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Thursday Apr 21, 2022   
The 2022 water year in California started off looking promising with several storms in November and December delivering healthy precipitation to Northern California, with a late December dumping of snow brought the state’s snow water equivalent (SWE) to well above normal levels, as shown by the blue line in the figure below.  The most important period for California hydro is the period from January to February, as most of the total snowpack is accumulated during those months.  The first three months of the 2022 calendar year were a disappointment as they developed, with the lowest precipitation levels ever recorded for the state.  The amount of snow remained virtually unchanged from the 1st of the year until two thirds of the way through March as the precipitation was ... » read more
Wednesday Apr 20, 2022   
The hits keep coming.  The latest shockwave to global energy markets emanating from Russia’s invasion of Ukraine is hitting the coal market as the European Commission stepped up to ban imports of the Russian-sourced fuel.  Such a decision supports the European coal futures, which translates to an inherent rise in U.S. coal pricing.  As we move forward, the global construct will continue to have an impact on the overall coal-to-gas switching inelasticity that started to appear last summer when it became apparent that coal fundamentals were changing.  Earlier this month, the European Commission agreed to impose a block-wide ban on imports of Russian-sourced coal.  The EU imports roughly 44 million tonnes of coal from Russia, which accounts for nearly 50% of EU ... » read more
Tuesday Apr 19, 2022   
It was only a little over two months ago where the prompt NYMEX settled at $3.94. Many at the time were calling for an end to winter with a smooth transition to the spring injection season. It was only a few days later that the weather forecast turned cooler initiating an unprecedented run on the NYMEX futures. As of last nights close the prompt contract has appreciated nearly $4 to $7.82. But this run up was not just a product of cooler weather forecasts. Natural gas supply/demand balances have been a running problem since last fall when futures were last above $6. During that moment there was no appreciable increase in natural gas production. That sent the signal that if the gas demand continued to increase as anticipated that there would be a large shortfall of natural gas storage ... » read more
Monday Apr 18, 2022   
I usually describe centralized, LMP-based electricity markets in the US as mature and stable from a policy perspective. FERC order 2000, which was released in 1999, encouraged transmission-owning utilities to join RTOs and set minimum standards for those RTOs. Over the ensuing decade or so, we saw a few things happen: (1) centralized markets that had been zonal such as ERCOT and CAISO, shifted to nodal dispatch and pricing, and (2) markets such as SPP and MISO went from real-time balancing markets to full, day-ahead and real-time nodal RTOs. While there are still nuances and differences in the market rules, for the most part the concept of the LMP has been settled policy. This is in sharp contrast to capacity markets or resource adequacy obligations where there are large differences in ... » read more
Thursday Apr 14, 2022   
The weather in the Pacific Northwest has been anything but normal this week with mother nature delivering cold temperatures and buckets of precipitation across the region, including the latest snowfall ever recorded during the spring in our own home city of Portland, Oregon this past Monday, April 11th.  The unseasonal cold has tightened up conditions across the Northwest this week as the demand profile looks more like what we would expect in January or February rather than mid-way through April.  Another change has exacerbated the impact to the grid, namely the implementation of spring fish spill operations in the PNW Hydro system.  Figure 1 | Spring Flowers or Winter Snow in Portland, OR? Each April the eight projects on the Lower Snake and Lower Columbia portions of the ... » read more
Wednesday Apr 13, 2022   
It has been a wild April for ERCOT.  New record highs for hourly wind generation and loads are being set with a near-constant parade of weather patterns featuring the warmest April temperatures in ERCOT history, followed by big swings to cold.  The changing weather patterns have also been influencing the shape of the daily wind profiles.   Typically, when a market increases wind output, that creates the potential for a larger downside delta when the winds stop blowing.  This in turn can often be a trigger of price volatility.  But this April, ERCOT's wind fade outs have come during light load and midday hours.  Per the latter, ERCOT being the beneficiary of robust growth in solar, the price spikes associated with wind dropouts this month are less severe ... » read more
Tuesday Apr 12, 2022   
The Midwest and Northeast have been experiencing unseasonal cold since the start of March 2021 where this April has been delivering well-below normal temperatures across the region.  As a result, the heating demand has been robust all the while power burns are supportive as the peak power demand numbers are indicating there is plenty of electric furnaces in play.  When it is all said and done, the natural gas rescom demand is establishing itself as the difference maker as the combined Midwest and East volumes are trending anywhere between 3-6 BCF higher than normal.  The graph below displays the Midwest region’s rescom demand where roughly 2-4 BCF of the delta has sat since the beginning of the period mentioned above.  The problem is that this gain in rescom ... » read more
Monday Apr 11, 2022   
The dynamics between the day-ahead and real-time power markets tend to get lost in the shuffle, especially given the fact that the natural gas pricing environment has been on a terror as of late.   Some of the old traits still exist, for example is there is an unplanned power plant outages that hit a specific grid and the real-time price spikes for a couple of hours, the next trading period for the day-ahead market will most likely attract a bunch of physical and virtual buyers, which drives specific markets higher.  We also have the flipside of things, where the renewable penetration around wind generation is creates volatility around the actual output to which could change within a day or from day to day.  The introduction of solar powered megawatts creates a ... » read more
Friday Apr 8, 2022   
Ever since Storm Uri, the ERCOT market has seen changes to the how it goes about its daily business.  One of the components that has been impacted is the overall price cap that once was $9,000 and is pegged at $5,000.  The other component that had a change order is the construct calculation of the Operating Reserve Demand Curve (ORDC) to which we have written about over the past couple of months.  With price volatility showing up in early April, we wanted to dig a bit deeper and reflect back to how the price action might have looked under the previous ORDC regime. A few days ago on April 4th, ERCOT experienced a significant price spike across all its pricing hubs. While some level of price elevation was predicted in the day ahead prices, the magnitude of the real time ... » read more
Thursday Apr 7, 2022   
Over the next week the weather in Texas looks to undergo some swings that will bring about some changes in market outcomes.  We have written in the past about an inflection point in ERCOT for periods when total thermal demand in the region falls below 9-10 GW in a give hour or series of hours.  This is a sort of threshold below which we observe curtailments rise rapidly rather than displacing more thermal generation.  It also coincides with prices at the ERCOT West Hub dropping to $0 or below, a phenomenon that has become more and more pronounced over the past couple years.  Over the next several days ERCOT is seeing colder weather move into the region starting today, dropping average temperatures by about 10 degrees compared to Wednesday and reducing the load in the ... » read more
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