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Wednesday Jun 2, 2021   
In a recent Newsletter we discussed how structural changes in the ERCOT power market are leading to a series of surprising real-time performance figures.  ERCOT is not the only market experiencing structural shifts with visible results.  They occur in a variety of markets across North America, often for unique reasons, and sometimes rather unexpected.  Alberta is a good example. This week, Alberta power loads could set new June records because of the coincidence of structural demand shifts being amplified by some of the hottest weather for this time of year in several years.  Typically, when I hear “heat” in Alberta, I think of nothing more than a few days were you can pair flip flops with shorts and a tee.  It certainly doesn’t conjure up images ... » read more
Tuesday Jun 1, 2021   
This was a very unusual Memorial Day Weekend. Much of the Midcon and Midwest saw average temperatures range 4-12 degrees below normal which brought very cool weather to the holiday weekend. Normally these regions are making the turn to summer weather with daytime highs in the mid 80's. This turn of events combined with the stormy Gulf weather took the country's power burn total down from 32 to only 23 BCF. But this may be the calm before the storm. In the coming days the CDD total for the country will jump from 2 to 10. The Midwest will have heat indexes in the low 90's as the humidity takes its effect.  Figure 1 | Lower 48 Cooling Degree Day Forecast and Last Year The nuclear fleet is much healthier as the month of May is when the refueling season typically comes to an end the back ... » read more
Friday May 28, 2021   
For the past two and a half months, we have been watching the fallout unfold from the disaster of Winter Storm Uri. The events of February have rendered the 12x24 hedge a thing of the past in ERCOT: wind projects with existing hedges are scrambling to unwind or restructure their positions, and new wind projects seeking contracted cashflows are left scratching their heads. The risks inherent in the 12x24 hedge have been dramatically laid bare, but what can replace it? We are at a critical juncture right now. Texas has proven out the model that wholesale markets – more specifically, standard wholesale energy hedges -- can enable new wind and solar development. There are a number of entities working on Version 2.0 of the renewable hedges. Recently, we’ve seen structures ... » read more
Thursday May 27, 2021   
Now that June is right around the corner and the summer months will soon be upon us, it is the time of year that the focus on ERCOT moves to the forefront as peak demand tends to show up in July/August and scarcity pricing is accounted for in the daily analysis.  Well that is not the case this year as 2021 delivered a storm of the century back in February where ERCOT has been front and center of almost every conversation tied to how a grid should be designed, who are the active participants now that many have been pushed to the sidelines and how will the new rules/regulations impact a market that was once known for placing a price cap at $9,000, trigger an uplift (ORDC) to make sure the signal is there for new generation and most importantly held to the motto that ... » read more
Wednesday May 26, 2021   
European and Asian summer forward strip prices have been in flux in recent days in reaction to headline news.  Prices posted steep losses last week when it was revealed the U.S. would not be enforcing sanctions on a Russian pipeline project designed to increase supplies to European markets.  But this week has seen some recovery as the market has settled down with realization that the project won't come online fast enough to stave off the market tightness resulting from severely depleted EU storage inventories.  While the price swings were some of the greatest moves posted in the EU and Asian forward curves in quite some time, the fact that the declines still weren't great enough to risk closing the economics to ship U.S. LNG abroad is yet another affirmation that U.S. LNG ... » read more
Tuesday May 25, 2021   
Coming out of winter the gas market took a decidedly bullish turn when it was apparent that the COVID demand destruction from one year ago was not going to carry over to this year. Power burns, exports to Mexico and LNG sendouts were higher and as a result the storage injections in the Gulf were disappointing. Week after week the EIA storage injection numbers posted under expectations. But this bullish tone changed dramatically once the calendar page was flipped to May. Henry Hub cash prices started moving back down to their largest discount to futures this spring. At face value this could be blamed on the return of nuclear capacity and a bout of mild weather. But there was a bigger factor involved. Pipeline flows from the Northeast down to the Gulf maximized out their ... » read more
Monday May 24, 2021   
The stat that stuck out to me this weekend as I was watching the morning local news was tied to the precipitation pattern as the forecast was calling for massive rains hitting the I-5 corridor on Monday.  The Saturday morning meteorologist stated that the last time the region saw a quarter-inch of rain in a single day was back on February 18th, 2021.  If you have ever lived in the Pacific Northwest, you fully understand that such a stat is next to amazing as the end of February and start of March is typically filled with heavy rains/snow depending on the temperatures.  It signifies how the region has been turned upside down in a matter of weeks as the regional hydro year has went from one of slightly below normal to that of in dire straits this spring as the region's other ... » read more
Friday May 21, 2021   
How were you introduced to the electricity industry? It can be a difficult industry to wrap your arms around. It can be hard to explain to your friends and family: Me: You can picture a barrel of oil, right? Mom: (Nods in Agreement) Me: Ok, now picture a bunch of electrons being pumped on to the grid by generators and flowing through transmission wires where they are measured at all key points on the system so you know exactly who produced what and who consumed what. Mom: (Blank Stare) Me: Ok, and when there is too much supply on the grid, the price can actually go negative. Yes, negative!!! You have to pay to produce energy and you get paid to consume it. Mom: (Blank Stare). What do you mean … what are negative prices? Me: Maybe we should head out to dinner now. The mix of ... » read more
Thursday May 20, 2021   
As we start to move out of the hot summer days and go trick or treating with our children at the end of October, the fall leaves are changing and it seems like Thanksgiving Dinner is upon us just like that.  Once we finish the big meal with family and friends (except for 2020 - pandemic), the day of wreckoning known as "Black Friday" pentrates most households as many get up early and sit in the parking lot of some big chain store to get that $99 flat-screen television special or some laptop that is deemed steeply discounted compared to its retail price.  Once in the door, consumerism is real and the shopping carts are full of Christmas gifts along with other items not necessarily on the list but who can pass up a great deal right??  Oh, do not forget about the ... » read more
Wednesday May 19, 2021   
It is that time of year where prognostications for the upcoming tropical storm season begin publishing.  The Colorado State University at Fort Collins, home of those stalwart Rams, issued its highly-anticipated annual Atlantic hurricane season outlook, as has IBM’s The Weather Company.  NOAA will release theirs later this week.  The two former entities are expecting a busier than normal tropical storm and hurricane season, which poses significant bullish risks to gas production, but nearly equal bearish risks to demand.  CSU is expecting this year to be more active than normal with 17 named storms spanning an estimated 80 days, and 4 major hurricanes spanning 9 days.  CSU is giving a 44% chance of at least one major hurricane hitting the Gulf Coast, and a ... » read more
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