Learning and remembering all of the terms that come along with the energy industry can be tough. But no worries – we’re here to clear things up! Below, we have compiled a list of the most common terms you need to know. These terms will give you more insight into the inner workings of the energy market, allowing you to walk away a more informed customer.
Units of Measurement
First let’s start with units of measurement. Energy is measured in giant numbers! Here are some of the most common measuring units used in this industry.
Bcf – Billion cubic feet
This is the standard unit of measurement for natural gas supply/demand – 1,000,000 MMBtu = 1 Bcf.
Btu – British thermal unit
A “Btu” is a unit of heat. Specifically, it is the amount of heat that is required to raise the temperature of one pound of water by one degree Fahrenheit. This is important to remember as it can heavily affect your energy bills!
GWh – Gigawatt hour
The unit of measurement for 1 billion watts used for one hour.
MMBtu – One million British Thermal Units
Standard unit of measurement for natural gas financial contracts (also equal to 1 dekatherm).
MMcf – Million cubic feet
Standard unit of measurement for natural gas supply/demand – 1,000,000 MMBtu = 1 MMcf.
MWh – Megawatt-hour
1 million watts used for one hour.
Tcf
Trillion cubic feet.
Energy Terms to Know
With so many different terms in the energy industry, it can be confusing at times. We are here to help clear up the confusion by providing you with a breakdown of each energy term that is important to know.
Natural Gas
Natural Gas refers to a fuel burned under boilers and by internal combustion engines for electric generation. These include natural, manufactured and waste gas.
Dry Gas
Dry gas is a natural gas that consists mostly of methane. It produces little condensable heavier hydrocarbon compounds, such as propane and butane, when brought to the surface. In the U.S., dry gases are defined as those that contain less than 0.1 gallon of condensables per 1,000 cubic feet of produced gas.
Wet Gas
Natural gas that consists of an appreciable proportion of hydrocarbon compounds heavier than methane (e.g., ethane, propane, and butane). In the U.S., wet gases are defined as those that contain more than 0.1 gallon of condensables per 1,000 cubic feet of gas.
Power Burn
Power burn refers to natural gas that is consumed for power generation.
Production
Natural gas production is measured in one million cubic feet (MMcf)/day or a billion cubic feet (Bcf)/day.
Energy
Energy has several forms. Some are easily convertible and can be changed to another form useful for work. Most of the world’s convertible energy comes from fossil fuels that are burned to produce heat that is then used as a transfer medium to mechanical or other means to accomplish tasks. Electrical energy is usually measured in kilowatt-hours (Kwh), while heat energy is usually measured in British thermal units (Btu).
Electricity
A property of matter created by the movement of electrons. This “movement” is initiated usually by a generator fueled by any number of energy resources such as coal, uranium, water (hydropower) or directly converted from solar radiation in photovoltaic cells. Electricity is not energy per se, but the “carrier” of energy that originates in fossil fuel and renewable energy sources.
Electric Generation
Measures in watt-hours (Wh), this is the process of producing electric energy or transforming other forms of energy into electric energy.
Markets
Commodity markets that deal specifically with the trade and supply of energy are referred to as Energy markets. This could include an electricity market, but can also refer to other sources of energy.
Forward Market
A forward market is a financial market in which financial instruments or commodities are traded for future delivery.
Futures
Futures are standardized forward contracts traded on a centralized exchange.
NYMEX
The abbreviation for New York Mercantile Exchange, which trades in futures exchange of energy and other commodities.
Spot Market
A financial market in which financial instruments or commodities are traded for immediate delivery (or “on the spot”).
“Spot” time period
This can refer to the next day or even two days out delivery. “Cash” markets refer to the same day, as in you have to pay cash (no credit).
Fuel
Any substance that can be burned to produce heat is considered fuel.
Fuel Consumption
The amount of fuel that is used for gross generation, providing standby service, start-up and/or flame stabilization.
Transportation & Storage
Transporting and storing energy involves a giant web of processing, safety measures, and locations to ensure it can be delivered and used all over the world.
Henry Hub
Henry Hub is a distribution/delivery point for natural gas located in Louisiana. It’s used as a domestic and global benchmark for natural gas futures and is traded on the NYMEX exchange.
Injections
Injections refers to underground natural gas storage, when physical natural gas is stored underground to be pulled out and used later.
Liquefied natural gas (LNG)
Liquefied natural gas is composed of methane and some mixture of ethane. It is used to convert natural gas to liquid form for ease and safety of transport while in storage. Cooled to approximately -256⁰ Fahrenheit, it can be transported from countries with a large supply of natural gas to countries that demand more natural gas than they produce.
Pipelines
There are interstate pipelines and intrastate pipelines that serve as a key method for moving natural gas from producing regions to consumption points.
Storage
Measured in cubic feet, physical natural gas is stored underground to be used later.
Withdrawals
Refers to physical natural gas being removed from underground storage to supply the market with additional inventory during a time of high demand (i.e., during winter).
Contracts
Contracts are used in the energy industry to lock in rates and ensure continuity of service.
Outer Years/Back end of curve
Depending on curve length, this typically refers to a five-year curve; the back-end of the curve is the last 2-3 years.
Prompt/Front Month or Prompt/Front Year
The contract term with an expiration date closest to the current date.
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