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Tuesday Feb 22, 2022   
Commodity prices all over the globe have been on an enormous run over the past year. It is not just confined to the energy space although that garners much of the attention. Widely overlooked has been the coal sector which has seen an unheard of appreciation in prices over the past twelve months. In the past year steam coal prices all over the continent have nearly doubled at the major producing basins. Eastern rail coal for example has jumped from $55 to $90 per metric ton. With a good portion of the Midwest and Midcontinent still using coal generation on the grid this has had a huge effect on the dispatch prices. It is no longer the low price leader pushing natural gas generation further into the merit order. Taking a look at the PJM system it is apparent how the ... » read more
Friday Feb 18, 2022   
The Pacific Northwest is filled with blue skies as of late and afternoons full of sunshine.  This is a stark change to the weather pattern that roared through the region back in December 2021 and the beginning of the year.  Back then, rainfall turned into snowpack as temperatures dropped from British Columbia on down to Oregon and cross over from the Westside to that of the Snake River basin.  Now, the forecast is showing nothing but below normal precipitation conditions where some days are bone dry. The weather pattern has been moving the overall ESP model runs lower when it comes to the Jan-Jul MAF at The Dalles. Figure 1 | 2022 Pacific Northwest Water Supply Forecast at The Dalles (MAF) The impact of the six-week weather trend on the outlook of the hydro system in the ... » read more
Thursday Feb 17, 2022   
Over the years, the California System Operator (CAISO) has been managing the influx of renewable capacity in the form of wind and solar.  The former can create volatility within the day while the latter has a consistent profile as megawatts are produced during the daylight hours as the sun’s rays are the key source for the panels that overlay both residential communities along with the utility-scaled development projects that are strategically placed in the desert land in Southern California.  Figure 1 | CAISO Solar Generation Profile – Hourly Figure 1 above displays the hourly profile for solar generation within the CAISO system for the past two weeks along with the numeric values tied to the heavy load block of hours.  As you move left to right in the table ... » read more
Wednesday Feb 16, 2022   
Tensions along the Russian-Ukrainian border are high as the threat of a Russian invasion looms large.  The topic is – and has been – of keen interest to energy markets as Russia is a major supplier of gas to Europe through Ukraine.  Yet, while current events have gained broad attention, close energy market observers are used to all of this.  So used to it, in fact, that it is possible much of the fear premium has already been priced in.  High level interest over a Russian invasion center on concerns that Russia will cut off gas supplies to Europe.  However, there are a handful of reasons to discount such concerns.  As we have discussed with clients through our LNG and European Gas Storage reports, Russia already severely curtailed gas flows to ... » read more
Tuesday Feb 15, 2022   
Last week was the beginning of the fiscal Q4 earnings season for the oil and gas industry and after a number of releases there is a consistent theme for the North American producers. The recent climb in crude prices has ushered in rates of return that have never been seen in the modern drilling era. The returns along with the well documented inventory issues have many focused on expanding output particularly in the highly efficient shale plays in West Texas. The EIA currently estimates the Permian Basin is producing just over 5 million barrels per day of crude oil. As per the EIA Drilling and Productivity Report posted last week they expect that amount to grow to over 6 million barrels per day in 2022. That would be a never been seen before 20% increase in output. Figure 1 | EIA Crude Oil ... » read more
Monday Feb 14, 2022   
The National League Football (NFL) came to an end last night with the Super Bowl Champions Los Angeles Rams defeating the Cincinnati Bengals 23-20 in a triller of a game.  If you are into streaks, the Rams was the second straight team to win the Super Bowl in their regular season home stadium.  If you recall, the Tampa Bay Buccaneers beat the Kansas City Chiefs in Tampa Stadium last year.  It was also the first Super Bowl where both starting quarterbacks has losing career records, with Matthew Stafford ringing up losses with the Detroit Lions while Joe Burrow’s losses were tied to his rookie season being cut short with a knee injury (since he is only in is second year, his W-L-Tie record was 12-13-1.  Figure 1 | Super Bowl LVI If you are not into the game ... » read more
Friday Feb 11, 2022   
There is a lot of talk in the Western US about pushing the grid to 100% renewable electricity. The traditional regulatory push towards high renewable portfolio standards has been a steady drum beat in most states in the west for the last five years (or longer). California is supposed to reach 60% renewables by 2030 and requires all the state’s electricity to be carbon free by 2045. The traditional way of accounting for RPS compliance is simple – the number of compliant RECs is in the numerator and the total load for the compliance period (say, one year) is in the denominator. Of course, there are strict rules associated with what types of resources count towards the RPS but the timing of production does not factor into things. To give an extreme example, in 2030 California ... » read more
Thursday Feb 10, 2022   
As part of our Newsletter Platinum Renewables package we break down the market fundamentals in different regions across the country each month, with a focus on the events most relevant to the renewable landscape.  Our most recent Renewable Monthly report, titled “Mild West, Frigid East” drills down into the mild weather and excess storage that has accumulated in the SoCal Gas system throughout the month of January as well as the changing CAISO supply stack.  The report also discusses the frigid winter weather that has blanketed much of the Midwest, Ohio Valley and Northeastern United States in recent weeks.  Down in the South-Central region, we drill down into ERCOT, touching on structural changes in ERCOT load and how these changes and high gas prices are ... » read more
Wednesday Feb 9, 2022   
Former president George W. Bush sometimes slipped up his words when giving impromptu speeches.  One famous gaff came when he tried giving a phrase about learning from mistakes.  He said, “There’s an old saying that says, ‘Fool me once, shame on…shame on you.  Fool me – you can’t get fooled again.”  While he didn’t exactly get the phrasing right, those familiar with the phrase knew what he meant: if you don’t learn from your mistakes, its on you.  Last week’s ERCOT power market seemed to show it wouldn’t get fooled again by a winter storm.  There were a few major factors that enabled the market to weather last week’s winter storm that featured the coldest temperatures to hit Texas so far ... » read more
Tuesday Feb 8, 2022   
Heading into this winter it was assumed that the record natural gas production levels in Alberta would more than offset gains in demand and exports leaving the province with plenty of storage inventory prior to next summer. Total natural gas receipts were posting 1 BCF per day higher at 14.3 BCF. That was 1.2 BCF per day more than the previous year thanks to increased pipeline capacity out of the British Columbia foothills.  It was the single largest year on year increase in production which started the music for a large sign up in export capacity on TransCanada Pipeline and Gas Transmission Northwest. This was expected to be an orderly balancing year for Alberta with receipts posting at record levels.   Figure 1 | Nova System NG Production But then December ... » read more
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