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Tuesday Jan 19, 2016   
Bye Buy Brent-WTI Spread Last week one of the most persistent energy price relationships in the global energy markets flip-flopped. For the last five years Brent crude oil has traded at a premium to West Texas Intermediate (WTI) as evidenced by the figure below which shows the Brent WTI spread (Brent less WTI). Earlier this week WTI traded $1.28 per barrel above Brent. Figure 1 | Brent-WTI Spread for Last Five Years (dollars per barrel) So what has caused the Brent WTI spread to collapse and, at least temporarily, reverse? While some analysts suggest the lifting of ... » read more
Friday Jan 15, 2016   
A necessary element in understanding power and gas prices is an understanding of the relationship between coal and natural gas power burns. The equation becomes complicated during winter months as fluctuating natural gas prices can push gas fired generation out of the money, displaced by relatively cheaper coal generation. If we look at the EnergyGPS Coal Burns report we can see the grid changing as we move through winter.  Figure 1| Regional Coal Burns BCF Equivalent - Daily  By converting the total MW coal burns into a BCF equivalent we are able ... » read more
Thursday Jan 14, 2016   
As oil is currently sitting around  $30 a barrel for the first time in 12 years, the decline is particularly relevant to the Northeastern power markets as we typically see oil generation begin to replace natural gas this time of year.  During the winter months it is not uncommon for traditionally gas burning generators to switch to oil as cold temperatures drive up the price of natural gas. Considering the overall bearish conditions in the gas market thus far this winter, it seamed that any oil generation, especially gas to oil switching, would not ... » read more
Wednesday Jan 13, 2016   
As we work our way through the 2016 Winter, there are a three things that are keeping the natural gas market from making a big rebound.  The first item on the list is the weather.  In December, we saw spring-like conditions in the Eastern portion of the country (Philadelphia was topping the 80 degree mark on certain days).  The Midwest was not too far behind with highs in the upper 60’s/low 70’s while Texas was seeing massive wind days netting back the overall power loads.  As a result, the overall res/com demand numbers were coming in ... » read more
Tuesday Jan 12, 2016   
Coming into this winter there was a lot of speculation about the El Nino weather pattern and its possible effects on the on going drought in California.  The primary expectation was the El Nino weather pattern would drive increased precipitation possibly ending the two year drought for the golden state.  Thus far the precipitation in California is up significantly YoY and we are seeing the results in the hydro power production. Figure 1| California Hydro Generation HL YoY - MW/h  Total hydro production is up around 300 MWs from last year and ... » read more
Monday Jan 11, 2016   
There are some parallels to the Green Bay Packers offense and the SP15 implied heat rate, the common thread to each other is they are both hard to figure out these days.  If you are an avid Packer fan (like me) it will all make sense.  Over the last two weeks of the regular season, the Packers led the league in QB sacks (13 to be exact), they only converted on 18% of their 3rd down conversions and lost two fumbles that resulted into defensive touchdowns.  The good news for Packer fans is they still made the playoffs, which as a fan we know it starts a ... » read more
Friday Jan 8, 2016   
After having the wettest December on record in the Pacific Northwest, the New Year has provided us nothing but dry, cold conditions.  As a result, the overall MAF for the Jan-Jul time period has shifted down from 101 at The Dalles to the most recent report showing 89.8 MAF for the same time period. Figure 1 | NWRFC ESP MAF Table and Chart The reason for the big shift down over the past couple of weeks is due to the December precipitation coming in the form of rainfall, which increased the Westside run of river flows but had little impact on the overall lower ... » read more
Thursday Jan 7, 2016   
Last month we published a newsletter reviewing JP Morgan’s paper titled “A Brave New World – Deep De-Carbonization of Electricity Grids.” The production of the paper was overseen by Vaclav Smil, Distinguished Professor Emeritus in the Faculty of Environment at the University of Manitoba. Over the holiday break I spent some time reading more work by Professor Smil. Of particular interest to me is his book Natural Gas – Fuel for the 21st Century. The book is a comprehensive review of all facets of natural gas extraction, distribution, and ... » read more
Wednesday Jan 6, 2016   
With the colder weather moving through the Pacific Northwest, the overall wind generation has all but gone away with the heavy load average shifting down below 50 MW across the entire region.  Within BPA's balancing authority, the heavy load actually averaged less than 10 MW on the 4th. Figure 1 | BPA Wind Generation - Hourly Down in California, the wind output has had a different story, as the total output jumped up for the 5th in the DA market. Figure 2 | California Wind Generation - Hourly If you look at Figure 2, you can see that the SP15 evening ramp ... » read more
Tuesday Jan 5, 2016   
Over the past two weeks, California has seen its snow water equivalent (SWE) jump up to around 100% of normal for this time of year.  It seems like light years since we have seen this as the past three years have been well below normal with the last two in the severe drought-like category. Figure 1 | California SWE Percentage We have always said, California is a three storm state, meaning that all it takes is three big storms to make the water year.  So far this year, we saw the first set come through around Christmas as Northern California and ... » read more
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