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Friday Sep 10, 2021   
This past week has seen another miniature heat wave in much of the Western US. While it’s miniature in the sense that temperatures aren’t soaring to record-breaking highs as they did earlier in the summer, it’s having an outsized impact on the CAISO grid and prices due to a number of intersecting factors. Yesterday we wrote about SoCal Citygate gas and the strain that the El Paso pipeline explosion in Arizona during the middle of August has placed on the regional gas system. As the blog mentions, under mild weather conditions this wouldn’t be an issue as the constraint from the rupture is relatively small. However, Wednesday and Thursday this week saw demand in excess of 40 GW in the CAISO as a result of the regional heat. Still, loads over 40 GW aren’t ... » read more
Thursday Sep 9, 2021   
It has been nearly six years since the Aliso Canyon storage cavern rupture just North of Los Angeles but since that moment SoCal Gas continues to see impairments of all kinds that threaten the utility's ability to manage the franchise demand. Although the rupture of Aliso Canyon has been largely rectified with the cavern receiving a clean bill of health back in 2019, the restrictions on the cavern withdrawals remain in place. This is just the tip of the iceberg. Since that moment in 2015 there have been a series of outages, some planned and some forced that have cut the ability to receive gas from interstate pipelines that connect to California. The latest is the El Paso Pipeline rupture/explosion outside of Coolidge Arizona on August 15th.  Figure 1 | ElPaso Pipeline Map from Kinder ... » read more
Wednesday Sep 8, 2021   
With the passing of Labor Day, it is time to put away the sparkly whites and seer-suckers and accept that the transition to fall is underway.  Weather forecasts and energy markets now embark on the transition from cooling-degree days (CDDs_ - in which heat drives demand for electricity to power air conditioners -  to heating-degree days (HDDs) in which cold temperatures drive demand for natural gas and electricity to run furnaces and heaters.  The transition typically moves latitudinally, starting earliest in the Canadian energy markets over the next few weeks before HDDs become firmly entrenched by the end of the month.  As this transition takes place this year, it will provide a good environment to see the effects of structural changes in the Alberta gas ... » read more
Tuesday Sep 7, 2021   
The long Labor Day weekend has come and gone but not is all lost in the long holiday weekend memories as it symbolized the start of college football, gave the children one last period to hang out with their friends before digging deep into the books and getting to sleep in one extra day instead of waking up on East Coast time on the West Coast.   As we turn the corner and look forward to the fall season, there is  a lot going on in the energy markets from a fundamental standpoint as a hurricane whipped through the Gulf and knocked out power along the Gulf Coast.  The remnants from the storm moved up the Atlantic Coast and drenched the Northeast where the region saw massive flooding that will take time to fully recover from.  Out West, the battle of the fires is ... » read more
Friday Sep 3, 2021   
This year SPP has enjoyed an impressive showing from the renewables portion of its supply stack, with average wind generation exceeding 12.5 GW in March and April, and 10.8 GW in May.  After dipping in June and July to levels comparable to 2020, August saw a resurgence as wind again reached 10 GW on average, over two GW higher than the previous year. Accompanying this explosion of wind generation has been a similar explosion in wind curtailments, as heavy wind production brought down net load numbers compared to previous years.  Figure 1 shows cumulative SPP wind curtailments for each of the past four years, with 2021 shown in blue.  Starting in February curtailments diverged from the prior three years, rising sharply throughout the spring and then leveling off in late ... » read more
Thursday Sep 2, 2021   
The summer months in ERCOT have been quite different compared to previous years for a lot of reasons but the one that sticks out the most is tied to the real-time price action across the board.  For example, the forward curve always put a premium to July and August as the power demand hourly profile was at its peak given the fact that AC units usually ran around the clock for long periods.  On the supply side, the supply stack would work through the lower cost units only to be left with the units that sat in the steeper portion of the curve.  Throw in the fact that ERCOT had the Operating Reserve Demand Curve (ORDC) uplift charge incorporated into their model/calculation.  The trigger for such the uplift charge was when the reserve levels reduced to a threshold that ... » read more
Wednesday Sep 1, 2021   
A couple of days before Ida formed into a full-fledged hurricane, forecasts indicated the storm would strengthen and take aim at Mexico.  Instead, Mexico was almost completely spared the effects of Ida, but the country did not experience such luck earlier in August.  Nor is Mexico even close to being out of the woods for the remainder of the 2021 hurricane season.  Mexico can get hit by storms off both the Atlantic and Pacific oceans.  In general, tropical storm season tends to be demand-destructive, which – in turn – can cut U.S. pipeline exports to Mexico by some pretty large daily numbers.  Although, there is history of tropical storms being disruptive to Mexico’s own productive capacity, too.  Since Mexico’s tropical storm season ... » read more
Tuesday Aug 31, 2021   
It has been three days since Ida landed on the Louisiana Coast as a category 4 storm with wind speeds up to 150 miles per hour. Ida hit the New Orleans area exactly eleven years after Hurricane Katrina devastated the city in 2005 but fortunately the damage reports have not come in as severe as that event. Currently there are over 1 million people without electricity in the metro area and one hundred thousand outages in Mississippi. Fortunately the loss of life has been minimal. Because the entire Louisiana Coast is without service it is hampering efforts to bring off shore oil and natural gas production back to market.  Figure 1 | Power Outages Map as of Tuesday Morning As a precautionary measure platforms were evacuated on Friday dropping Gulf natural gas receipts by 1 BCF per day. » read more
Monday Aug 30, 2021   
California saw some heat last week that changed the supply/demand balance to which drove the overall natural gas demand in Southern California to a level that warranted SoCal Citygate to move back up to $7.16 level.  Such a level pushed the California Citygate spread out to $1.83, this was after a week where SoCal Citygate settled under its counterpart to the north.  The reason behind all of this commotion is the simple fact that the SoCal Gas demand (Sendouts) rose above the total import volume that was flowing on a typical summer day.  When this occurs, storage gas is going to be needed and the cost to the system operators increases instantaneously.  We have seen this occur over the years so it was not too surprising to say the least. Figure 1 | SoCal vs. PGAE ... » read more
Friday Aug 27, 2021   
By Tim Belden A few weeks back I wrote about the signs of a bull market in natural gas and electricity – or at least perhaps the end of what has been a 5+ year systemic bear market in North American electricity and natural gas commodities. The energy-related bull markets are everywhere. The labor market for experienced energy personnel is red hot. Just ask anyone looking for a job or trying to hire someone. I know of a person with 15 years of experience in the biz who is not actively looking for a job who keeps receiving unsolicited, inbound inquiries. He waits. The inquiries keep coming and getting increasingly rich. When people started dangling 150% of his current comp package things start to look interesting. Companies in the “energy transitions” niche are in the ... » read more
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