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| Tuesday Oct 19, 2021 | |
| It has been the story since early spring that the North American natural gas market has been in the biggest bull market seen in the past ten years. Continuous contract prices ran up from $2.46 to $6.31 in just six months. But a good portion of the bullish perception was based on the expectation of a normal winter. Under that scenario the heating load across the continent would cause an early draw down of inventory prior to the peak of HDDs in January. The experience of last February also remained fresh in the minds of the market as many of the structural balancing issues in Texas and Oklahoma have not been remedied. But now winter is just two weeks away and as short term weather models start to roll out heating degree day forecasts there is consensus that the record warm October is ... » read more | |
| Monday Oct 18, 2021 | |
| Last week’s special article, titled ‘CAISO Curtailment Components’, took a deep-dive into the CAISO renewable curtailments as the past couple of weeks have presented scenarios where the system operators need to shed localized generation as certain nomogram constraints are in play and the morning and middle of the day have no other outlets thus solar megawatts are the only solution when it comes to balancing the grid in real-time. Figure 1 | CAISO Solar and Wind Supply/Curtailments – Hourly The figure above displays the potential volume of energy for both solar and wind within the CAISO footprint over the past week with the x-axis representing the hours within a day while the y-axis is the MWh volume tied to each resource. The gray colored bars is the actual ... » read more | |
| Friday Oct 15, 2021 | |
| In CAISO, what was already a meager hydro output during the summer has scaled back even further over the first half of October. Flat Hydro generation has averaged 1.3 GW over the past two weeks, down from 1.7 GW over the month of September. Interestingly, almost all of the reduced output has come during heavy load hour hours—during the peak evening ramp hours, in particular. The figure below shows average hourly hydro generation in CAISO by month, which each year going back to 2015 having its own colored line. The thick brown line represents the generation during the current year. The profile went from being stretched out to the limit during the summer months to a much more compressed shape in October. The bottom of the profile is unchanged from ... » read more | |
| Thursday Oct 14, 2021 | |
| It is hard to imagine the life that we once led just over two years ago. The fall season was filled with consumption tied to Halloween as children and adults alike tried to figure out what costume they were going to be wearing to the party or out and about as they obtained handfuls of candy. Once the end of October transitioned to November, the talk was all about Thanksgiving and who was going to be joining each household for the big dinner and conversations. In our household, we had a routine of getting together with another family we have known for years but with the busy daily schedules could only muster getting together for the feast mentioned above. The topic of going out on Black Friday always came up with everyone never really understanding the passion ... » read more | |
| 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 | |