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Friday Aug 17, 2018   
Right around the year 2000 electricity policy makers at FERC and across the country collectively said: “We are sick of stranded utility generation costs. We want independent power producers to invest capital, take risk, and earn returns. We want to create competitive wholesale electricity markets where merchant generators can thrive.” Calpine heard the call and got busy building out its fleet of efficient, merchant natural gas generators. Yes, they got out a little too far over their tips, filing for bankruptcy in 2005, but today they are the largest generator of electricity from natural gas and geothermal resources in the United States. Its fleet of 79 power plants in operation or under construction represents approximately 26,000 MW of generating capacity. In 2018, J.J. » read more
Thursday Aug 16, 2018   
When it comes to weather, Portland-OR has seen the most consecutive 90 degree days within recent history while California has come off a record breaking month of July.  Over in the East, the Northeast got off to a mild summer as June temperatures fell in line with last year. However, this quickly shifted to the upside as July heated up. Looking at the year over year monthly average temperatures, there was a 3 degree spread during the month of July. Figure 1 | Actual Temperature Averages for July Even though it was hotter, the simple graphic misses some of the details. Last summer held a fairly stable temperature across the region, but this summer saw wild swings with heat wave after heat wave passing through while interspersed thunderstorms brought flooding rains separating the heat ... » read more
Wednesday Aug 15, 2018   
Being a Green Bay Packer fan growing up, there were several highlight reels played where Vince Lombardi is on the sidelines yelling at his players and the referees.  One of his most famous lines was captured on film as he was seen frustrated with the play of his team and yelled  "What the hell is going on out there?" Figure 1 | Vince Lombardi's Famous Quote Over this past week, it seems like Vince could be heard standing on the sidelines of both Texas and California yelling his infamous phrase as both ERCOT and CAISO have been hit with moderate fundamentals as the Dog Days of Summer just ended.   Taking a look at ERCOT, both Dallas and Austin have been looking at average temperatures 5-7 degrees below normal with last Friday kicking things off.  This big ... » read more
Tuesday Aug 14, 2018   
This year, we are seeing many regions across the country have a change in dispatch strategy for coal fired power plants. Not only are we seeing total output drop due to retirements, the year on year change in the relationship between fuels generation has caused natural gas to move further into the base-load bucket.  Power burns, as a result have remain buffered from any large swings in the net load. Weekday to weekend power burns are not as volatile as they were in years past. This has been a big reason why the power burns remain 4.5 BCF per day above last year's levels so far this month.  Figure 1 | PJM Coal Output for 2017 - 2018 But in order to continue the gains for subsequent years, we need to see additional natural gas generation brought online as well as ... » read more
Monday Aug 13, 2018   
Over the past couple of weeks, the natural gas prompt month has moved up $0.15 or so to end the week just under $2.95.  This leaves the speculative participants wondering if they should be selling since it the number mentioned is only $0.05 away from the top of the range ($3.00).   Figure 1 | Prompt Month Henry Hub Natural Gas Settles - Daily Some of the key drivers are tied to the overall demand on the grid via Power Burns, Mexican Exports and the Industrial growth across the Lower 48.  The power burns are tied to both Mother Nature as well as new facilities coming online such as Middleton Energy Center (TETCO) and Lordstown (DTI).  Over the past 18 months, we have seen numerous power plants tie into the grid as the lower priced Marcellus/Utica basin was sending ... » read more
Friday Aug 10, 2018   
In the last 18 months we’ve seen a proliferation of “one to multiple” renewable deals where one project has multiple off-take agreements for a single project. This is a great development. Large projects can presumably come in with a lower levelized cost of energy. Often times a large project has an anchor tenant who takes more than half of the output, and then the project must find one or more smaller buyers to take the rest (sometimes leaving a small portion merchant). As more corporate buyers come to the marketplace we see demand for smaller chunks. So corporate buyers either organize themselves to purchase from a project or a project lines up multiple buyers on its own. The aggregation trend in renewable procurement is likely here to stay. It is a natural development ... » read more
Thursday Aug 9, 2018   
Last week we spoke about the carbon pricing that NYISO is considering implementing in order to reach renewable goals. This week we will move north to ISONE which has drastically different plans for the future. The smaller grid chooses to take what some might consider a more practical approach as it continues to develop combined cycle power plants. These are already a proven technology that can reduce carbon emissions as a result of their extremely efficient operations. Figure 1 taken from the ISONE State of the Grid shows that historic development and future plans are depending heavily on natural gas for energy needs. However taking a closer look, perhaps they are putting too many eggs in one basket. Figure 1 | State of the Grid ISONE But natural gas is abundant, cheap, efficient, and ... » read more
Wednesday Aug 8, 2018   
The past few weeks have been pretty exciting in the Western natural gas and power markets as we have seen SoCal Citygate index just under $40 the last week of July while August has shown us that Midc and Mead need the power when their respective loads hit a certain level.  The Desert Southwest is not too far behind given that Phoenix and the surrounding areas have seen their fair share of hot summer days.   Figure 1 | Phoenix Temperatures - Daytime High/Low  In this week's Gold Package Newsletter Article we took a look at how the West has unfolded and who some of the winners and losers have been throughout this wild ride.  As it stands right now, despite the Midway-Vincent nomogram constraint still showing up, the generators within NP15 seems to be in the ... » read more
Tuesday Aug 7, 2018   
One of the pricing dynamics we have seen for most of the summer is that the cash markets, in many areas of the country are quick to move over the forward strip. In California for example, both SoCal and PG&E Citygate cash markets are trading over the whole winter strip. Based on the shape of that curve, natural gas operators should take all they can out of the ground to maximize the value of what is in the ground. A similar cash dynamic is happening in the Gulf. Henry Hub cash markets have moved over the forward futures values which sets an incentive to take volume out of the ground. This has been the case over the past three years and has transformed the Gulf market for storage services from a two season to four season product.  Figure 1 | Henry Hub BOM and ... » read more
Monday Aug 6, 2018   
If your focus in the Western power and natural gas markets, you have been privy to some major excitement over the past couple of years.  Making sure we keep this short (as we know California has had a lot of things happen over the years, both by choice and just some bad luck), lets start in 2015 when the Aliso Canyon storage facility had a leak at one of the values at a wellhead.  It took engineers months to drill a parallel well and tunnel over to stop the leak. By that time, every political and regulatory agency were involved, which made it clear the facility would never be the same. During the time of Aliso Canyon and its leak, the State of California's renewable portfolio continued to grow with both utility-scaled solar facilities popping up everyone along with the behind ... » read more
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