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Wednesday Jun 8, 2022   
Mother Nature continues to deliver early heat across parts of the country starting with California and the Desert Southwest with her eye now on Texas and the Plains.  By the time she is done with the 15-day period, the Midwest, Ohio Valley, and Southeast will be active in the discussions around the power demand across the country.  As we saw in May, the power load profiles moved up substantially on well-above normal for this time of year all the while the supply stack was dealing with their outage season tied to nuclear, coal and natural gas units.  As a result, the overall power burns ended up averaging 3.4 BCF higher than that of May 2021.  Figure 1 | Mother Nature and the Heat The natural gas forward strip is taking all this in as the front of the curve moved up ... » read more
Tuesday Jun 7, 2022   
For most of the aging workforce across the country June is a great month to retire. Grandkids are getting out of school; summer weather has arrived, and it is an opportune time to travel.  In the energy space, the retirement theme is tied to the coal generation fleet as the several gigawatts have left the grid over the years; to which is causing serious issues to the overall supply of energy on extreme days when the renewable output shifts lower.  With higher gas prices now in play, there is not an optimal time for more coal plants to retire, especially this spring when peak electricity demand is right around the corner.  Figure 1 | The Retirement Plan tied to Coal Power Plants The EIA tracks the power plant retirements and additions on their website and for this month ... » read more
Monday Jun 6, 2022   
The month of June has just begun, and we are already shifting into full summer power demand load territory as Mother Nature is delivering some intense heat over the next 15-days, which starts with California, Desert Southwest and Texas regions moving their daytime highs to the upper 90’s and triple digits.  As we get into the 6-10 and 11-15 day periods, we have the Midwest and East joining the party while the Southeast is not wanting to be left out so it is going to be the last region to get connected to the rest of the country. Figure 1 | WSI Day on Day CDD Aggregation by Bin The table above displays the delta CDD aggregation by three five-day bins where the red coloration considers the daily shift of a day along with the forecast deltas that are in play.  The darkest of ... » read more
Friday Jun 3, 2022   
Price Majeure Event (noun) or To Price Majeure (verb)  - When one party to a contract breaks or attempts to re-trade a deal due to an adverse move in input costs, operating costs, or market prices such that the deal no longer makes economic sense. Examples: “Our energy supplier just called, they say they can no longer deliver electricity to us because they can sell it for more down the road” or “Our electricity provider just called, they say their costs have gone up so much that they can no longer honor that $17 per MWh VPPA price.” I had to make up the definition because if you Google the term “Price Majeure” you get 11.8 million results and the first fifty entries I reviewed relate to the term Force Majeure. People who cut their teeth in ... » read more
Thursday Jun 2, 2022   
The Memorial Day weekend is a time for rest, relaxation, and a little beach time if you live in Southern California.  If you lived in Folsom, CA and did not work the real-time shift within the CAISO, you might have enjoyed boating, swimming, and tubing on the Lake Folsom as the elevation level was at 88% of normal compared to last year’s sub-50% level over the long weekend.  Inside the CAISO control room, the Memorial Day weekend was full of mayhem that would make an Allstate Insurance commercial look like a stroll through the park as the power demand was moderate all the while the renewable landscape was basking in the sun (solar) and taking a stroll where the winds aiding in the brisk pace of the in-state turbines.  Throw in the simple fact that the Pacific ... » read more
Wednesday Jun 1, 2022   
Please Justify the Market is the motto that comes to light when you happen to look at the market fundamental drivers that are being used to balance the grid.  Its acronym is fitting (PJM) as it highlights one of the markets that has everyone’s attention as we turn the corner from May 2022 and look forward into the lens of June and all of Q3-2022.  In fact, the months of April and May have been quite exciting given the simple fact that it was outage season, the retirement buzz, and the fact that Mother Nature delivered some heat from the middle of May through yesterday. Figure 1 | PJM Peak Load – Daily The graph above depicts just how much of an impact the weather had on the last day of May (31st) within the PJM market as the forecast was calling for a peak load ... » read more
Tuesday May 31, 2022   
This week the East Coast is going to get its first taste of summer. Daytime highs along the I-95 corridor are going to move up from the high 70's to the low 90's with heavy humidity which are conditions typically reserved for July and August instead of May. PJM is forecasting a new record peak hour load for the month of May near 140 GWa which is 15 GWa higher than the last record that was set in 2018. This creates some issues for the grid. Noting today is going to look much like a summer dispatch day the grid operator will have to bring resources online similar to what a July or August dispatch would look like. That is very different than what is dispatched in late spring. In years past PJM has more than double the amount of coal generation on the grid than what is occurring at this ... » read more
Friday May 27, 2022   
Reversion to the Mean? Who the heck knows where natural gas prices are going? As of yesterday, the price of natural gas for delivery in 2023 was $5.93 per MMBtu. One year ago, the 2023 price was $2.62. Mr. Market along with many others are scratching their heads as to why and like anything else that trades for the future, there are a lot of ways to think about such natural gas prices. The image below shows historic natural gas prices from 1997 through 2022 along with 2023 to 2035 forward prices as of March 25, 2021 (blue) and March 25, 2022 (orange). The simple average historical price from 1997 through 2022 is $4.30 per MMBtu. One common theory for commodity prices is a random walk with reversion to the mean. That is, prices move up and down but tend to return to the mean. The ... » read more
Thursday May 26, 2022   
At the end of last week, PJM was facing very tight grid conditions as a heat wave settled over the Midwest, Northeast, and Southeast starting on Thursday and extending into the weekend.  Temperatures rose over 90 degrees on Friday afternoon across large swathes of PJM, MISO, and the Southeast.  The conditions stressed the PJM grid at a point when there are still units on outage for spring maintenance, and high coal costs on top of recent coal retirements as well as further retirements looming in the future tapped out the available thermal output within PJM’s borders.  Our latest Newsletter Special Report, “Setting the Stage for a ‘Battle of the Megawatts’ in PJM and MISO this Summer” walks through the events of the past week as PJM needed to ... » read more
Wednesday May 25, 2022   
The Southwest Power Pool (SPP) has been known as the highest wind to power demand ratio region within the Lower 48.   This is quite impressive considering most of the press it tied to California’s renewable mandates through policy and what ERCOT has been able to do over the years.  When it is all said and done, SPP has a lot going on when it comes to the wind penetration and now with what is happening in the Midwest and East markets, the transmission is just as valuable as the West market participants deemed it over the past few years.  Throw in the fact that SPP has just as much exposure to the uptick in natural gas prices and we have a market transitioning from curtailments to figuring out where their megawatts want to go and for what price. Figure 1 | ... » read more
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