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Friday Jan 31, 2020   
Over the past few months, we have written about the big uptick in wind generation across the state of Texas over the past few years and its impact to the ERCOT power grid. In the blogs/articles we have touched on how Texas has become the leader when it comes to wind capacity being placed on the grid and how it has impacted rule changes such as the Operating Reserve Demand Curve (ORDC) uplift chart during the summer months.  Such a price signal is good as it is the lever the system operators can pull in the real-time market as well as a proxy for developers to incorporate into their pricing forecast model to see if a project is economically feasible to finance and put what we would call steel in the ground. Figure 1 | ERCOT Net Load Hourly Profile The graph above ... » read more
Thursday Jan 30, 2020   
Yesterday saw the February contract roll off the board as it settled just under $1.90.  This symbolizes another month has liquidated (January 2020), which means we are one step closer to the end of the current winter season.  As we all know from the EnergyGPS daily commentary within our subscription packages, Mother Nature has delivered a pretty mild winter season to date.  The current 15-day forecast is not changing that mindset as the next 5-day period is showing the East, Midwest and parts of the South Central all warming up for Super Bowl Sunday and the start of a new month.  The 6-10 day period is holding serve when it comes to warmer weather while the 11-15 day period is hovering around what is considered the normal marks for HDD accumulation.   Figure ... » read more
Wednesday Jan 29, 2020   
We have written about the wind penetration across the middle third of the country with both SPP and ERCOT really stepping up over the past five years.  In fact, when it is all said and done, the Lone Star State is paving the way to be the leader across all of North America as it's cumulative peak generation topped the 19.8 GW this month. The previous peak wind generation number was sitting at 19.2 GW for most of 2019. Figure 1 | ERCOT Wind Generation Breakdown - Monthly The graph in Figure 1 breaks down the monthly capacity factor in the top pane with the bottom pane representing the two parts that make up the capacity factor ratio.  The numerator is the monthly average generation, which is represented by the bars while the denominator is the cumulative peak generation ... » read more
Tuesday Jan 28, 2020   
The ongoing issues with the lack of heating load across the continent has resulted in a forecasted surplus of gas storage inventory this summer. The current expectation is prior to next winter the Lower 48 will see the in ground supply approach 4 TCF. That bumps up against the storage capability. In an effort to avoid end of season balancing issues, actions are being taken now too incentivize power burn demand. By doing this the increased gas dispatch can buffer the surplus in the balancing. But in order to do that, the gas prices must cooperate. By dropping cash gas values, the heat rates will position gas generation as an advantage in the merit dispatch. We are seeing this in every major power market across the US grid. Figure 1 | Selected Spot On Peak Heat Rate ... » read more
Monday Jan 27, 2020   
The sad news of Kobe Bryant passing away hit not only the sports world yesterday but everyone who he has touched over the years.  The tragedy was compounded by eight other individuals on the helicoptor flight, one of which was his 13-year old daughter Gianna.  The National Basketball Association (NBA) had 8 games on the schedule for Sunday and each game was played with heavy hearts and tears.  Some games started with the team winning the tip-off crossing half court only to let the 24 second clock expire which is considered a turnover.  Upon the other team getting the ball, the inbounds pass went to a player who stood there and let 8 seconds pass without going over half court.  This is a violation within the rules of the NBA and ball is then returned to the team ... » read more
Friday Jan 24, 2020   
Yesterday's short-term natural gas market came out firing on all cylinders, which meant the prompt month was up a measley $0.05 prior to the open.  If you looked at the weather model runs, there was a slight HDD uptick in days 14 and 15 that game some hope for a late winter-season 'rally'.  This move up pushed the prompt month up to $1.96 which is still $0.20 below where the month of February started the month trading. Figure 1 | Weather Model Run - 15 day Forecast As the day went on, the EIA stroage number was released and the noon weather model runs were coming out.  This halted the little party that was going on in the front of the curve as the day ended up settling a couple of pennies higher than the previous close.  As of this morning, the model runs have taken a ... » read more
Thursday Jan 23, 2020   
Now that we are basically into the final third of January 2020, we though it would be a good time to cover a couple of things that has shaped the natural gas market into its current state.  This state is a robust supply situation and a prompt month that has dropped below the $2.00 handle it was holding onto for some time.  The two main pieces of this conversation are production across the country and the weather pattern that has been locked in since early December 2019. Figure 1 | Balmy Weather Patterm - Lower 48 Starting with production, we continue to see strength in numbers as the daily average for the month of January 2020 is right around 94.5 BCF/d which is up just over 7.0 BCF/d when compared to last January.  This number is quite impression as the pipeline expansion ... » read more
Wednesday Jan 22, 2020   
Throughout my career in the energy industry, the Pacific Northwest has always been close to my heart as it is a market that reshuffles its cards every year, has a lot of intra-year volatility and is quite interesting to learn about as the Columbia and Snake river basins have a lot of histroy.  What gets lost in the shuffle sometimes with the Pacific Northwest Hydro outlooks is what is happening on the Westside as this region can produce anywhere from 1.7 to 2.0 GWa of generation when the streamflows are at their cresting point.  For this to happen, Mother Nature needs to deliver either precipitation in the form of rain or be cold enough to layer in some lower elevation snowpack that will eventually melt when it warms up and send the newly found water down the mountains and into ... » read more
Tuesday Jan 21, 2020   
While the Lower 48 has seen a record warm winter so far, the temperatures in Western Canada have not been so fortunate. Alberta just experienced one of the coldest weeks in history with average temperatures in the province posting 40 degrees below normal. That sent the Nova Intra demand to a new all time record of over 7.5 BCF per day eclipsing the mark set during last February's polar event. This cold event forced the storage draws on the system to max out at 2.6 BCF per day. But even with the response from the cavern system it was still not enough to meet the native demand. Figure 1 | NGTL Demand for 2018 - 2020 Once the storage withdrawals were maxed, the AECO cash prices had to run up far enough to compromise the variable transport costs out of the province. Pipelines cut ... » read more
Friday Jan 17, 2020   
Basis from generation projects to load are of critical importance to all market participants.  In recent years, many long-term renewable energy contracts have been written as hub-settled deals, where the resource owner settles with the buyer at a zonal hub price (gen hub or DLAP) and wears the basis risk to its project’s pnode. Figure 1 shows how three chosen CAISO nodes, one in Antelope Valley (teal color) and two in San Joaquin (gold and dark lavender colors) fared.  Both areas have seen large increases in solar generation in recent years. Note that all basis quantities are calculated as Node LMP – Hub LMP, so a negative basis means that the node is at a discount to the hub, and positive basis means the node is at a premium.    One of the most ... » read more
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