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Tuesday Feb 23, 2021   
Last week provided the biggest price shock in the history of the natural gas market as daily indices in Oklahoma and Texas ran up from $2.75 to $500 in a moments notice. Coming out of the long weekend and the South Central fully entrenched in a polar vortex situation, the cash price jumped up to a staggering $1,000 at OGT while the Texas trading points were starving for molecules as reserve capacity dropped to zero across the majority of intrastate pipelines. The factors that led to the dire situation were your typical freeze-offs at the wellheads as well as the actual pipeline pressure to the gas-fired power plant at dangerously low levels when heating demand tied to electricity pushed the numbers well above anything we see during the hottest of summer days. Usually constraints ... » read more
Monday Feb 22, 2021   
How Much is Enough Reliability? By Tim Belden How much reliability should consumers be required to buy? The question is rarely presented in that way, but that’s the central issue surrounding ERCOT’s unique market structure and the horrific blackouts from last week. For a moment, let’s turn the clock back a few decades to frame up the issue. Electricity deregulation (re-regulation, really) was part of a trend that included the airlines (Airline Deregulation Act of 1978), oil and gasoline (1981), telephone service (AT&T breakup mandated in 1982), the Natural Gas Wellhead Decontrol Act of 1989, and the FERC Order 636 which unbundled pipeline service in 1992. Competition in electricity generation first started with PURPA in 1978. This enabled “Qualifying ... » read more
Friday Feb 19, 2021   
By Tim Belden The electricity industry will forever remember this past week. Risk wonks will be analyzing the ERCOT price action and debating how to incorporate this risk into modeling. The governor and other elected officials will demand explanations and push for change. Policy wonks have always loved to debate the merits of ERCOT’s unique market structure, and the debate will continue with even more vigor moving forward. I’ve always had respect for ERCOT’s market structure. It is a cohesive set of policies which are designed to provide generators with strong, appropriate, hourly price signals while honoring the state’s objective of not creating stranded costs via capacity payments. Is it the best market structure in North America? Were the supply shortfalls and ... » read more
Thursday Feb 18, 2021   
This week we have noticed a number of articles about who is to blame for the energy crisis unfolding in Texas. Most of these articles are polarizing and do not take into account a full picture of the problem. There is a semblance of nuance that is missing in the dialogue. We will take the high road and assume that most of the commenters do not have a full understanding of how complicated it is to deliver energy from a source to a sink or from a well head to a furnace. But this is not stopping the flood of misinformation. These are the top ten excuses hitting the press in the past 24 hours for the balancing issues in Texas: Frozen Wind Turbines Fossil Fuel Reliance The independence of the ERCOT grid Market manipulation Market Price Caps Democrats Republicans Capitalism Oil Companies Under ... » read more
Wednesday Feb 17, 2021   
This week saw (and continues to see) North American energy markets behave in ways that were unimaginable in all but the most outlying of scenarios.  It was no secret that the coldest weather in the past several winters was en route: we issued an alert to clients in early January noting that several meteorological forecasts were indicating the potential for a polar vortex to setup.  But the intensity of the cold exposed the impacts of a variety of fundamental shifts that have been developing in the markets the past few years.  Those shifts combined with widespread supply-side disruptions to drive gas and power prices to record highs that were leagues beyond previous highs.  While the brunt of the cold action put its bullseye on Texas and the Midwest, its effects ... » read more
Tuesday Feb 16, 2021   
In sport, the saying goes 'records are meant to be broken' when an athlete or team plays at their highest level on a given day or over a period of time.  For example, a track athlete that is performing at the World Championship or Olympics runs a race for the ages and beats the World Record that has stood for decades, that is an achievement in and of itself.  In team sport, the Boston Celtics of the 50's and 60's was the team to beat as Bill Russell and company reeled off 11 championships.  Along came this athlete named Michael Jordan, who put together six NBA championships where they consisted of two three-peat runs with two years off in the middle.  The most recent record setting athlete playing in a team sport is that of Tom Brady who won his 7th Super Bowl with the ... » read more
Monday Feb 15, 2021   
The latest EnergyGPS Special Report, titled 'ERCOT's Red River Showdown', details what is happening in the Lone Star State as Mother Nature takes on the ERCOT footprint.  As it has been well documented in our ERCOT Market Flashes over the past two weeks, colder weather was going to push down from the north unlike anything the state has ever seen.  Figure 1 | Weather Pattern over the Weekend As a result of such, the power demand numbers were substantially higher compared to other winter months over the years.  In fact, as we rolled into the middle of last week, the power demand numbers were going to exceed the peak summer levels seen over the past two years if not record breaking since the inception of ERCOT. Figure 2 | ERCOT Net Load Profile - Daily The graph above ... » read more
Friday Feb 12, 2021   
We are looking at more tumultuous times in US energy markets. Over the last few days we’ve been writing about the cold weather enveloping the country. Temperatures in Dallas are projected to decline throughout the weekend. The forecast for Monday is a low of 2 degrees and a high of 15. And yes, we are talking about Fahrenheit. Natural gas prices in certain markets have risen into the double digits. Pipelines are experiencing deliverability challenges and intra-day gas supplies are uncertain and volatile. This is a bona fide event in electricity and gas markets. I spend a lot of time working on ERCOT wind and solar transactions. I have a soft spot in my heart for the players in that market. I worry about the unhedged project when prices are low. I also worry about those with fixed ... » read more
Thursday Feb 11, 2021   
The weather forecast in Portland, OR over the next 72 hours is calling for the streets to be blanketed with snow and the daytime highs to not get over the freezing level on Friday. It happens a couple of times each winter, when the schools close (wait most schools are not in session), sporting events are postponed (once again already happening) and everyone works from home due to the icy conditions on the road (hmmmm, already doing that).  I guess the world we live in can look very different in many ways as the COVID 19 virus is still in play.  What does not seem to change is how the natural gas and power grids are impacted by what Mother Nature brings to the table in form of the winter weather. Figure 1 | Winter Weather Warning During a mild winter, there is a lot of looseness ... » read more
Wednesday Feb 10, 2021   
Just three winters ago, the Sumas price hub in the Pacific Northwest set that winter’s high-water mark for regional gas prices due to an explosion on an upstream supply pipeline causing severe downstream shortages.  After those issues were resolved it was generally regarded that all was in the rear-view mirror.  Even with this winter featuring numerous cold periods, no major gas price spikes have cropped up as the PNW seems sufficiently supplied.  Headed into this current week, there were no expectations of any major price swings as, even though the coldest temperatures of the winter are en route, the region projected to be well supplied.  That all turned on a dime this weekend, though, when the same upstream supply system that caused the Winter '18-'19 ... » read more
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