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Thursday Mar 26, 2020   
Over the past few weeks the world has been turned upside down in a way that countries are in full lockdown mode, individuals are asked to cozy up in their small apartments/flats and every news station is finding it hard to stay on top of the information surrounding the coronavirus.  During this time high officials across the world have thrown out the words 'pandemic', 'stay-in-place' and 'social distancing' as they get their arms around what is happening on a daily basis.  The word 'pandemic' is similar to the words widespread, pervasive or rampant and in its noun form is defiined as an outbreak of an pandemic disease.  Figure 1 | Pandemic Alert The 'stay-in-place' is being used by government officials/top business owners who have made the decision to mandate ... » read more
Wednesday Mar 25, 2020   
The Corona Virus (CV) and the related illness COVID-19 (C19) has unsettled and upended the world as we know it. People are socially distancing, businesses are closing, people are losing jobs, those with jobs are working from home, people are getting sick, and people are dying. This is like nothing we’ve ever seen before. In addition to the horrible personal toll this is taking on people’s health, lifestyle, and livelihoods, the CV and the measures taken to limit the spread of the CV and C19 are having tremendous impacts on markets. The US equity markets are down about 30% from the highs in February. Oil prices have fallen by more than 50%. Other energy markets are under pressure due to little change in supply and sharp reductions in demand. It is difficult to handicap what ... » read more
Tuesday Mar 24, 2020   
The last couple of weeks have been a disaster for energy prices. The two edged sword of quarantine efforts as well as the break down of oil quota talks has slashed near term natural gas prices. But there is a silver lining to the recent price action. The futures prices beyond this immediate summer strip have been well supported. Since the first week of the month when both issues started to gain steam, the Q3 2020 NYMEX HH contract has risen 19 cents to $2.61 while the Q2 2020 has fallen 7 cents to $1.68. Each of the two major event is contributing to the widening of the spreads. Figure 1 | Q2 2020, Q3 2020 and Q1 2021 NYMEX HH Natural Gas Futures Settles First, the news that Saudi Arabia is sending 24 MM barrels of crude oil to US shores has producers in a panic. This is an attempt ... » read more
Monday Mar 23, 2020   
It is so easy to lose track of what day it is as they all get co-mingled into one lump sum now that working from home is being mandated by the stay-in-place orders sent down from either the state's governor or the city's mayor.  No matter who it is issuing the mandate, our country is working dilegently to stop the spread of the coronavirus that has taken over the world.  On our daily walk around the neighborhood, the streeets are now being used as a walkway for social distancing as there are few cars on the road.  As we passed the local public golf course on Saturday, I found myself staring at the putting green as there was a line of folks standing there (6 feet aprt) as five golfers were on the green putting their balls to their own exclusive hole.  Under normal ... » read more
Friday Mar 20, 2020   
Summer in ERCOT gets most of the attention as the hot days stretch the system.  In such times, system operators see the operating reserves diminish to a point that the Operating Reserve Demand Curve (ORDC) escalator price is added to the energy component within each hour.  We are not to this point yet, but the recent hourly price/implied heat rate pattern is worth discussing. Looking at the graph below, the red line represents load, the blue area shows wind generation, and the teal area shows net load—that is, load minus zero marginal cost resources. The yellow dotted line shows the North Zone’s day-ahead implied heat rate, which is calculated by dividing the auction power price by the bilateral gas price. Figure 1 | EROCT North Day-Ahead Implied Heat Rate compared ... » read more
Thursday Mar 19, 2020   
Growing up in the Midwest and now living in the Norhwest for over 20 years wrestling has been in my blood since my childhood.  I never have competed at a high level but participated in matches as apart of my middle and high school physical education classes.  When I went off to college, the University of Minnesota wrestling team was decent as they recruited out of the state of Iowa and Washington.  Two of the big time programs at the time were the University of Iowa and Oregon State.  Everyone knew the former as the lore of Dan Gable was present and still is to this day while the latter entrenched itself as being one of the top teams in the country residing in Corvalis, OR.   Figure 1 | Dan Gable Lore If you have ever been to a wresting match or ... » read more
Wednesday Mar 18, 2020   
Over the past few days my wife and I have had the opportunity to spend more time with our kids as we have taken the necessary actions to do our part to supress the virus from being transmitted in any way, shape or form.  This means that the lost art of having dinner together and talking to each other has come to light along with walking the dog as a family.  If I stop to think about it a bit, these two items mentioned were a common theme during my childhood as there was no iphone to hold onto, no club sport that required driving to/from practices/matches three times a week and cable television was so primative that it took up hardly any time at all.   Figure 1 | Sitting at the Dinner Table Up until last week, the hustle and bustle of today's world came to a halt with ... » read more
Tuesday Mar 17, 2020   
In an effort to avoid spreading COVID19, the population is starting to seclude themselves. Schools are closed. Restaurants have shut down and workers are staying at home instead of coming to the office. This has a toll on our economy. There are estimates that the United States gross national product will shrink by 5% this quarter due to the quarantine efforts. This will have a big effect on the fuels consumption. Since the first of the month we are starting to see evidence of a slowdown in the natural gas metering. Running regressed LDC demand versus temperature there is up to a 10% shift down in the distributed demand. Figure 1 | TCO-Ohio LDC Demand versus Average Temperatures in Columbus Over in Italy, the stats are similar when it comes to the power demand destruction (anywhere ... » read more
Monday Mar 16, 2020   
Over the years, we have described the State of California's hydro system as a three storm system.  By this we mean that all it takes is three storms to create what would be considered a decent water year hence the slogan 'when it rains it pours'.  Three does not seem like a lot but if you look back in time, the evolution of the jet streams provided the state with drought-like conditions between 2012 and 2016 where it became so dry that engineers were describing how certain foundations to housing complexes were shifting and cracking.  It was not too long after that the weather changed and California saw one of its wettest seasons on record, which in turn helped refill the storage facilitiies.  In fact, for those of you who have been in the business for some ... » read more
Friday Mar 13, 2020   
It won’t be long before we’ll start looking to the summer season in various power markets to see how the supply demand balance is fairing. Just last week ERCOT published its Seasonal Assessment of Resource Adequacy (SARA) for Summer 2020. Table 1 shows ERCOT’s overall projected supply-demand balance picture for Summer 2020 along with comparable values from ERCOT’s final Summer 2019 assessment.  Table 1 shows major resource categories and planning reserve margin (PRM), which is the percent by which total resources exceed expected (1-in-2) peak demand.  The table shows that year on year, ERCOT has significantly improved its position.  ERCOT is experiencing only  modest retirements, an increase in “mothballed-but-available” units, the ... » read more
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