Just wondering if anyone in power trading has some comments regarding what went on in ERCOT last week (8/1). I've heard that power prices went wild, and scanning their site it looks like peak prices where around 3k. How unusual is this?
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On the natty side hub traded around 11 or 12 cents over each day almost. Heck some dudes were rolling their storage at .25 after index settled.
Overall would say it's pretty common when the market is how its situated right now. We have had crazy breakouts all year like this the market is short-term focused, in the long-run we are over supplied but short-term have been squeezed. PJM has done it atleast 3-4 times this summer if not more.
Basically we have had record weather again and again. When the whole southwest is crazy hot and texas is insanely hot like it was SHIT WILL hit the fan.
every firm i know of have sent out emails for traders to be quiet... doubt you will find much info
aka monty made a killing and was at the bar within hours.
I was on golf course
Heat is the main factor, some outages. Demand for power went crazy. If you think 8/1 was bad, take a look at 8/4 http://www.ercot.com/content/cdr/html/20110801_real_time_spp
What was worse, was some companies were locked out of the DAM because they needed to post a ton of collateral to ERCOT immediately so they could participate, but since these numbers were pretty high, several were forced to buy in the RT.
RT prices stayed at $3,000/MWh for a couple hours. 8/1 was tiny. Expect next week to continue. It would be well over $3,000 if ERCOT didn't cap it.
This is similar to Feb 2 when it hit $3,000/MWh for nearly 8 hours. However, that was greatly to do with Outages, plus the cold. If you remember back when ERCOT called for rolling blackouts. Between planned and unplanned outages, they couldn't produce enough power for the market. Now, they can produce enough, but they are close to maxing out. Luckily, the heat of the day is around 2:00 till 4ish. So the large power prices are only crushing the market during those times.
Big difference is Feb 2, it was only a day, August, we've just started. I imagine this will continue into next week. Better hope for some rain. However, you will want to watch the heat index. The DAM is still really high, as well as the ancillaries.
For all you businesses and resis that locked in fixed, you won't get hurt too bad, only consumption goes up... For all you who are on variable rates,,,, I feel bad for you when you get that power bill. Just watch those REPs hope no one goes bankrupt because of this, like back in Feb.
Thanks for the info Sam and Wallace. A couple follow-up questions:
How much did the early Feb. well freeze offs in West Texas have to do with the power squeeze on the 2nd?
Marcellus_Wallace: when you say the hub was trading 11 - 12 cents over, is that cash to prompt? What do you mean when you say rolling their storage at 25 cents?
Awesome info guys, BIG thanks from a fledgling natty analyst!
Back on Feb 2 there were a couple generators already scheduled to be offline. The problem was that a few more generators tripped and went offline. This compounded with above predicted demand crushed the power market in ERCOT.
http://www.ercot.com/content/cdr/html/20110202_real_time_spp
You'll see prices went high extremely early, and stayed high, because there wasn't enough generation., Hence ERCOT initiated rolling blackouts. Just to state the obvious, cold temperatures will increase load demand, but the real problem was the compounding of generators going offline. That's why it didn't get better as the sun came up (when it should have naturally gotten a little warmer).
By Feb 3, it was still cold, however, generation was up, just not at full capacity. Hence, the prices didn't go back to $3,000 but they were still high.
If you compare those numbers with Last week, you see that prices didn't stay high the entire time, just during the hours of extreme heat. Luckily, actual load has been fairly on par with forecast.
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