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Wednesday Nov 14, 2018   
When you talk to traders in the natural gas industry, they refer to the following year as the color red for some reason.  For example, being in November and the current winter strip January 2019 is spoken in terms of what it is while January 2020 is considered the 'Red' January.  Speaking of the winter strip, the spread that gets plenty of discussion is the Mar-Apr as they are the two months that bring the end of winter together with the start of the summer months.  In terms of this time of year, the current Mar-Apr spread is worthy of a discussion while the 'Red' Mar-Apr does not see as much action as in years past. If you have been following the natural gas futures market prior to this month, the forward outlook was hitched to the production story where the Summer 2019 ... » read more
Tuesday Nov 13, 2018   
The AECO cash market exemplifies how the market have changed over the years as many basis hubs have seen more volatility due to new production, pipeline maintenance and increased demand when it comes to power burns and industrial.  For example, the Alberta gas market has seen negative settles at times over the past year while other times it gets to compete with the connecting US markets when gas can flow.  All this is due to the NGTL upgrades and expansions, which has bound up the system for much of the summer.  Such binding has restricted access to the storage caverns which has limited the injections. During demand episodes where the excess system pack has been reduced, the storage operators are then capable of competing for daily injection volumes. The result is a price ... » read more
Monday Nov 12, 2018   
As we head into the winter months, we always seem to get some sort of polar vortex in the Northeast, where Algonquin prices rip higher as the demand for natural gas tied to rescom takes precedent over the need for power burns on the pipeline.  This type of situation usually forces the implied heat rate ($power/$natural gas) below the operating economics for the gas-fired generators needed to help balance the electricity grid.  While the power plants are putting some of the gas back on the pipe, the system operators are needing to go to the top of the supply stack resources, such as oil, to balance.  In some regions,  such as AECO, the top of the supply stack comes quicker as coal retirements are in play and wind volatility is enough to push the marginal megawatt ... » read more
Friday Nov 9, 2018   
Figure 1 | If only I had been of a longer duration ...  Reserve margins in several regions of the U.S. are getting tighter. Consider some of the news: ERCOT’s Reserve margin was revised downward this summer. ERCOT had record breaking peak loads in May and June and set a new all-time high during July 2018 at 73.3 GW. There have been 4 GW of coal plant retirements of recent and another 5.6 GW of existing power plant capacity is expected to retire by 2022. CAISO is known for having a lot of capacity laying around due to its aggressive renewable build out in recent years, but three things have changed in the last few years: (1) retirements are up; approximately 3 GW in the last year; (2) the value of capacity for solar is decreasing due to increased penetration; and (3) the ... » read more
Thursday Nov 8, 2018   
The power supply curves across the country all have some unique characteristics tied to the dispatch of units, especially within an ISO where economic bidding strategies come to the forefront of any day-ahead and/or real-time hourly auction results.  There are some cases where the optimal solution to the dispatch is not straight forward as certain constraints in the model have different outcomes.   We have also seen some ISO operations trigger out of merit or out of market dispatch as the grid needs the units on for reliability purposes they say.  The one that always starts to scratch the head is when an unit is running or getting dispatched at an implied heat rate lower than its marginal heat rate.  This is the indicator that states the facility is tied to other ... » read more
Wednesday Nov 7, 2018   
With the Republicans maintaining the majority of the Senate and the Democrats taking over the House of Representatives, the next two years will be full of fireworks as the president will be in the crossfire of many political debates and war of words as he rounds out his first term.  Moving onto the state level, all eyes were on Washington as they had Measure 1631, which was essentially a Carbon Tax tied to the core industrial and power producers in the state. Figure 1 | Washington Ballot Measure - Initiative 1631 (Carbon Tax) Two years ago, the state ballot had an initiative that was similar in nature but did not pass as many of the industrial advocates were out in full force making sure people voted against it.  This go around, the polls seemed to be tilted in the direction of ... » read more
Tuesday Nov 6, 2018   
A few years ago I had the privilege of coaching my sons second grade basketball team. They were all first year players just trying to learn basic fundamentals. We taught them footwork, layups and basic defense. But it is amazing how much they can learn from watching one another. One of the boys on the team liked to watch professional basketball. One night while watching LeBron's Cavaliers he observed a head fake that eventually sent a ripple throughout our team. By the following afternoon every player on the team had given up layups for head fakes. Never mind the fact that only four kids could do a correct layup, they all knew how to throw a fake before a drive to the basket.  Just a few weeks ago NOAA and other forecasters posted their seasonal updates calling for a above/much ... » read more
Monday Nov 5, 2018   
Over the weekend, the weather forecast got a lot colder across the Midwest, Ohio Valley and the Northeast.  In fact, some model runs have the frigid weather dropping down into the South Central and Southeast parts of the country.  This type of weather pattern has ignited the front end of the forward curve as the prompt month (December) is up $0.19 before trading begins.  The beginning of the New Year (Jan-Feb) is up between $0.13 and $0.15 as the fear of natural gas consumption early in the season will expose the fact that the storage facilities are already almost 1 TCF behind being full and roughly 623 BCF lower than last year to start the winter. Figure 1 | Lower 48 Natural Gas Storage - Weekly EIA Storage has been an ongoing concern for some time as several key regions ... » read more
Friday Nov 2, 2018   
General Electric has come upon some really tough times lately. At the beginning of 2017 GE’s stock price stood right around $31 per share. The stock has lost more than two-thirds of its value since then. They have experienced cuts large and small in the last year. In June it was removed from the Dow Jones Industrial Average where it had been a member continuously since 1907. In September GE announced the failure of several turbine blades in its new machines causing the stock to fall 4% in a day. Figure 1 | GE - The New Symbol  At the beginning of October they announced that CEO John Flannery was being shown the door after just over a year, being replaced by board member Larry Culp. The stock enjoyed a rare 15% bounce on the news. Mr. Culp’s honeymoon with Wall Street was ... » read more
Thursday Nov 1, 2018   
With Autumn upon us, the Northeast got off to a cold start as a Nor’Easter blew through the region last Saturday bringing the first wave of snow. Mount Snow in Vermont reached down to 30 degrees allowing the snowfall to stick around for a while. As temperatures cooled off but remained above freezing along the Coast, flooding rains invaded the region. With a significant portion of generation still on outage from maintenance season, power prices had no choice but to increase with the declining temperatures.  Figure 1 | Temperatures in Mount Snow, VT   This served as an early reminder that winter is just around the corner. To prepare for the upcoming months, generation is returning from its hibernation during maintenance season. The additional supply should put the ... » read more
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