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Friday May 22, 2020   
The phrase "sucking wind" comes to mind when I take a look at recent ERCOT wind-weighted pricing. By this I mean the Urban Dictionary's third definition which is "In business, to perform poorly." Energy GPS has advised on a lot of wind deals in Texas -- we've represented sellers, buyers, capital providers, and merchant projects. We do settlement validations for a number of VPPAs scattered around the US -- including some in ERCOT. In recent months we've noticed that the corporate buyers have been cutting checks to projects due to the low price environment. ERCOT wind VPPAs that have been signed in the last few years have been in the $17 to $19 per MWh range, broadly speaking. Most settle at ERCOT North. Figure 1, below, shows the wind-weighted price for ERCOT North (using ERCOT North Wind ... » read more
Thursday May 21, 2020   
Growing up as a child in Western Wisconsin, the memories in the spring were tied to the snow melting and the local river tributaries rising to where the water actually starting flowing over the bridge out of town.  When this occurred, it was time to grab a group of friends and head to the entry point upstream with our canoes. As we entered the water, the conversation was all about how we needed to navigate the waters that were our version of high rapids. Figure 1 | The Spring Activity on the River I start this blog out with this story as the Midwest and other parts of the country are experiencing such flooding that starts with the Mississippi River and all it's tributaries that run through many small towns from Minnesota down throught Lousiana.  As we move to the east, the ... » read more
Wednesday May 20, 2020   
The bilateral price signal at the Midc for today is representative of the old days when Mother Nature would provide enough water in spring where the need for coal and natural gas-fired generation would not be needed across the entire 24 hour period.  When this occurs, both the heavy and light load settles shift down to the $0.00 mark with many of the end of day transactions shfiting into negative territory.  For today, the heavy load ended up settling at $0.09 while the light load came in at a negative $0.28 which tells us there is not much more the system can do but turn to the renewable/baseload sector within its own region. Figure 1 | Midc Bilateral Settles  Looking at the key components for such a downturn, look no further than the hydro and wind generation as the ... » read more
Tuesday May 19, 2020   
Spring is not the typical time of year when we expect to have extreme heat rate moves in the Northeast power markets. That situation is usually reserved for the West with the large hydropower swings and early heat events. But this year due to a number of circumstances there have been some very volatile swings that are typically not seen until we get to Q3. The swings have been quite wild with the rates moving from and expectation of an 8 during Q1 to over 12. Then virus lock down effects, swings in weather, pipeline ruptures and a production shut-ins have all fueled more volatility.  Figure 1 | PJM/M3, On Peak Cash Heat Rate Settles for Q2 2020  Here are some bullet points for the events this spring: A record warm winter dropped ResCom demand and cash gas prices. This led ... » read more
Monday May 18, 2020   
The ground rules have been set for some time and now that we are moving into the back half of May 2020, the battle between the key supply/demand components will be playing out in the cash market.  The components are production on the supply side and power burns, rescom and LNG on the demand side.  Starting with production, the price signal that laid into the month of May at the month end settle is showing its hand as the trend has been downward at a decent slope.  A lot of the decrease can be tied to associated gas but as we saw over the weekend, there is some firect impact to the natural gas shale regions like the Marcellus/Utica basin. Figure 1 | Production in the Marcellus/Utica Basin Turning to the rescom demand, the colder weather that showed up two weeks ago has ... » read more
Friday May 15, 2020   
Historically, Western Canadian oil and gas production dips in the late spring as a result of annual ‘breakup’, it typically rebounds when roads re-open.  This year, however, a rebound is less certain due to the timing of the collapse of global energy prices. ‘Breakup’ refers to springtime in Western Canada when the region’s ice roads and rivers begin to thaw.  The  roads used to access well-sites turn into a muddy, impassable quagmire while the rapid snowmelt can create widespread flooding as area rivers swell get choked by ice flows.   The spring ‘breakup’ ultimately leads to declines in British Columbia and Alberta oil and gas production by forcing drilling and onsite maintenance programs to radically slow with the ... » read more
Thursday May 14, 2020   
The market is full of jitters and unknowns as the crude market has been hit the hardest which means the associated natural gas tied to the Bakken, Permian and other regions across North America continue to see their production numbers shift lower.  This past week started out with the daily natural gas production numbers shifting down below the 90.0 BCF/d mark we say up until this point in May.  As if this morning, the 'reported' number is now down to 86.5 BCF, which is over 3.5 BCF/d lower.  If you look at the daily movement from last week to this week, the Monday numbers shfited down just over 1.5 BCF/d where as today dropped another 2.0 BCF. Figure 1 | Lower 48 Natural Gas Production - Daily Starting with the first delta earlier in the week, the 1.5 BCF/d delta seemed to ... » read more
Wednesday May 13, 2020   
The Pacific Northwest is delivering plenty of generation on the power side as the wind and hydro generation is adding up to a level that warrants single digit heavy load average settles in the bilateral market.  When this happens, the molecules for power plants need to find a different home which means the compressor flows are needing to adjust or more goes into JP storage.  Over the past few weeks, the T-South compressor flows have maintained a level just over 1.0 BCF/d while the Roosevelt compressor is fluctuating depending on what is happening at the Jackson Prairie or the rescom demand that has moved up a bit this week as temperatures have shifted lower.   Figure 1 | Natural Gas Daily Supply/Demand Balance for Pacific Northwest (WA/OR/BC) – ... » read more
Tuesday May 12, 2020   
At the beginning of this winter there was concern that the Alberta storage complex would not have enough volume to cover the provinces demand needs in the event of a cold winter. The inventory was entering the withdrawal season with only 263 BCF in the ground which was near a modern day low. The previous year saw 140 BCF taken out of the ground to meet the Nova system demand. If we had a repeat of that this year system integrity could have been at risk. But oh the times have changes since then. A mild winter combined with an increase in production helped to keep inventory through March. Since then the fortunes of the storage balancing have turned completely around. Much like the Lower 48, Alberta is on the path to see the system reach high inventory levels by the end of the summer. Since ... » read more
Monday May 11, 2020   
The holiday festivities seem to be taking it on the chin as well during the virus crisis as Easter has come and gone and now Mother's Day brunch was left to the cooktop instead of the family heading out to mom's favorite eating establishment in the neighborhood. If you were in the Midwest and Northeast, it would have been tough to even think it was May 10th as the weather pattern dropped some extremely cold temperatures on both regions all weekend.  Speaking of which, below is a weekend breakdown of some of the things that are perculating in the energy sector. The NYMEX session saw the prompt month up 2 cents to $1.84 but has now retreated ever so slightly. As mentioned above, it has been a cold weekend for the Midwest and Northeast. Temperatures across the regions fell into the 20's ... » read more
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