I am currently reading the novel "Short" by McMeel. So I try to learn electricity market by reading some stuff on the internet. I read that the average electricity price at the PJM West in January 2011 came to $60.15. On peak spot prices spiked to $115.00/mwh on January 21st. It makes me wonder what are the factors determines the price of electricity, besides the temperature, nat gas price and "congestion on the grid" (picked this up from that Enron movie)... Any electricity trader here would care to enlighten me? or familiar with this particular price action?
Feb 08, 2011
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Whub spiked to over $400 last week... its a long dirty list of things to create a quick spike...
^ ^ Concur with above ERCOT was bumping up on the 3,000 $/Mwh, and ran in the $500/Mwh, but according some people that's normal stuff, b/c it also happens in PJME, (laughs).
1st try to learn about the MRP and technologies that drive it, it also may worth your time to learn about SREC's in NJ, and other PJME markets. It can be a shallow market, but come, compliance season everyone is on board.
inch wide mile deep
generation stack, transmission outages and constraints, weather, tie flows, etc.
i think the particular time period your referring to, there was a spike in tetco-m3 gas basis (the delivery point close to west hub) due to cold in the entire eastern interconnect. cash gas was trading for like 15 bucks up there. an efficient gas plant would go from around $35 to run up to $105 (pardon the rough math. i figured a 7 heat rate with approximately $5 gas and $15 gas).
the mid atlantic corridor is a congested area, so by and large they're stuck with their own generation mix when the lines cant bring any more cheap midwestern power over.
We had record weather in the NE. Record load in various areas. Pipelines were constrained like mad. Everyone was getting cut and cutting others on that very weekend.
it sucked for one guy and was heaven for another guy on our desk.. power is a truly different animal.. i am going on 4 years and get slammed on new info all the time
Daily or weekly firm is the best when you know spreads are there!
then may I ask if those spikes are foreseeable? frequency of those spike during the summer or winter? average duration that price staying at those lvls which are way above the average? can traders capture those gains? how would hedge those risks if you are a power producer? Since power cannot be stored, and the future price is kinda pure future regional supply and demand, what would it take to be a good power trader (with those volatility)? If the regional market is thin, then are there are a lot of manipulations? What is the future regulatory environment looks like in your opinion?
Sorry that's a lot of questions. If you don't have time to elaborate, are there any good books out there that would answer those questions?
Spent more than half an hour, I couldn't figure out. I tried ERCOT website, EIA etc. From the Day-Ahead Markets data, they have the resource names who are supplying power Feb 2nd 3rd and 4th during the peak hours. But those resource names doesn't make any sense to me. The real time data are in xml or csv, my computer can't open them. Even I can open them, I doubt I will be able to answer the question above. Anyway I gave up, time to cut losses...
I guess dinner is on me...
OP, I am going to write a reply since no one has given you anything. That said your asking all the right questions, but no one truly is going to explain to you how a $90mm weekend worked, for no OTC product out there will you find a book to explain how the best trades work, it makes no sense. Even the few books on energy always explain things in an ordinary market, no one says lets analyze when "NE basis went crazy" or "PJM got hit hard". But your asking all the right questions, that said trying to figure out a $90mm weekend is not easy there is tons of factor and only those like monty who saw it in real-time can explain most of it.
I would say start with looking at a time in the summer when a power market is quiet. Also I would not look at ERCOT or PJM, two very complicated markets look at something more simply. Try to builld a power curve, figure how much hydro/nuke/wind can fill a market then figure when the more expensive sources are need. Then grab weather from somewhere and see how that curve/load changes. Baby steps....
txu, calpine and austin energy
I know nothing about ERCOT, but how many of those 3 can pass costs to the consumer? If so then I am not sure a 30mm loss is truly realized. If not, ouch is all I can say.
Thought this may be of interest, there was an article in the Platts MW Daily talking about ERCOT and these events. Awesome response/solution... "We have to do more with texting technology," Doggett said.
http://www.plattsenergyweektv.com/story.aspx?storyid=135803&catid=293
ERCOT set a new winter peak demand record of 57,282 MW, beating the previous record set during colder weather about one week earlier. ERCOT's new record, set in the hour between 7 a.m. and 8 a.m. CST, beats the February 2 record of 56,334 MW by 984 MW, or about 1.7%. The February 2 record was just less than 1% more than the previous record, set in January 2010.
barclays put out a nice write up tuesday on events.... i dont always follow their daily write up but this one was good. if you can get your hands on it..check it.. email me if you want a copy
Hi out there! I have a question? can you virtual trade the nodal markets in the day ahead markets and be profitable and make a living? what are upto congestion products in PJM? what are the next markets to look at after PJM? any help is appreciated on this as I see some very smart people out there
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