be extremely thorough with their application materials to alleviate the backlog of projects currently under review.
There needs to be a long-term, clear price on carbon, supported by incentives or requirements to source low-carbon products.
The Known Unknowns of CCUS
Legacy wellbore risk is still a huge topic. How can these risks be quantified?
How is the AOR defined? The height where the hydraulic head of the pressurized reservoir meets the depth of drinking water (underground sources of drinking water or 10,000 TDS).
How do different rock types behave when in contact with CO2? CO2 mineralizes in basaltic reservoirs within two years. These projects expect smaller plume sizes and a lower risk of CO2 escape. However, is large-scale injection possible?
How do different caprock lithologies react with CO2 and will containment issues arise?
Volumetric capacity estimation for CO2 storage assumes fluid displacement. If EIR assumes pressure competition or a closed system, reservoir utilization (or efficiency factor) could be reduced from 4% to 0.4%, or a 10x reduction in storage capacity.
Learn more with our CCUS Fireside Chat Webinar Series, where host Graham Bain explores different aspects of the CCUS value chain with esteemed guests.
About Enverus Intelligence®| Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts, and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.
E&P activity targeting the Cleveland formation in the Anadarko Basin more than doubled in 2023 with 46 new wells reaching first production, compared to 20 in 2022 and similar levels the previous two years. The increase has bucked the overall trend in the Anadarko Basin, where completion activity decreased to 589 new wells in 2023 from 630 in 2022.
A large portion of the increase is attributable to privately owned Mewbourne Oil increasing its program from 11 wells in 2022 to 21 in 2023. In particular, Mewbourne ramped up activity in Ellis County, Oklahoma, to 16 new wells last year versus two in 2022.
Even excluding Mewbourne from the tallies, there was still an 11-well increase last year at 25, with the most active operators being Duncan Oil Properties (six wells), Latigo Petroleum (six) and Upland Operating (five). Each of these companies at least doubled their tally YOY. Nine companies had new wells tapping the Cleveland in 2023, up from six in 2022.
So far in 2024, permitting activity suggests another active year for the formation. A total of 72 Cleveland permits were approved in 2023 compared to 25 in 2022. As of April 10, 19 permits have been approved YTD, including 14 filed by Mewbourne.
Big increase in laterals and frac loads helped boost Mewbourne IP90s 44%.
Besides being the most active Cleveland player, Mewbourne’s productivity in the formation also leads its peers. In 2023, the company’s new wells delivered 90-day cumulative volumes of 71,608 boe (59% oil) per well—a 44% increase from its 2020-2022 average. To achieve that increase, Mewbourne is using 31% longer laterals at 9,201 ft, more than 2.5x higher proppant intensity at 1,703 lb/ft and more than double the fluid intensity at 43 bbl/ft, according to Enverus Foundations data. On a normalized basis, the company’s 2023 IP90s averaged 6% higher than the previous three years at 91 boe/d per 1,000 ft.
About Enverus Intelligence Publications
Enverus Intelligence Publications presents the news as it happens with impactful, concise articles, cutting through the clutter to deliver timely perspectives and insights on various topics from writers who provide deep context to the energy sector.
Renewable fuel uptake has surged in California in recent years, contributing to a 141% increase in the California Low Carbon Fuel Standard (LCFS) credit bank surplus and resulting in a drop in credit prices from ~$185/tonne to $75/tonne from 2019 through 2023. A tsunami of renewable diesel (the largest credit-generating fuel type), renewable natural gas/biomethane and electric vehicles have flooded into the state, accounting for 81% of the credits generated in 3Q23. Fuel volumes grew by 233%, 62% and 130% since 1Q19, respectively, while the corresponding credits generated increased by 166%, 674% and 206%. The program might be on the brink of working too well, desensitizing investments in nascent clean fuel technologies and ultimately failing to achieve California’s stated emission reduction targets in the long term.
In our first LCFS Price Forecast, available to Energy Transition Research clients only, Enverus Intelligence Research (EIR) explores the relationship between credit bank volumes and the historical prices of LCFS credits, finding an R2 value of 0.98. EIR’s forecast includes our long-term price curve assumptions for LCFS under the California Air Resource Board’s latest scoping plan, which will be critical to navigating the volatile market dynamics of low-carbon fuels.
Research Highlights
(You must be an Enverus Intelligence® Research subscriber to access links below.)
Demystifying Data Centers – Energy and Tech Collide – Energy Transition Research’s primer for understanding the data center landscape highlights three of the key considerations when forecasting load from data centers and artificial intelligence, and how we think about those levers.
Electrifying the Permian – Decarbonize or Destabilize? – This report quantifies the potential electrification of oil and gas assets in the Permian Basin based on operators’ emissions reduction targets and its impact on grid demand, transmission flows and the generation required to serve this growing load.
About Enverus Intelligence®| Research Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.
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