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Friday Feb 25, 2022   
What a difference a year can make! This time last year, ERCOT was just emerging from the grip of Winter Storm Uri, where prices hit the $9000/MWh cap for over three consecutive days, by far the most prolonged period of high prices ever to occur in ERCOT (or any other market, for that matter). Now, at the same time a year later, ERCOT is abruptly emerging from a streak of very low prices as yesterday saw a big spike up during the morning ramp as wiind had died down and the power demand was exceeding the forecast by 4.0 to 5.0 GW.  This was enough to stretch the system and place the hourly hub settles north of $3,000 (tapping the $3,350 mark HE10 in the North Zone). Figure 1 | Average Real Time Price by Day and Hour at ERCOT North Hub from 2/14/22 to 2/24/22 The graph above shows real ... » read more
Thursday Feb 24, 2022   
Living in Portland over the past month, one could almost believe that winter had skipped a year in the Pacific Northwest.  In a sky that seems perennially grey and overcast, there have been few clouds to be seen in recent weeks, with only a smattering of rain here and there.  Even as temperatures have dropped this week, the skies have been blue and the air is dry.  That’s not to say that there has been no precipitation whatsoever in the Northwest but looking at the figure below shows just how far we’ve been from the usual pattern of “8 months of nonstop rain” in the Portland area.  The image shows precipitation for the month of February to date as a percentage of normal for all the geographic sub-regions shown on the map.  The red color ... » read more
Wednesday Feb 23, 2022   
In the past week, AESO power prices have shuttled between a range of $32 to nearly $750.  Many of the price spikes into upper triple-digit territory have occurred within just a matter of hours of quiet, double-digit pricing.   While the moves can be alarming, they are generally predictable by watching forecasts for a few key line item fundamentals.  Namely: AESO wind and loads.  As part of our AESO and Canadian energy market coverage, we publish dashboards with forecasts of the market’s line-item fundamentals, and publish flashes and alerts to clients when those forecasts indicate volatility is en route.  That was the case last week and earlier this week when forecasts for Alberta weather indicated cold weather would lift loads, though the bigger ... » read more
Tuesday Feb 22, 2022   
Commodity prices all over the globe have been on an enormous run over the past year. It is not just confined to the energy space although that garners much of the attention. Widely overlooked has been the coal sector which has seen an unheard of appreciation in prices over the past twelve months. In the past year steam coal prices all over the continent have nearly doubled at the major producing basins. Eastern rail coal for example has jumped from $55 to $90 per metric ton. With a good portion of the Midwest and Midcontinent still using coal generation on the grid this has had a huge effect on the dispatch prices. It is no longer the low price leader pushing natural gas generation further into the merit order. Taking a look at the PJM system it is apparent how the ... » read more
Friday Feb 18, 2022   
The Pacific Northwest is filled with blue skies as of late and afternoons full of sunshine.  This is a stark change to the weather pattern that roared through the region back in December 2021 and the beginning of the year.  Back then, rainfall turned into snowpack as temperatures dropped from British Columbia on down to Oregon and cross over from the Westside to that of the Snake River basin.  Now, the forecast is showing nothing but below normal precipitation conditions where some days are bone dry. The weather pattern has been moving the overall ESP model runs lower when it comes to the Jan-Jul MAF at The Dalles. Figure 1 | 2022 Pacific Northwest Water Supply Forecast at The Dalles (MAF) The impact of the six-week weather trend on the outlook of the hydro system in the ... » read more
Thursday Feb 17, 2022   
Over the years, the California System Operator (CAISO) has been managing the influx of renewable capacity in the form of wind and solar.  The former can create volatility within the day while the latter has a consistent profile as megawatts are produced during the daylight hours as the sun’s rays are the key source for the panels that overlay both residential communities along with the utility-scaled development projects that are strategically placed in the desert land in Southern California.  Figure 1 | CAISO Solar Generation Profile – Hourly Figure 1 above displays the hourly profile for solar generation within the CAISO system for the past two weeks along with the numeric values tied to the heavy load block of hours.  As you move left to right in the table ... » read more
Wednesday Feb 16, 2022   
Tensions along the Russian-Ukrainian border are high as the threat of a Russian invasion looms large.  The topic is – and has been – of keen interest to energy markets as Russia is a major supplier of gas to Europe through Ukraine.  Yet, while current events have gained broad attention, close energy market observers are used to all of this.  So used to it, in fact, that it is possible much of the fear premium has already been priced in.  High level interest over a Russian invasion center on concerns that Russia will cut off gas supplies to Europe.  However, there are a handful of reasons to discount such concerns.  As we have discussed with clients through our LNG and European Gas Storage reports, Russia already severely curtailed gas flows to ... » read more
Tuesday Feb 15, 2022   
Last week was the beginning of the fiscal Q4 earnings season for the oil and gas industry and after a number of releases there is a consistent theme for the North American producers. The recent climb in crude prices has ushered in rates of return that have never been seen in the modern drilling era. The returns along with the well documented inventory issues have many focused on expanding output particularly in the highly efficient shale plays in West Texas. The EIA currently estimates the Permian Basin is producing just over 5 million barrels per day of crude oil. As per the EIA Drilling and Productivity Report posted last week they expect that amount to grow to over 6 million barrels per day in 2022. That would be a never been seen before 20% increase in output. Figure 1 | EIA Crude Oil ... » read more
Monday Feb 14, 2022   
The National League Football (NFL) came to an end last night with the Super Bowl Champions Los Angeles Rams defeating the Cincinnati Bengals 23-20 in a triller of a game.  If you are into streaks, the Rams was the second straight team to win the Super Bowl in their regular season home stadium.  If you recall, the Tampa Bay Buccaneers beat the Kansas City Chiefs in Tampa Stadium last year.  It was also the first Super Bowl where both starting quarterbacks has losing career records, with Matthew Stafford ringing up losses with the Detroit Lions while Joe Burrow’s losses were tied to his rookie season being cut short with a knee injury (since he is only in is second year, his W-L-Tie record was 12-13-1.  Figure 1 | Super Bowl LVI If you are not into the game ... » read more
Friday Feb 11, 2022   
There is a lot of talk in the Western US about pushing the grid to 100% renewable electricity. The traditional regulatory push towards high renewable portfolio standards has been a steady drum beat in most states in the west for the last five years (or longer). California is supposed to reach 60% renewables by 2030 and requires all the state’s electricity to be carbon free by 2045. The traditional way of accounting for RPS compliance is simple – the number of compliant RECs is in the numerator and the total load for the compliance period (say, one year) is in the denominator. Of course, there are strict rules associated with what types of resources count towards the RPS but the timing of production does not factor into things. To give an extreme example, in 2030 California ... » read more
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