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Friday Jun 3, 2022   
Price Majeure Event (noun) or To Price Majeure (verb)  - When one party to a contract breaks or attempts to re-trade a deal due to an adverse move in input costs, operating costs, or market prices such that the deal no longer makes economic sense. Examples: “Our energy supplier just called, they say they can no longer deliver electricity to us because they can sell it for more down the road” or “Our electricity provider just called, they say their costs have gone up so much that they can no longer honor that $17 per MWh VPPA price.” I had to make up the definition because if you Google the term “Price Majeure” you get 11.8 million results and the first fifty entries I reviewed relate to the term Force Majeure. People who cut their teeth in ... » read more
Thursday Jun 2, 2022   
The Memorial Day weekend is a time for rest, relaxation, and a little beach time if you live in Southern California.  If you lived in Folsom, CA and did not work the real-time shift within the CAISO, you might have enjoyed boating, swimming, and tubing on the Lake Folsom as the elevation level was at 88% of normal compared to last year’s sub-50% level over the long weekend.  Inside the CAISO control room, the Memorial Day weekend was full of mayhem that would make an Allstate Insurance commercial look like a stroll through the park as the power demand was moderate all the while the renewable landscape was basking in the sun (solar) and taking a stroll where the winds aiding in the brisk pace of the in-state turbines.  Throw in the simple fact that the Pacific ... » read more
Wednesday Jun 1, 2022   
Please Justify the Market is the motto that comes to light when you happen to look at the market fundamental drivers that are being used to balance the grid.  Its acronym is fitting (PJM) as it highlights one of the markets that has everyone’s attention as we turn the corner from May 2022 and look forward into the lens of June and all of Q3-2022.  In fact, the months of April and May have been quite exciting given the simple fact that it was outage season, the retirement buzz, and the fact that Mother Nature delivered some heat from the middle of May through yesterday. Figure 1 | PJM Peak Load – Daily The graph above depicts just how much of an impact the weather had on the last day of May (31st) within the PJM market as the forecast was calling for a peak load ... » read more
Tuesday May 31, 2022   
This week the East Coast is going to get its first taste of summer. Daytime highs along the I-95 corridor are going to move up from the high 70's to the low 90's with heavy humidity which are conditions typically reserved for July and August instead of May. PJM is forecasting a new record peak hour load for the month of May near 140 GWa which is 15 GWa higher than the last record that was set in 2018. This creates some issues for the grid. Noting today is going to look much like a summer dispatch day the grid operator will have to bring resources online similar to what a July or August dispatch would look like. That is very different than what is dispatched in late spring. In years past PJM has more than double the amount of coal generation on the grid than what is occurring at this ... » read more
Friday May 27, 2022   
Reversion to the Mean? Who the heck knows where natural gas prices are going? As of yesterday, the price of natural gas for delivery in 2023 was $5.93 per MMBtu. One year ago, the 2023 price was $2.62. Mr. Market along with many others are scratching their heads as to why and like anything else that trades for the future, there are a lot of ways to think about such natural gas prices. The image below shows historic natural gas prices from 1997 through 2022 along with 2023 to 2035 forward prices as of March 25, 2021 (blue) and March 25, 2022 (orange). The simple average historical price from 1997 through 2022 is $4.30 per MMBtu. One common theory for commodity prices is a random walk with reversion to the mean. That is, prices move up and down but tend to return to the mean. The ... » read more
Thursday May 26, 2022   
At the end of last week, PJM was facing very tight grid conditions as a heat wave settled over the Midwest, Northeast, and Southeast starting on Thursday and extending into the weekend.  Temperatures rose over 90 degrees on Friday afternoon across large swathes of PJM, MISO, and the Southeast.  The conditions stressed the PJM grid at a point when there are still units on outage for spring maintenance, and high coal costs on top of recent coal retirements as well as further retirements looming in the future tapped out the available thermal output within PJM’s borders.  Our latest Newsletter Special Report, “Setting the Stage for a ‘Battle of the Megawatts’ in PJM and MISO this Summer” walks through the events of the past week as PJM needed to ... » read more
Wednesday May 25, 2022   
The Southwest Power Pool (SPP) has been known as the highest wind to power demand ratio region within the Lower 48.   This is quite impressive considering most of the press it tied to California’s renewable mandates through policy and what ERCOT has been able to do over the years.  When it is all said and done, SPP has a lot going on when it comes to the wind penetration and now with what is happening in the Midwest and East markets, the transmission is just as valuable as the West market participants deemed it over the past few years.  Throw in the fact that SPP has just as much exposure to the uptick in natural gas prices and we have a market transitioning from curtailments to figuring out where their megawatts want to go and for what price. Figure 1 | ... » read more
Tuesday May 24, 2022   
When there is a problem in the energy sector, the solution is to send a price signal at it until it goes away.  When supply is greater than demand, the signal is downward trending while the opposite is true when demand is greater than supply.  The actual price movement is modest when the balancing act sits within the first standard deviation of a normal distribution curve.  The more extreme price moves show up as the grid gets stretched to the tail end events.  Back in 2015, the fracking technology put the Marcellus/Utica region on the map and ultimately put plenty of production into circulation all the while other regions were increasing their natural gas output.  This led to regional basis cash trading hubs to drop below the production marginal cost levels on ... » read more
Monday May 23, 2022   
Over the past couple of years, the pandemic has changed the how we view the world as the days of talking on an office telephone has been replaced with some sort of headset that connects to one’s home computer and some communication application such as Zoom, Skype or the popular Microsoft Teams.  The communication change comes in handy as many still can work from home and it is a nice way to bring the presence of team members to the forefront all the while some dreamy background is on display as we all still figure out a way to fight through the changes that are now present in everyday life. Speaking of changes to the everyday life, many individuals are feeling the brunt of the cost of gasoline as they need to fill up their tanks as they must commute to their jobs a few days a ... » read more
Friday May 20, 2022   
The past month has been a tale of volatility in ERCOT. Since April 20, we have released no fewer than five ERCOT Market Flashes detailing the swings that the market has taken due to a variety of factors—renewables that are growing tremendously year-on-year, the new ORDC rule changes introducing higher pricing at lower net load levels, and extreme tightness stemming from sudden unit outages. To take a look at some of the major events of the last 30 days, we’ll briefly pick out some of the highlights from each of the five ERCOT market flashes we’ve published recently. Wind Giving Way to Solar in ERCOT Curtailments On April 20, we discussed the increasing amounts of renewable curtailments in ERCOT this year compared to prior years. Of course, renewable curtailments ... » read more
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