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Wednesday Oct 13, 2021   
Sumas cash prices are on the march to reclaim its spot as the top priced western gas hub.  While this is typical for this time of year, a confluence of unique factors threaten to make this year’s run more outstanding than years past. Sumas spot cash gas prices typically spend the summers on a vacation of sorts as the pleasant summertime climates of the region give gas demand a reprieve.  Gas in the summertime does get consumed for power generation, but load levels tend to be lower than hotter climes, and the PNW’s fairly diversified power portfolio can often distribute loads across a variety of sources beyond gas.  This summer’s Sumas relationship to other hubs was not much different, though it was somewhat notable given PNW power loads were amongst the ... » read more
Tuesday Oct 12, 2021   
One of the pitfalls of forecasting natural gas supply and demand balances is assuming weather will be normal. It is a luxury that the forecaster gets to look out on a forward natural gas curve and assume a regressed demand level to the historical daily average degree day. Even if there is a bias towards global warming the question always falls back to what happens under normal circumstances. What is normal hardly ever gets challenged as it is too easy to just rely on a historical average even though it is recognized as the biggest driver of energy consumption. Figure 1 | Daily Lower 48 HDDs - Average, Actual and Forecast But over the past two decades it has largely been an error to not assume some level of global warming in the degree day equation. Those who have avoided this mistake ... » read more
Monday Oct 11, 2021   
Everyone is familiar with the acronym “www” as it stands for the worldwide web and infamous with every url that has been created over the past three decades as the internet is alive and well.  This past weekend, I had the honor of driving from Portland, OR to Walla Walla, where the path takes you down I-84 through the Columbia River Gorge Scenic region and the high desert landscape along the Columbia River.  The transition from the former to the latter in a prior lifetime was apparent by the diminishing tree lines and greenery giving way to the brown rock formations along the banks.  Since the early 2000’s, the other element that is on display to distinguish between the two regions along the drive are the wind farms that sit on both the Oregon and ... » read more
Friday Oct 8, 2021   
We’ve written a lot about wind hedges in ERCOT over the last several years. Together with ReSurety we published the paper the “P99 Hedge That Wasn’t” back in 2017 highlighting the challenges and issues with the fixed quantity wind hedges in Texas. While many people were becoming increasingly concerned with the mismatch between as-generated and fixed-quantity commitments, Winter Storm Uri put a nail in the coffin of that structure. It appears to be largely un-financeable and for good reason. The main challenge with that structure is the wind project is selling something that it doesn’t actually own. Turns out that’s a bit of a problem. In the second quarter of this year we wrote a premium article and an associated blog proposing a new structure for ... » read more
Thursday Oct 7, 2021   
SPP is a market that does not get the love as the likes of PJM, ERCOT and CAISO usually take over the conversations around coal to gas switching, price cap volatility and how a renewable portfolio standard (RPS) impacts the market.  We tend to forget that SPP is the leader when it comes to the volume of wind compared to the power demand on the grid.  Yes, ERCOT has the most wind capacity within the Lower 48 and California has its solar and battery technology, but SPP is a market that has a lot going on when it comes to volatility with all the wind.  For example, over the past few years the wind growth has paved the way for what we deem as renewable curtailments as the grid’s transmission lines are not able to find a home for such megawatts within a given ... » read more
Wednesday Oct 6, 2021   
European and Asian gas prices have been on an absolute, record-breaking tear this summer with a significant acceleration in the past couple of weeks.  Throughout the summer and over recent weeks, we have been putting out frequent flashes to subscribers of EGPS' LNG market reports on the variety of factors conspiring to keep pushing European and Asian gas prices higher.  Just when it seems prices can't go higher, some new piece of news breaks on a near-weekly basis to keep the momentum alive. Last winter kicked off the action.  Temperatures across Europe and Asia where the coldest they've been in decades.  Changes in both market's power stacks along with carbon/climate goals contributed to higher gas consumption rates than have ever before been seen.  In Europe ... » read more
Tuesday Oct 5, 2021   
With all the news swirling around Southern California regarding increasing the pressure on the L4000 portion of the SoCal Gas system and setting up a date in early November 2021 with the CPUC to determine the level of natural gas that can be injected into Aliso Canyon prior to the heart of winter had the market turning the clock back to what once was prior to the El Paso pipeline rupture in the middle of August 2021.  The graph below is a representation of the November-March 2022 future basis strip for delivery into the SoCal Border and Citygate markets.  As you can clearly see, the straight drop down took the entire premium that was built into the hubs back out as the sediment in the market is that everyone act in accordance with system reliability.  The shift down is the ... » read more
Monday Oct 4, 2021   
Volatility is the word tied to the energy space these days as the European market is fast approaching its winter season with a pretty good deficit when it comes to the amount of natural gas in the ground and an energy sector that has been reeling over the past few months.  The North America market fundamentals are closely tied to such volatility as LNG exports are a mainstay in the overall supply/demand picture.  Throw in the simple fact that the US production levels have not been responding to the uptick in the overall price movement and we are seeing our own volatility in the Nymex forward curve. Figure 1 | Nymex Prompt Month Daily Settle The graph above illustrates the prompt month Nymex settle on a daily basis over the past two years with the blue line representing the ... » read more
Friday Oct 1, 2021   
Back in June, we wrote about the impact that Winter Storm Uri was having on fixed quantity wind hedges: iced-over projects were on the hook to deliver their contracted quantity despite the weather, and with no way to generate the only option was to buy from the market at the $9,000/MWh prices. This resulted in existing projects scrambling to unwind or restructure their hedges and exposed the risks inherent in the fixed quantity hedge structure. We proposed an alternative hedge structure and quantified the associated risks and values. In short, we proposed a settlement on a monthly quantity (rather than 12x24) where the floating price would be equal to the average of the bottom 80%-90% of prices during the month. A wind project does not own a fixed quantity of generation due to the highly ... » read more
Thursday Sep 30, 2021   
Here at EnergyGPS, we spend a lot of time slicing and dicing the data related to energy prices within the CAISO market as there are a lot of moving parts that driver the daily results.  Once of the reasons as of late is due to the influx of renewable battery capacity that has showed up throughout 2021.  This is not the first time the renewable sector has been tied to the CAISO pricing impact as the solar penetration is tethered to what is now known as the ‘Duck Curve’.  The avenue we use to distribute such insight is via the EnergyGPS West Power Market Fundamentals Offering as well as the growing eCommerce Newsletter Packages (Gold, Platinum and Platinum Renewables).  Within each, subscribers have been regularly receiving reports and articles dissecting the ... » read more
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