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Monday Aug 15, 2022   
During times of heat and the days when most homes did not have air conditioning units, the early morning hours were based on opening all the windows in the house and letting the overnight coolness penetrate the inner walls.  After a couple of hours, the windows were shut, the drapes were pulled down and the curtains closed as this was the method used to keep the house cool the rest of the day.  Figure 1 | Closing the Curtains – No light Shed Once moderate temperatures returned, the curtains were drawn to shed more sunlight on what was happening outside and bring in some of the rays that were once overpowering.  Last week, the most recent EnergyGPS Newsletter article, titled ‘CAISO Pulls Back the Curtain on Batteries’, analyzed the new battery data being ... » read more
Friday Aug 12, 2022   
When we think about prices in ERCOT, we typically like to break them down into “buckets” based on the implied heat rate. Implied heat rate can be calculated in any interval by dividing power price by gas price, and gives a hint about what might be driving price formation. The lower the heat rate, the fewer thermal generators will find it economic to run. At higher heat rates, more revenue is available and less efficient plants will be able to come online. We think of intervals with implied heat rates below about 5 as oversupplied: gas isn’t what’s setting price, and there’s probably a lot more generation available than what’s needed. In contrast, heat rates above about 15 indicate scarcity. Again, the operating costs of gas plants aren’t ... » read more
Thursday Aug 11, 2022   
The middle of August 2022 is another example of how the Pacific Northwest and California are connected as both regions are looking at heat moving into their respective territories.  Such an event is setting up a battle of the megawatts that typically flow between the two regions on both the AC and DC transmission lines on any hour for a given day. Figure 1 | CAISO 7-Day Peak Demand – Actual and Forecast Starting with California, the heat is going to be extended along the coastal region of the state to which has not been seen for over two years.  When this occurs, the demand areas around San Franscisco and Los Angeles tend to consumer a substantial amount of energy for AC cooling and the grid has exposure to sub-regional bottlenecks around getting megawatts from source to ... » read more
Wednesday Aug 10, 2022   
The beginning of August has shaken up the SoCal gas world with SoCal CityGate pricing more than a dollar over PG&E CityGate. It’s the first time this summer we’ve seen a premium for SoCal like this, contrary to previous summers when SoCal has priced over frequently to move power burns up north.  Last week, we published a monthly report, titled ‘July 2022 Fireworks’, that detailed the fundamentals in July that led to SoCal’s low pricing last month. Let’s review the fundamentals from July to understand our starting point for this month. The weather in California remained mostly mild in July, even as the surrounding regions experienced summer highs. For those betting on SoCal needing gas to meet demand for some hot summer days, this July was a ... » read more
Tuesday Aug 9, 2022   
This has been one of the most eventful years for trading commodities especially natural gas. The issues in Europe combined with the underlying supply/demand tightness have kept a fire burning under the price support. But one of the biggest events of the summer was the loss of the Freeport LNG terminal to a rupture in mid June. The shut down of the facility backed 2 BCF of liquefaction gas back into the daily balancing. Each turn of the saga between the Freeport operators and the Department of Transportation-Pipelines and Hazardous Materials Safety Administration(PHMSA) has been the basis for more price volatility. While Freeport has maintained a quick turn around from the repairs with operations expected by the end of October the PHMSA has pointed out several issues and a need for a root ... » read more
Monday Aug 8, 2022   
As the Pacific Northwest is dealing with a mini-heatwave, California is taking on the challenges congestion showing up between the North and South zones.  Such an event basically islands off the LA Basin region as the lifeline transmission lines tied to the DC intertie, Palo Verde and Mead are either delivering less volume or netting export volumes to help serve their respective power demand profile.  This is especially true across the heavy load block of hours (HE7-HE22), with the focal point being during the evening ramp block (HE17-HE20). Figure 1 | CAISO Day-Ahead Marginal Congestion Component (MCC) The graph above illustrates what we are talking about when it comes to the congestion between SP15 and NP15 over the past nine days.  The x-axis represents the hours within ... » read more
Friday Aug 5, 2022   
Over the last few months we’ve observed a significant uptick in inbound requests for information about deal structuring and nodal pricing in the Energy Imbalance Markets (EIM) outside of the CAISO balancing authority footprint. While we routinely have clients seeking to understand how transmission costs, scheduling, and logistics works outside of the CAISO, we are seeing increasing interest in understanding how to manage busbar price exposure if selling at an EIM node. The increased interest at EIM nodes is driven by QF deals where energy settles in the EIM, corporate deals where corporate off-takers wish to settle at an EIM hub and the project bears the EIM node to EIM hub risk, as well as merchant exposure post-PPA time period or projects with nameplate capacity in excess of the ... » read more
Thursday Aug 4, 2022   
As we move into the second full month of summer, the Pacific Northwest hydro is at a transition point.  Each water year, sometime between the middle of July and the very beginning August the hydro system reaches the culmination of the refill efforts beginning in early spring and April showers and melting snow provide the elevated flows needed to replenish water in the reservoirs behind the major storage projects all along the Columbia and Snake Rivers.  The figure below illustrates the trend over the past four years, showing daily total MAF in storage peaking each year right as July turns into August (except for 2021, where the heat and dryness were so severe as to require supplemental releases from storage a couple weeks early).  Early in August, projects transition from ... » read more
Wednesday Aug 3, 2022   
Prices spiked to almost $1000 /MW last week in Alberta. A few factors contributed to this, including rising temperatures and a lack of wind. With another heat wave expected for AESO in the next week, let’s take a look back at what culminated when red overtook the Alberta forecast in the last week of July. The figure below from Atmospheric G2 shows the temperature forecast from Wednesday, July 27th. The day was above normal seasonal temperatures with highs in Calgary at 82 degrees. And it only got hotter over the next two days with highs in the upper 80s. The weekend and into this week cooled slightly, but still offered temperatures above seasonal norms. As always, the heat increased load as people reached to turn on their ACs. Figure 1 | Min/Max Temperatures in AESO from Atmospheric ... » read more
Tuesday Aug 2, 2022   
At the advent of the energy trading industry some 30 years ago hurricane season meant that weather events would pick up in the Atlantic Basin increasing the threat to off shore supply in the Gulf of Mexico. Market participants would assume a bullish bias on natural gas prices as storms would form in the Atlantic. That mantra has changed over the past 15 years as more supply was moved to on shore destinations with the fracking revolution. Now a hurricane development has the opposite effect. As storms make landfall they threaten shipping avenues reducing the LNG liquefaction demand along the Gulf Coast. On shore demand is also at risk as winds and heavy rains knock out power demand.  This year the hurricane season is off to a slow start. There have been no major storms in the Gulf ... » read more
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