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Tuesday Feb 18, 2020   
SoCal Gas has a problem and it is not the same issue they have faced since the Aliso Canyon rupture in 2015. Because of the early season efforts to conserve storage usage as per the Aliso Canyon Usage Protocols and a lack of heating load the system is now faced with an abundance of in ground supply. That poses a big problem for the system as they make the transition to spring. As demand wanes SoCal Gas will need all the flexibility it can get to manage the pipeline deliveries from the Border. Last year, SoCal Gas injected 44 BCF into the caverns. Noting they only have 23 BCF of space in the cavern complex means the system will be full by the end of Q2.  Figure 1 | SoCal Gas Storage Inventory for 2016 - 2020 The flexibility concerns are not being overlooked. SoCal Gas has been ... » read more
Friday Feb 14, 2020   
We spend a lot of time thinking about renewable energy risk here at the Energy GPS headquarters. Wholesale price risk is driven by the overall level of natural gas prices, the market clearing heat rates in the various wholesale markets, and the shape premium or discount that wind and solar enjoy (or dread) in each market. We’ve written on this topic before and concluded that PJM’s Northern Illinois Hub is the most “well behaved” renewable market in the US. By well behaved, we mean that it is highly correlated with Henry Hub natural gas prices. Stated another way, when one buys output from a renewable project or invests in a merchant renewable asset, there are a litany of things that may impact the amount of revenue received. With wind resources in the Northern ... » read more
Thursday Feb 13, 2020   
Depending on the time of year and how the supply stacks are shaping up, the Alberta and Pacific Northwest market dynamics are always interesting.  There are times when the Alberta market is caught short on supply due to increased power demand during the colder winter days along with the lack of wind blowing and unit outages such as key coal plants.  This strikes a cord in the Alberta power market auction clears to where prices can rip up to $900 to $1000 on any given hour.  Such a tightness does not drive the natural gas market as AECO is pretty well supplied. Where it does come into play is with the implied heat rates that anyone who could produce any incremental power onto the grid would. Figue 1 | AESO Market Price/Implied Heat Rate Results - Heavy Load The table in ... » read more
Wednesday Feb 12, 2020   
With Valentines Day this week and March Madness right around the corner, it is usually a good time to talk about putting an end to the winter season as spring is in reach.  If you have been following the natural gas and heating oil space, you already know that the winter season has yet to come as the accumulated monthly HDD levels have been dismal all year.  Another indication tied to the lack of winter is the snowless streets across the Southern Plains of Nebraska and parts of Kansas.  My time in Colorado last week was met with a snowstorm that ran through the mountain range to dump over 24-36 inches of snow around Vail and blanketed Denver with 5.3 inches of snow in the metro area.  The prior weekend saw the daytime highs in the Mile High City jump up over 70 degrees ... » read more
Tuesday Feb 11, 2020   
By and large this has been the winter that never showed up. Since the beginning of December the Lower 48 has only seen 13 days where the HDD count posted above normal. The lack of heating load has eliminated approximately 650 BCF of demand from the natural gas balancing. Storage inventories across the country have swelled and now stand at a 610 BCF surplus to last year. Most of this issue resides right in the EIA East and Midwest caverns. In the llatest EIA natural gas inventory report posted last Thursday, the two regions make up 313 BCF of the surplus. It is not going to get any better as the latest forecast has the HDD count continuing to drop through the end of the month.  Figure 1 | NOAA EIA East Population Weighted HDDs -  Actual and Forecast through Feb ... » read more
Monday Feb 10, 2020   
The past two EnergyGPS Newsletter Articles have detailed the wind penetration and impact to the supply stack in SPP as well as how it and the hydro generation in the Pacific Northwest has reshaped how the month of February has traded.  The former has had little impact on the overall natural gas consumption as there is a point of increased wind canabalizing itself and curtailments ultimately occur.  The latter does has a direct impact on the natural gas consumption as there are days when both the wind and hydro output is enough to not need as much thermal generation so the marginal cost of energy has to shift down into the lowest portion of the coal stack. Figure 1 | Pacific Northwest Wind Generation The green hourly bars in Figure 1 represent the wind generation across the ... » read more
Friday Feb 7, 2020   
Recently, we took a look at the changes in the SPP market. It’s easy to miss gradual changes that happen over the course of years, but comparing years can reveal dramatic trends. 2019 was a “wet” wind year while 2018 was a “dry” one. The graph below shows a couple of important details about this trend. In the top pane, the yellow line shows 2019 wind gen and the green shows 2018 wind gen. 2019, unsuprisingly, is higher. However, this isn’t attributable merely to new installations. The bottom pane shows capacity factor, a measure of how efficient a generator is. EGPS defines capacity factor in this instance as the generation for an interval divided by the maximum generation. 2018 capacity factor is each interval of 2018 wind generation data, divided by ... » read more
Thursday Feb 6, 2020   
Yesterday was a travel day for me as I am speaking at the East Meets West conference in Vail, Colorado.  As I booked by ticket, the seat selection was important to me as I wanted to have a window seat not by the wing.  This is so I could take some time to look out over the mountains as I wanted to see first hand how much snowpack sits along the Snake River Basin, the mountains around Jackson Hole and what is happening in the Rockies.  I got my seat and was impressed with what I saw as the mountain basins were stocked with decent snowpack, but it was not until I was in the shuttle from the airport in Eagle to Vail that I realized things will be changing as the avid skiers were talking about feet of new snow.  I then received a text on my phone from United Airlines that ... » read more
Wednesday Feb 5, 2020   
Over hte past couple of days, Texas weather has moved from being warm to a bit of a chill as temperatures drop across the Lone Star state.  For example, the likes of Dallas and Houston have shifted down from the upper 60's for a daytime average to more like 45 degrees and falling today and tomorrow. Figure 1 | Daily Average Temperatures for Key Demand Cities - Texas The shift down has sparked both power burns and rescom demand across the state where the former is tied to the lack of wind that has dropped off as well.  If you look at the following net load graph and North Zone price action, you can clearly see that the ERCOT market needed to send a price signal to market participants during the later afternoon hours as the grid needed more natural gas-fired generation to turn on ... » read more
Tuesday Feb 4, 2020   
The development of the LNG export industry has become one of the most important pieces of the continental balancing dynamic. In just five short years the volume total has grown from 1 to 9 BCF per day and that total is expected to grow this summer with the completion of Kinder Morgan's Elba Island terminal in Georgia. This would not be possible without the development of the global demand for natural gas. For years, exporters such as Cheniere, have relied on markets across the Atlantic for their cargoes as the prices were multiples higher than what we had seen in the United States. Figure 1 | Lower 48 LNG Export Volume But the price advantage is not what it used to be. In the past year the spread between the United Kingdom's National Balancing Pool (NGP), which is a proxy for ... » read more
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