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Friday Jan 21, 2022   
Author | Tim Belden This is my first blog of 2022. As we settle into the New Year I thought I’d take the opportunity to share some share some observations related to the trends we are seeing from the work streams that come across our consulting desk.  The Bulls are Running: We wrote extensively over the last 18 months about the bullish factors in the wholesale electricity and the renewable energy / energy transition space. On the energy price side of things, we saw natural gas prices bottom out in Q2 of 2020 and steadily rise since then. The figure below shows the prompt month natural gas futures contract over the last five years. The markets got pretty hyped heading into the winter and are off from the highs. However, the markets are up a good $1.50 ... » read more
Thursday Jan 20, 2022   
Colder weather is moving into the South Central regions, for the purposes of this newsletter blog specifically Texas/ERCOT.  This means all eyes will be on the natural gas production component along with the happenings in the control room within ERCOT as management has spent the past 11 months honing in on reliability and availability.  It should be noted that the temperatures are not as dire as Storm Uri, but the next couple of days is the coldest stretch of the winter season to date.  Figure 1 | ERCOT Net Load - 7 Day Rolling Average The graph above represents the ERCOT net load rolling 7-day flash average for each day and compares the past three years.  The grey line is the forecasted tied to the demand volume to which is the highest the grid operators have seen if ... » read more
Wednesday Jan 19, 2022   
EU storage inventories continue treading at relative record lows, but the new year-to-date has provided a bit of relief with mild weather and featuring a brief period of injections.  The deceleration of draw-downs has helped narrow some of the annual deficits, but hasn’t quite been enough to bring current inventories out of record-low territory.  And, while all of this has eased some of the price pressures on European and Asian prices, forwards remain astonishingly strong. Over the past month, we have been pushing out a series of flashes as part of our EU Storage dashboards describing how the storage situation has unfolded.  The European winter got off to a strong start weather-wise this year.   Compounding issues, Russia – a major supplier of gas to ... » read more
Tuesday Jan 18, 2022   
In the past two weeks the weather pattern across North America has made a big shift. The west has warmed and the region east of the Rockies has cooled.The one area that has seen the largest magnitude of change has been Alberta. The province has flipped from seeing temperatures 20 degrees F below normal to 15 degrees above normal. The Nova system demand has fallen by 1.5 BCF per day. The looser balancing combined with the ramp up of heating load in the Midcon and Northeast has provided an opportunity for pipeline shippers to increase volumes flowing into the Lower 48. TransCanada, Northern Border, Alliance and Westcoast pipelines have increased flows by a combined .8 BCF.  Figure 1 | Canadian Pipeline Flows into the Lower 48 for 2020-2022 Combined with increased volumes flowing into ... » read more
Friday Jan 14, 2022   
The month of January has, so far, been an interesting time for CAISO transmission. To begin with, the Palo Verde line was derated to 1 GW. Since this line regularly provides ~3 GW of baseload or ramping supply to California, and can provide as much as 3.6 GW, moving down to only 1 is a significant shift. This shift occurred on January 3rd, 2022 and should be continuing to the last week of the month.  Throw in fact that currrent weather pattern has brought with it some cloud cover therefore impacting the in-state California solar output.  The combination of less megawatts from the Desert Southwest and the the solar fleet (both behind the meter and utility-scaled) has the potential of burdening the natural gas supply stack within PGAE, SCE and SDGE. The statement is general in ... » read more
Thursday Jan 13, 2022   
The Nymex rally over the past week has been solely driven by the simple fact that Mother Nature has decided to deliver winter-like weather to key demand areas across the Lower 48.  This is something that we have not seen since last February when Storm Uri sliced down the middle vertical third of the country and knocked around the ERCOT power grid and the natural gas landscape. Figure 1 | WSI 6-10 Day Model Forecast Conditions The image above is an illustration of the current WSI 6-10 day period and the coloration Mother Nature is going to be delivering.  As you can see, North America is divided by a downward sloping white line as the West is moderate in temperature while the eastern portion of the grid varies in its degree of blue.  The darker hue is further north but ... » read more
Wednesday Jan 12, 2022   
Easy come, easy go.  It was only a handful of weeks ago that we were talking about Sumas rising to become the nation’s highest-priced gas cash hub.  Now, it has fallen back to earth.  While eastern gas markets gear up for their first significant cold blast of this winter, western markets are sliding back into the easy chair.  In particular: the Pacific Northwest.  The brunt of that region’s cold is very much in the rear-view mirror with the road ahead looking smooth. In the final weeks of December, the Sumas spot cash prices climbed sharply, doubling in the span of just a handful of days to top out at $11.11.  Last February, prices went higher during the U.S. Deep Freeze event, but prior to that, Sumas had not breached an $11-handle since its ... » read more
Tuesday Jan 11, 2022   
The Northeast is waking up to their coldest weather of the winter this morning with overnight lows in the single digits. As a result the New England heating demand has pushed up from 2.7 to 4 BCF per day this morning which is at the high end of the historical range. The problem for New England is that they do not have in ground storage due to geologic limitations. This is a big problem when the demand soars on the coldest days. Residential demand is always the top priority for reliability concerns and during these demand events New England does not have the pipeline import capability to serve all components of demand. Something has to give and that is usually the natural gas generation in the power dispatch. In the past five days ISO New England has had to forcibly switch ... » read more
Monday Jan 10, 2022   
The regional weather is always a focal point this time of year as any cold pattern originating in the northern arctic and diving down into the Lower 48 causes concern on the heating demand front when it comes to the Midwest, Ohio Valley and Northeast.  On the occasion when the colder weather pattern knifes deeper into the South Central or Southeast, we have a grid that is pushing and pulling molecules on the pipelines along with megawatts on the transmission lines.  If you recall, last February Storm Uri was such that the South Central was hit quite hard by well-below normal temperatures to which both the natural gas and power grids nearly came to a screeching halt. Figure 1 | North America Weather Pattern – 11-15 Day Period So far this winter, the only region that has ... » read more
Friday Jan 7, 2022   
Over the first week of the new year, cold weather has brought significant increases to coal usage in the Midwest, East, and Midcon regions of the country.  As we move further into January and the heart of winter, however, there is evidence that rather than simply being a function of increased overall thermal demand by itself coal is beginning to displace natural gas to some degree within the thermal stack as well.  Figure 1 shows daily round-the-clock coal generation from December 1st through yesterday.  Generation for the major ISO for each of the three regions is shown in the top three panes—MISO, PJM, and SPP.  The bottom pane shows aggregate coal dispatch.  As the wave of winter chill caused temperatures to drop and thermal demand to increase by January ... » read more
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