Good Morning,
Inexplicably the ISO pulled off a strong weekend LMP-wise:
The rally can’t be explained by loads, those are soft, but perhaps the renewables deserves much of the credit:
There simply wasn’t any wind energy in Socal, nor will there be much for the remainder of this week. But we don’t think wind explains all of the strength and you must look at the state’s hydro to get a more complete picture:
Seven of the nine river basins we track are now below their five year averages for this week which is a statement of fact that could not be made since last year and suggests that El Nino 2016 has pretty much run its course; those rivers will continue to drop and these freaky negative prices will occur less and less, at least that is what we think.
Flows on Path 26 were a touch odd over the weekend:
We haven’t seen that much energy flow into NP since before the hub’s hydro went mondo this winter. Perhaps it was just an aberration but clearly NP needed that ZP energy, energy it would normally dump on its sister hub, SP. Perhaps it is another sign of a general tightening in Cal hydro.
Loads are low and there is not much respite in the ten day outlook from these low temperatures, at least in California. Temperatures in the northwest have soared, will be hot for a few days, then fall back off:
And with warm spring weather comes a surge in water from the melting snow, right? Maybe not so much this time, most of that snow is gone, what remains is at higher elevations and the total surface area now covered by snow is a fraction of the surface area that was covered by snow a few weeks back. Case in point is our Sideflow Index:
Temperatures have been in the 70s in Wenatchee most of last week, were in the 80s over the weekend, and the index has kept dropping. The Spokane has the same story to tell:
That river is done, runoff over, end of story and as goes the Spokane so goes every other low elevation stream in the western Rockies. The brutally warm April weather has already put much of WY16’s snow pack into the Pacific Ocean. Not to say inflows on the major systems, the Kootenai, Pend Oreille, and Canadian Columbia won’t continue to feed Coulee solid inflows, they will, but the days of 200k cfs discharge are over.
The big driver for Mid-C prices for the rest of this month will be the rate of refill at the storage projects; Coulee has begun that process, albeit slowly, but we think they will be approaching the drum gate max elevation of 1254 by week’s end. Refilling the reservoirs gives BPA new bullets, if they don’t like the price the feds store the water, if they like the price then she crank the turbines. Right now the project is running about 75% of hydraulic capacity and it won’t get much over that for the remainder of the month, then June rolls around and all of these rivers are dropping, or have ended their runoffs, and then BPA finds herself losing some of that flexibility. If they find themselves with 30′ to go in June there may be a problem with refill as inflows won’t be there. If prices are low BPA fills the reservoir, if prices are high … BPA fills the reservoir and drives the price even higher. You get the picture.
Summary
To be, or not to be in love with BOM: that is the question: whether ’tis nobler to be long and to suffer from prematurely acquired length or to take arms against a sea of troubles and short the beast? Me, I’d pass on the nobility and keep my June length for as the great Buffet once said “a rising tide raises all ships” and if BOM is strong so shall June rise in sympathy.
My biggest hangup with BOM length is the Ansergy forecast – it just doesn’t show much love in May:
This plot compares MidC’s daily on peak hydro with the amount of demand served from the thermal stack and there just isn’t much change for the next few weeks, really not much change for the rest of the month, then things get real interesting after Memorial Day. So we’ll chose to Not Be and stay flat May MidC and keep all those positions we flagged last week.
