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Friday Jul 22, 2022   
The US Natural Gas market has taken its share of prisoners since the second half of last year, and it’s showing little sign off easing off the volatility we’ve seen since then given the growth of many pressures on the supply demand balance (including geopolitical factors, changes in the production profile, and weather events) in that time span. While this volatility classically makes for a more exciting trading environment with fresh opportunities for many, it also has a singular drag on a major piece of the puzzle for most shops; maintaining liquidity. This is in part because credit facilities and exposures are often estimated, sized, and priced in proportion to the Potential Future Exposure (PFE) calculation for a given company, line of business, or trade. And that ... » read more
Thursday Jul 21, 2022   
The Pacific Northwest so far this summer has enjoyed relatively mild conditions on the power grid.  Temperatures have been cool with only a handful of days with above average heat which has kept demand moderate.  Things have been a far cry from the summer of 2021 when a late June heat dome effect had the entire region setting all-time high temperature records and pushed Mid-C into the forefront of the West as the highest priced hub.  The Northwest is seeing a little bit of warmth currently, but the weather forecast for next week has the specter of another heat wave looming ahead.  The figure below shows WSI Trader’s 15-day temperature forecast for the Northwest, showing daily min/max estimates.  The large block of red colored cells starting next Monday ... » read more
Wednesday Jul 20, 2022   
Over the last few months, we have been covering the attempts to prolong power generation at Glen Canyon Dam. Battling climate change and the increasing strain of water use combined with power generation, the forecast for the lake and the power generated by its dam has been bleak. Back in March of this year, levels at the lake behind Glen Canyon dam reached a historic low and simultaneously passed an important marker that allowed for the Bureau of Reclamation to intervene. Figure 1 | Elevation in Feet at Lake Powell (2010 – 2022) The figure above shows elevation in feet at Lake Powell since 2010. Some yearly cycles of draining and refilling are present, but overall, the trend has been downward with an especially prolonged drop down starting in 2019. The orange section of the line ... » read more
Tuesday Jul 19, 2022   
There was a time in the not too distant past that Southern California power prices were the highest on the continent. Shut down of the San Onofre nuclear generating station as well as the Mohave coal fired power plant pushed the power prices well above every other index across the land. But since those moments a monumental build out of solar and wind generation in the California desert has helped to relieve the price premium. This year the SP15 zone, which represents the southern half of the states grid encompassing both Southern California Edison and San Diego Gas and Electric, has stayed as a significant discount to the NP15 zone in the north. That is until this week.   Figure 1 | CAISO On Peak SP15/NP15 Cash Prices for 2022 The change in pricing is due to the ongoing ... » read more
Monday Jul 18, 2022   
A couple of weeks ago one of the Newsletter alluded to the Portland City United (PCU) 04 Boys soccer team (my son plays on this team – most of them seniors) winning the US Soccer West Regional tournament which stamped their ticket to Nationals.  That time has arrived given that the 16 players, two coaches and me (team manager) boarded a plane on Sunday morning and were destined for Orlando, Florida where they will be participating in what is called Group Play Tuesday through Thursday.  There are four brackets where the top team in each advanced to the semi-finals on Saturday for the chance to play in the finals on Sunday.  Their match on Wednesday evening (6:00 PM EDT) will be live streamed on ESPN 3, which is exciting for all relatives and friends who cannot make it ... » read more
Friday Jul 15, 2022   
The past week has been a volatile one within the Lone Star State as Mother Nature continues to blanket the region with the 'heat dome' pattern that was seen last spring/summer in the Pacific Northwest.  Starting last Sunday, ERCOT issued a news release calling for conservation during the afternoon/evening periods as the week was about to get started.  The announcement was brief but to the point as it cited extreme heat and record-breaking demand as the reasons for conservation but behind the scenes the ERCOT system operators also had one eye on the supply situation as any disruption to the resource stack would cause concern that has not been in play since Storm Uri (February 2021 Cold Snap). Figure 1 | ERCOT Conservation Appeal from 7/10/22 Yesterday, we published a special ... » read more
Thursday Jul 14, 2022   
ERCOT was faced yesterday with a large escalation to the pattern of scarcity and spiking electricity prices, as the real-time SPPs ran up to the $5,000 price cap mid-afternoon and remained there for several hours.  Leading up to yesterday, the system operators saw Monday’s day-ahead auction clear rip to levels not seen since the tail end of Storm Uri as prices cleared north of $650 across the heavy load block. With conservation alerts sent via the ERCOT message board, on television and via every mobile phone application, the word was out that every megawatt would matter when it comes to balancing the system.  The figure below shows ERCOT’s real-time price map, captured at 4:50 pm.  The deep red color covering almost the entirety of ERCOT’s territory is an ... » read more
Wednesday Jul 13, 2022   
The power burn numbers for July 12th topped the 49 BCF mark, which is quite impressive given that a few days ago we were looking at levels settling between 43-45 BCF per day.  If you take into consideration that the Midwest, Ohio Valley, and Northeast are taking a bit of a sabbatical from the warmer temperatures that smothered the area in June and the start of July.  This gets the market thinking about where things could go from here if the mentioned regions start re-enter into the realm of warmer temperatures. Figure 1 | PJM Peak Power Demand Actuals and Forecast – Daily The image above is that of PJM’s daily peak power demand levels in aggregate and broken down by specific regions.  The bars in the left image represent the forecasted values while the dots ... » read more
Tuesday Jul 12, 2022   
Typically when we hear the phrase "Dog Days of Summer" we think of lazy dogs trying to stay cool by laying around in the shade on the hottest days of the year. It makes intuitive sense but the phrase has a deeper origin going back to Ancient Greece. The Greeks noted that the constellation Canis Major, or Greater Dog, was present in the same region as the sun during the summer months. Heat associated with this time of year became synonymous with the Dog Star, Sirius, which is the brightest star in that constellation. The Ancient Greeks used to believe that the Dog Star got its brightness from the sun propagating the belief that warmth was associated with dogs. Nobody looks at constellations any more so it is easier for modern society to think of lazy pets. The peak of summer is upon us. » read more
Monday Jul 11, 2022   
ERCOT has a lot going on as we enter the first full week of July as the day-ahead auction clears topped the $625 mark across the heavy load block of hours.  This is the highest average auction print we have seen since the week of Storm Uri, back in February 2021.  Such auction results have move the ERCOT system operators even closer to the edge of their seats as the grid’s supply is going to be essential to keep the lights on later today and if the latest 15-day weather forecast holds, the balance of the month is in question. Figure 1 | ERCOT Day-Ahead Auction Clears – Heavy Load We discussed this situation in the most recent EnergyGPS ERCOT market flash, which is a part of our ERCOT Power Package we offer to clients with interest in the Lone Star State’s ... » read more
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