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Friday Sep 21, 2018   
Renewable transactions can take many forms. Virtually all transactions involve the conveyance of RECs – after all, that’s what makes a transaction “renewable.” Common transactions include a physical transaction with bundled RECs, fixed price REC deals, and floating price REC deals (known as contracts for differences) where the REC price goes up as power prices go down and goes down as power prices go up. The deal structure is typically dictated by the buyer, provided that the structure and pricing can be financed. Many buyers prefer to purchase bundled energy and RECs. Some corporates are concerned with derivative accounting of financial transactions. In California, the state RPS rules require that RECs be bundled with physical power. The physical delivery of ... » read more
Thursday Sep 20, 2018   
The 7th Circuit Court of Appeal upheld the Illinois Zero Emission Credit program last Thursday allowing the nuclear subsidy to remain in place. The Zero Emission Credit (ZEC) was passed in 2016 and effectively subsidized nuclear facilities in Illinois. The credit allowed uneconomic nuclear units to run by putting a price on the social cost of carbon. However, this was not a direct fixed cost but a price collar that would allow qualifying facilities their approximate break even cost to continue operations. A group of independent power producers (IPPs) formed an alliance and immediately filed suit against the nuclear facilities citing a distortion in power prices. The court initially ruled in favor of the subsidy, but the opposing group would not be deterred taking the case to the court of ... » read more
Wednesday Sep 19, 2018   
As we worked our way through the 'Dog Days of Summer' months, SoCal Gas was busy putting gas in the ground at Aliso Canyon.  In fact, there were times that price did not seem to matter as the daily injections were massive despite the fact that the bilateral cash price at SoCal Citygate was telling entities to burn the gas not store it.  This is an illustration of the wackiness of California when it comes to issues in either the power or natural gas market. Figure 1 | SoCal Citygate Cash Prices - July through Current Once we hit the middle portion of August, SoCal Citygate prices started to fall as the daily indices moved out of the double digit level and was coming back into reality.  This was due to the fact that SoCal Gas put the peddle to the medal and made up some ... » read more
Tuesday Sep 18, 2018   
The outages and maintenance items that have riddled the NGTL system have been going on through much of the summer. The system has had delivery and receipt issues for the better part of the past five months. The big drop in AECO cash prices has been a product of those capacity problems which has helped natural gas generators that are dispatched onto the AESO system. The maintenance and outage problems have come to a head this week as the climate across the province has flipped from cooling to heating load. The call on natural gas volumes from the ResCom demand has further bound the NGTL system forcing many generators to cut back on gas consumption. Despite the daily heat rate results, many gas generators have been left in the cold.  Figure 1 | Calgary Actual and Forecast Weather for ... » read more
Monday Sep 17, 2018   
As we hit the midway point of September, the 2017-2018 Pacific Northwest water year is slowly coming to an end.  We thought it would be a good time to take a look back at what this year had to offer as well as what lies ahead for the 2018-2019 water year.   Before we dive into the details, it should be noted that each water year has an official start date of October 1st of the current year and ends on September 30th.  This allows the system operators an entire summer to take a look back on what transpired between the January and July time period as well as make sure the water levels are where they need to be in the fall prior to the precipitation levels increasing in the form or rain and/or snow. Looking back at 2017-2018 water year, the January to July time period is ... » read more
Friday Sep 14, 2018   
The most interesting part of economics for me is shining light on subtle and sometimes unintended-second order effects of a change in policy or incentive structure. The Tax Cuts and Jobs Act of 2017 dramatically lowered corporate tax rates with the highest rates dropping from 35% to 21%.  A second order impact of the lower tax rates has been an increase in the price that tax-equity-financed wind projects which receive production tax credits are willing to sell their output into the short term markets. This newsletter tracks the impacts that changing tax rates have on wind generation offer prices in the ERCOT market. Before we get to the current unintended consequence, let’s trace this story back a few iterations to the first unintended consequence. The story goes like this. » read more
Thursday Sep 13, 2018   
Summer is finally making its way out the door with temperatures dropping below the 90 degree mark in many parts of the country. While parts of the Midwest and Northeast continue to have above average temperatures, normals are moving into a more comfortable range. As load declines, maintenance outages in PJM have ramped up. Looking at Figure 1, we can see that outages nearly doubled across the PJM footprint as soon as the heatwave from last week moved out of the region.  Figure 1 | PJM Generation Total Outages Looking further out, planned outages remain in line with previous years. Average temperatures will continue to cool as we reach the shoulder season which should put very few degree days on the board during October.  As a result, the over all power load profile should shift ... » read more
Wednesday Sep 12, 2018   
A couple of years ago, my wife got tickets for the James Taylor/Carol King concert in the Moda Center, here in Portland.  I was not sure what to expect as it was not Country music and the start time was after my bedtime since I get up at 3:15 am to start my writing for the day.  As we parked the car and started walking to the venue, it was apparent this was going to be a show with a bunch of loyal fans as many has t-shirts with either one or the other performers on the back as if they have been following them on the most recent tour.  I turned to my wife and said, will I even know any of the songs that the duo will be singing.  She looked at me and said, you will know 'Sweet Baby Jane', 'Country Roads', 'You've Got a Friend' and 'Carolina In My ... » read more
Tuesday Sep 11, 2018   
Hurricane Florence is now a category 4 storm (potentially category 5) with sustained winds over 140 miles per hour. The National Hurricane Center has the path of the storm westbound with a likely landing point right into the Carolina shore. If this lands at a category 4/5 hurricane, it will be the most damaging storm to ever make landfall on the Carolina coast. Damage to homes and businesses will be catastrophic and it will take a long time to recover. This should cause destruction to the energy infrastructure up and down the Southeast Coast. But based on the current estimates from the NHC, the impacts will continue be felt much farther inland. It is likely that the resting place of the remnants will move right over West Virginia which is the heart of the Marcellus natural gas production ... » read more
Monday Sep 10, 2018   
With the evolution of cable television , there is a specific station that covers the weather across the world which include hurricanes, earthquakes, tornados and winter storms that move across North America.  This station is know as the Weather Channel. Figure 1 | The Weather Channels         I get excited this time of year as my version of the Weather Channel is up and running, it is known as the NFL Ticket package as part of my Direct TV service.  Yes, the number one reason to get the 'Ticket' is tied to my obsession to watch/record all the Green Bay Packer games throughout the season.  Over the years, I have found myself flipping through all the games to get a lay of the land when it comes to the weather across the Lower 48. I find it very ... » read more
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