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Thursday May 19, 2022   
The transition from winter to spring in Texas over the past several weeks has brought the first glimpses of how ERCOT will respond to summerlike heat in its borders.  As recently as the afternoon of last Friday, May 13, real-time prices at ERCOT’s Houston Hub climbed over $5,000.  One pattern that has become apparent over the past month-and-a-half is that a significant amount of separation has grown in place between ERCOT’s price hubs.  While Houston is firmly in place as ERCOT’s highest-priced region, the West Hub price has routinely been the lowest—and by a large amount, with the North and South Hubs sitting in-between.  Looking over the past seven days in the figure below, on the days when prices rise in Houston, the West Hub often fails to ... » read more
Wednesday May 18, 2022   
As we turn the corner and work through the back half of May 2022, there are a couple of common themes that seem to be arising across the country.  The first is the simple fact that the summer forecasts are calling for above normal temperatures across the Midwest, East and South Central all the while the inner West will be scorching hot while the Pacific Ocean coastal region might be saved for the second straight year.  The second is the simple fact that the natural gas environment continues to try and find the price point that will either stimulate the production needed to balance or find a level that might trigger some demand reduction.  The former is typically much easier than the latter, but the past few years have taught us nothing is normal anymore.  Therefore, we ... » read more
Tuesday May 17, 2022   
There have been several energy related catastrophes over the past decade that have put pressure on the storage balancing in the state of California. The loss of San Onofre Nuclear Generating Station, The Aliso Canyon Storage Cavern rupture and the loss of L3000 and L4000 import pipelines into the SoCal Gas system are the main culprits in the saga. With the renewable push from wind, solar and now batteries and the recovery tied to the transport capacity over the past few years, the SoCal Gas system is as healthy as it has ever been. Unlike most caverns across North America, which are facing a large year on year inventory deficit, SoCal Gas has a large surplus that started with the CPUC granting the right to add an additional 7.2 BCF of storage capacity to the Aliso Canyon facility last ... » read more
Monday May 16, 2022   
This past weekend, I had the pleasure of traveling down to rural Iowa for my father-in-law’s celebration of life ceremony.  Many who new good ole Marv Wente, he always had a story to tell either about fishing, the farm or selling sweet corn at the intersection of two state highways for years. My conversations with him were plentiful over the years as he would come out to visit and we would sit on the computer looking up the yield numbers, soil content and other attributes to the seeds he sold to his clients.  It was quite the learning experience as the science behind developing crops continued to evolve. Figure 1 | Iowa Corn Growing Since Marv grew up on ‘the farm’ and sold seed corn at the local feed mill for years, he was aware of the ins/outs when it came ... » read more
Friday May 13, 2022   
I love reviewing the Energy GPS monthly renewables report. In one concise report I can check on how well the renewable fleet is doing through US electricity markets. The report has all of the key indicators such as maximum production for wind and solar, average production, curtailment, market pricing, and more. At a quick glance it is easy for me to track trends, see which regions are going with the flow, and which regions are bucking the trend. For example, the wind-weighted price in ERCOT North for April 2022 was $46, compared to $15 in April 2020 and $31 in April 2021. Wind values in ERCOT West were about $30 per MWh for April 2022 which is up about $6 per MWh from last year. Solar value in ERCOT continues to enjoy a premium to wind, coming in at $61 per MWh in April, but that premium ... » read more
Thursday May 12, 2022   
Despite the continued weather pattern in the Pacific Northwest keeping temperatures throughout the region approximately 10 degrees lower than what is normal for this time of year, the start of this week has shown some movement in the conditions for the hydro system that have been relatively stagnant over the past several weeks.  The weekend marked the scheduled end date for the Drum Gate maintenance work at Grand Coulee and the first evidence that refill operations have commenced at the project.  The reservoir elevation has been increased five feet since last Friday with 30-70 kcfs of inflow reserved for replenishing the pool.  Figure 1 | Forebay Elevation at Grand Coulee (Feet) At the same time the last few days have seen some significant increases in flows along the ... » read more
Wednesday May 11, 2022   
It is really hot in Texas with no signs of letting up.  The heat is exemplifying several major market themes in ERCOT that we have been discussing in depth with clients in the wake of last winter’s Storm Uri, and more so in the past several months in the run up to the summer market.  The heat is making a stark display of ERCOT’s stunning structural load growth, stout renewables generation increases, challenging transmission environment, and precarious reserve margins that have compelled new pricing structures to yield heightened volatility.  All of this is on display front-and-center this week and – given weather forecasts – will remain so for (at least) the next couple of weeks ahead. As we have shared in this report and in much greater detail in ... » read more
Tuesday May 10, 2022   
The EIA Weekly Natural Gas Storage Report continues to be the benchmark for monitoring the nations in ground supply. Each Thursday the market hangs its hat on the change driving prices based on the performance or underperformance of the posting versus the consensus estimate. Often the devil is in the details. Current inventory now stands at 1.57 TCF as per the latest report. That is now a 382 BCF to last year which is out from 347 BCF at the beginning of April. The lack of progress has been disappointing and is a big reason why the NYMEX futures climbed from $4.60 in the middle of March to $8.78 last week. But if you dig just under the surface of the inventory report a different story is starting to emerge.  Figure 1 | EIA NG Inventory for 2018 - 2022 The Weekly ... » read more
Monday May 9, 2022   
The CAISO battery fleet took a bit of a hit a few months ago when the Moss Landing facilities saw fires breakout to which the full operations came to a standstill.  Since that time, a new facility has sync’d to the grid to which provides roughly 184 MW.  The goal for the fire-ridden megawatts is to have them available by the third quarter per Vistra’s quarterly report highlights this past week.  Between now and then, the renewable sector continues to hit roadblocks tied to supply chain shortages of which was mentioned in the CAISO market briefing this past Friday.  At the end of the day, CAISO is starting to lay the foundation for a very stressful summer period if it gets hot within the LA Basin as the lack of new capacity and a hydro situation that is ... » read more
Friday May 6, 2022   
Since they occurred on January 1 of this year, we have released two special reports detailing the effects of ERCOT’s ORDC rule changes. These changes were made as a result of the price action during Winter Storm Uri, and have the broad effect of causing more, lower price spikes than have been previously observed in ERCOT. We have already seen this playing out in 2022, as the ERCOT hub prices have experienced significant price spikes despite higher-than-historical levels of reserves. However, post-Uri is not the only time that ERCOT has made significant changes to the ORDC calculations. The following chart shows the way that several primary inputs[1] to the ORDC calculation have changed over time: Figure 1 | Historical ORDC Rule Changes Working from the bottom up, the first item is ... » read more
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