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Tuesday Jun 26, 2018   
For much of the past two years we have dedicated much of our time deciphering the issues around the Southern California gas market. The Aliso Canyon debacle combined with long overdue maintenance has created a perfect storm for a reliability concerns. Due to the anticipated scarcity issues, SoCal Gas delivered prices have jumped for this summer. PG&E values have made a similar move in sympathy with the southern part of the state. But the rise did not correspond to the rest of the curve. In fact the Q3 PG&E strip moved well above the Q1 2019 value providing ample incentive for natural gas storage operators to withdraw their gas inventory this summer. This is contrary to the demand trends for the Pacific Gas and Electric system. Due to space heating load the gas consumption ... » read more
Monday Jun 25, 2018   
Most traders in West Power go out of their way to avoid the regions east the Pacific Northwest and California, and north of the Desert Southwest.  This includes the "markets" in Idaho and Montana, down through Wyoming, Colorado, and Utah.  Most of these markets are avoided because their liquidity is dreadful, with utilities that for the most part show a $15/MWh bid/ask, leaving any speculative trader that dared to dabble in these regions in a spot to get his teeth kicked in daily until said position is closed.  Mona, the main point of delivery in Utah, and the topic of today's newsletter, not only has the aforementioned dreadful liquidity, but it has another aspect that is even more scary: the ability to price above every other point in the WECC.  As a result, only the ... » read more
Thursday Jun 21, 2018   
Temperatures started to move above normal over the course of this weekend with Monday reaching the high watermark at 93 degrees in Columbus, Ohio. The rest of the Northeast was not far behind as Boston and New York both moved into the high 80s. As people cranked up their AC units, demand across the regions rose as well. Looking at Figure 1 we can see a red blob covering the entire northeast for Monday. Figure 1 | Historical Temperature Anomaly for June 18th The rise in temperatures caused electrical demand to hit its high so far this summer. With the hottest weather in the PJM region, the West Hub LMP rose to $64.19, head and shoulders above the rest. Looking at figure 2, we can see a cascading effect as LMPs settled a bit lower as you move north. Figure 2 | Select Northeast LMPs for ... » read more
Wednesday Jun 20, 2018   
Aloha, from the island of Oahu!!!  Over the past couple of days my family and I have been able to hangout in Honolulu while our son's soccer team participates in the FarWest Regional Tournament.  On our first full day, local friends took up to the North Shore where we got to drive past the Dole Plantation Factory (we did not stop and take a tour).  A little further up the two-lane road, over the tall stalks of grass that shielded us drivers, was the first glimpse of the new regime on the island. In the distant stood anywhere between 15-20 wind turbines, nonchalantly spinning as the wind blew off the Pacific Ocean and up the hillside. Figure 1 | Oahu Wind Farm   The push for renewables at the utility scale level was making an impact on the views to which many of the ... » read more
Tuesday Jun 19, 2018   
Coming into this week there were big expectations for power burns. The net load was expected to soar from 471 to 511 GWa which at face value should have produced the highest power burns of the year. But we noticed something different about yesterday's net load to power burn relationship. Gas consumption remained relatively flat despite the material gain in power demand. The original forecast was showing power burns climbing to over 35.5 BCF per day but the realized burns only measured 33.7 BCF. The implication was that there was another generation source getting dispatched ahead of natural gas once the load moved up to levels usually seen in July and August. Figure 1 | Lower 48 Net Load and Power Burns for the Past 20 Days Coal generation still remains a significant premium to natural ... » read more
Monday Jun 18, 2018   
Every year the water year in the Pacific Northwest is different.  Not only is the cumulative volume of water that goes through the various dams within the river system different each year, but so is the timing of when the snow melts and hits the rivers.  Further, every sub-region of the PNW (Snake basin, west side, Willamette Valley, Above Grand Coulee, etc) receives different volume and timing of their respective flows.  All of this said, at some point every year each region's runoff comes to an end.  As you can see in Figure 1, flows at The Dalles are coming off hard, a strong indicator that this year's runoff is nearing a wrap.  Figure 1 | Outflows at The Dalles (KCFS) From a generation perspective, as seen in Figure 2, hydro generation has fallen from a peak ... » read more
Friday Jun 15, 2018   
The first time I analyzed batteries as a wholesale power market asset was in 2013. A private equity outfit was looking into a battery company and asked me to help them evaluate the wholesale electricity market application of the batteries. The company was too far over its tips financially, and the applications for batteries in the electricity sector were largely behind the meter load management plays. Given the costs at the time and the revenue opportunity, there was simply no way to make the math work outside of a few niche opportunities. I learned a ton on that project about battery control technology, state of charge, degradation, and behind the meter applications. I learned about how accurately batteries can follow a signal and how much better they perform on performance based ... » read more
Thursday Jun 14, 2018   
The recent heat wave that moved through the Ohio Valley is a reminder to those in the Northeast that summer is almost upon us. In many markets across the country, electrical demand peaks during the summer time. As people start to switch on their AC units, driving up load, the ISOs are doing their best to have all resources available. With the calendar shift between seasons just a week away, we are seeing resources in PJM and New York return from maintenance. Figure 1 | Columbus Historical (Bar) and Forecast (dotted lines) Temperatures Last week in our newsletter we discussed how the Zone A LMP rallied due to line outages in the region. Multiple transmission lines coming out of Niagara took planned maintenance outages which drove congestion to the highest levels we have seen in ... » read more
Wednesday Jun 13, 2018   
Over the past couple of weeks, we have written about the weather in ERCOT as well as the recent price spike that drove HE 16 on June 5th up to $8,000 (ERCOT's Price Spike).  In the article underlined, we detailed the key components one needs to watch for as we move into the back half of June and look forward to the months of July and August.  One of the key components is the ERCOT wind profile as its volatility has an impact on the net load numbers on the grid. Figure 1 | ERCOT Wind Generation Hourly Profile - Actual and Forecast In the graph above, it shows the hourly ERCOT wind generation by day for the last 8 days as well as the next 7 day forecast.  If you look to the far left, you will see the later afternoon hours dip down below 1.8 GW HE 14 and sit around the 2.1 GW ... » read more
Tuesday Jun 12, 2018   
SoCal Gas continues to have a number of issues on their system that are expected to continue through next winter. Pipeline capacity into the Los Angeles Basin is severely restricted due to a number planned and forced outages. The result is that moderately high gas demand days will have to be met with storage draws to maintain pipeline reliability. That poses a bigger problem. The beleaguered Aliso Canyon storage cavern has also added to the supply woes because of the restraints placed upon its use by the California Legislature. The government imposed mandate will keep the regions largest storage cavern sitting on the sidelines unless its usage is deemed crucial to maintaining system integrity.   In anticipation of the supply issues during the peak of summer heat, SoCal ... » read more
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