FTR contract volume and value up slightly with mild temps, robust wind output
Houston — Financial transmission rights auctioned in September for use in October were collectively up slightly in contract volume and value in comparison with a year earlier, possibly in anticipation of milder temperatures and stronger wind output hitting transmission constraints.
October FTR volumes were up nearly 24% in the Electric Reliability Council of Texas market and the PJM Interconnection, compared with October 2019 volumes, and the value of those FTRs were up 11.3% and 20.1%, respectively.
However, the volume of New York Independent System Operator FTRs traded in September for use in October was down by 23.4% in comparison with a year ago, and the value was down 44.4% on the year.
Collectively, 245.9 TWh of FTRs were auctioned this September for use this October, down 7.8% from the 228.1 TWh for October 2019 FTRs. The value of this October’s FTRs totaled almost $137.6 million, up 1.2% from October 2019 FTRs’ $135.9 million.
FTRs — also known as congestion revenue rights, transmission congestion contracts and transmission congestion rights in some markets — are financial instruments that allow market participants to offset potential losses or hedge against the congestion component of locational marginal prices in day-ahead electricity markets. An FTR obligation contract entitles the holder to be compensated if congestion occurs between two points on the grid in the same direction as stated in the contract. The contract holder is charged if congestion occurs in the opposite direction stated in the contract. This analysis is limited to the monthly FTR obligations market, and does not cover FTR options or long-term FTR markets, which can include quarterly and annual FTR contracts.
The National Weather Service’s September forecast for this October’s temperatures indicated enhanced chances for above-normal temperatures across virtually all of the Lower 48 states except the Pacific Northwest. Usually, above-normal temperatures in October tend to lessen power demand.
In contrast, the weather service observed below-normal temperatures in October 2019 for the western two-thirds of the US, including much of Texas, and above-normal temperatures for the eastern third.
Two ISOs with large wind fleets, ERCOT and Midcontinent ISO, have through Oct. 19 shown substantial increases in daily wind output, 4.5% and 17.3%, respectively, compared with average daily wind output levels in October 2019. The numbers are actual according to ISO data for ERCOT in 2019 and for MISO in 2019 and 2020, but modeled by S&P Global Platts Analytics for the month to date this October in ERCOT.
MISO’s FTR contract volume was down 3.4% this October, but contract value was up 10.9% on the year.
Another large wind producer, the Southwest Power Pool, has shown a slight decrease – 1.2% — in daily wind output through Oct. 19, compared with October 2019. These numbers are actual from SPP.