By Scott DiSavino
(Reuters) – Freezing weather and snowstorms in the U.S. could cause massive power outages in the coming week and push demand to winter highs, energy analysts and reliability coordinators said.
The increase in demand is because gas supplies could decline due to the freezing of oil and gas wells and pipelines, known in the energy sector as so-called ‘freeze-offs’.
According to data from the U.S. Energy Information Administration (EIA), gas provides about 43% of the nation’s electricity generation and heats about 45% of the nation’s homes. The increase in demand combined with a drop in supply could push prices higher next week.
“Appalachia and Rockies production faces freeze risks if temperatures dip into the single digits or lower,” analysts at energy consultancy Gelber and Associates said in a note.
The U.S. produces about 105 billion cubic feet per day (bcfd) of gas, with about a third of that supply coming from the Appalachia region of Pennsylvania, West Virginia and Ohio, according to data from financial firm LSEG and the EIA.
In recent winters, freezes have reduced gas production by huge amounts, including the loss of about 16.5 bcfd in January 2024, according to LSEG data.
Frigid temperatures in December 2022 reduced supply by 19.4 bcfd, and in February 2021 production fell by 20.4 bcfd, according to LSEG data.
One billion cubic meters of gas is enough to provide approximately five million households with energy for a day.
As heating demand increases, LSEG expects total U.S. gas consumption, including exports, could reach 156.4 bcfd by Jan. 9. That compares to the daily record of 168.4 bcfd on Jan. 16, 2024, during another brutal winter freeze.
The combination of rising demand and freezes in January 2024 lifted spot gas prices on the U.S. Henry Hub benchmark in Louisiana to over $13 per million British thermal units (mmBtu).
The next day, prices at the Henry Hub were currently around $3.65 per mmBtu, the highest level since January 2024.
ENERGY COMPANIES ARE PREPARED
About 250 million people will experience cold air in 40 states over the next week, according to AccuWeather meteorologists. They warned of significant ice accumulations that could cause power outages in parts of Missouri, Illinois, Indiana and Kentucky over the weekend and into Monday.
U.S. energy company CenterPoint Energy (NYSE:) said Friday that its cold weather action plan is in effect for power and gas customers in several states, including Texas, Louisiana, Indiana, Ohio and Mississippi.
Earlier this week, the North American electric (NASDAQ:) Reliability Corp (NERC), the nation’s reliability coordinator, urged everyone in the electricity supply chain to take steps now to ensure the highest levels of reliability.
NERC said it is “particularly concerned about natural gas supplies given the significant amount of production in the Mid-Atlantic and Northeast.”
Extreme weather in February 2021 left millions of people in Texas without power, water and heat for days and resulted in more than 200 deaths as the state’s power grid scrambled to keep the electricity system from collapsing.
