Volte-face

Monday

Thursday

The cold hitting the norther half of the country is the real deal, one that will be talked about for years to come, and we are the first to admit it.  This is bullish beyond words, one that warrants just length …assuming the cold holds. That October precip hangover is already being worked out of the system and with cold comes high pressure dry ..the Mid-C shows very little precip (at least northern portion) for the next 10 days. So this cold event’s impact is not limited to BOM, to Dec, its effect will spill over into Jan and into all of WY17. Volte-Face, turn around and face the enemy, which is a short position anywhere.

---

Demand

Let’s start with loads:

Every hub is up except PV, but it is the Mid-C (and Rockies, though less so) that are the hubs de jour; the Mid-C is up nearly 5000 MW on peak. But that isn’t the story of the day (de jour, for our Canadian friends), the story today is the bitter cold the northwest is facing.

Mid-C Composite Temperature Outlook

Portland, OR

Ironically, or strangely, the Portland temperature is a mirror of the composite which shows how much of the cold, in this current forecast, is spilling over the Cascades. These ARE design days, boys and girls, and next week will be a test of how well the system was designed. What makes the event so striking, so singular, is it follows a very cold week (this week). If there was fat in the system it was worked off, mostly, serving that additional 5000 MW of load all week long, now we are into muscle and one and the current forecast suggests an even colder week next week. Volte-Face, turn around, face the enemy, buy back your shorts, go long, go really long.

The other hubs are not too cold, but here are the temps:

None approach the lows in the northwest, but all are colder than what was realized this week and all are dropping from Wednesday’s forecast and all will realize an increase in loads all of which renders the WECC more bullish next week than it was this week … Volte-Face.

Hub Composite Temperatures

Mid-C and NP15 are both below normals (10 year), though the Mid-C’s anomaly dwarfs NPs. The other hubs just flirt with normal.  Before exiting demand, let’s look at realized lows from yesterday:

Big load day, yesterday was, but look at the lows in Portland and Seattle, 30 and 28, respectively. Contrast those with what is projected for next week and you see why we titled this post “Volte-Face”.

---

Hydro

Oct and Nov brought record precip to the northwest, and near record precip to the Sierras, but now we are in a new weather pattern, one that occassionally spits out normal, and more frequently doesn’t spit out much of anything, today’s forecast is of the latter category:

Nearly an inch dropped out of the Mid-C composite, day on day, while NP picked up over a half inch. The city-level says it better:

You won’t see Boise over Portland and Seattle every day, you probably won’t see that city over again this year, or next year. The storm is centered on California and spills into the Snake basin. Coupled with those low temperatures and you have a recipe for possibly the best skiing in 20 years at Sun Valley, in case you care. Back in the day, skiers work snorkels on big powder days, not sure what they wear now.

The River Forecast Center is tweaking its numbers, let’s take a peak at the 10 Day:

Mostly their outlook is up from last Monday’s STP, it should be, loads are up and the utes are drafting to serve those loads. What is surprising, however, is that the forecasted generation is not up even more, especially next week. We think that will change in this morning’s outlook, it has to, BPA is going to have to pull down its reservoirs even further, shoot even more bullets it would rather save for Jan-Feb, shoot them in Dec, and what if this cold lingers another week?

We have never bought into the RFC’s water supply numbers:

Because the snow just isn’t there, one would have to assume massive projected anomallies (esp at Libby) to get to their numbers. Here are the actual snow anomalies:

Only the west-side is above normal, everything to the east of the Cascades is below normal, which implies that RFC’s numbers incorporate the Oct-Nov precip overhang via the reservoirs. Fair enough, but those reservoirs, that overhang, is getting worked out of the system and will be pulled even harder next week:

Between BC and Mid_C nearly a half MAF has been expunged from the system in a week, we think more will get pulled next week (assuming the cold stays). All of which makes our length in Q1 and 2 more desireable; we don’t like to get long, or short, too early, but also believe trading the water year is an incremental process …after N cumulative dry, or wet, days you adjust the position. We believe that with the big drafts in Dec, and a dry 10 day outlook it is time to add to Mid-C length.

BPA wisely built up reserves for the cold, but now they are working those out of the system:

Generation is up and the reservoir is falling, despite the drafting taking place at Arrow. Bullets are being expended, shell casing litter the ground, and the enemy (cold) presses on in even greater numbers. Volte-Face; maybe BPA will need to consider attaching the bayonets to conserve bullets?

---

Generation

The ISO’s total outages rallied, just when they needed them to come off:

All of those changes occurred at SP, NP remains unchanged. Only a few units came back …

While plenty fell to the wayside:

And the renewable (wind) outlook seems bullish:

The Mid-C has seen little wind energy, just when it needs it most, though there are signs of increased output over the weekend and into Monday. While on the Mid-C, let’s look at the utes and see how they are generating into this cold:

Comparing current generation to a month ago we see that the hub is about 5000 aMW greater yesterday than a month ago, and recall a month ago the hub was awash in water. The gencos cranked out the electrons yesterday:

But surprisingly, three failed to nominate for today’s market, probably in response to the weekend warming; they will be back next week, every turbine in the northwest will be spinning, they may even fire up those Energy Crisis diesel units that have gathered so much dust over the last fifteen years.

---

Transmission

Northbound flows out of ZP have fallen off a cliff, down about 3000 MW, probably form the surprise outages SP has realized, it certainly isn’t from SP’s loads.

Further north, we thought the loadings on the northern intertie were telling:

Telling because BC wasn’t selling more, they have their own issues, issues like serving their own loads, and though they loved the prices down south they just didn’t have the energy to fill the line. The other south-bound lines didn’t fill, either:

The DC is off around 500 aMW over the last couple of days while the AC is down almost 1000 aMW.

Maybe because the northwest had a better price than the ISO?

The Mid-C composite price (Hour Ahead, FFM) soared yesterday versus the other hubs, and soared versus the Day Ahead:

This is Pac West DA vs HA; let’s just hope they weren’t buyers. or if they were, they did all that buying in the DA market, because the HA was literally off the charts.

---

Conclusions

BOM – Volte-Face, buy back all the shorts and go long

Q1 – will buy another piece of HL at Mid-C

Q2 – will buy a piece of the off peak (mid_C) and keep the long onpeak

 

gsdaf