Intelligence Trading and Risk

Alberta power outages: Detecting value amid unpredictability 

byEnverus

This blog is based on a segment of CBC’s“Business Report, Calgary Eyeopener with Loren,” featuring Enverus Intelligence® Research’s* very own Al Salazar. Listen to the full segment here. 

In the ever-changing energy landscape, understanding market fluctuations, weather conditions and system resilience is paramount when factoring ideas for trading opportunities. Cue Alberta, a province that’s recently witnessed a confluence of challenges – extreme cold and record-breaking power demand soaring to 12,000 megawatts.

What happened?

Two of Alberta’s vital gas-fired plants, H.R. Milner (300 megawatts) and Sundance 6 (401 MW) were offline, timed for routine maintenance. An unanticipated surge in consumption alongside Alberta Energy Company’s (AECO) alarm bell for escalating power load drove the province into what can only be described as a power grid balancing act. Yet, the response from Albertans was overwhelming. A widespread text alert to reduce power use was met with compliant reduction, averting rolling blackouts.

Drilling down into the resilience of the Albertan electrical system, we arrive at some positive markers.

  1. The Cascade Power Project, a new entrant to the grid, will soon deliver 900 megawatts, strengthening the local system’s robustness.
  2. Gas, our homegrown resource, is voluminous in Alberta. It’s an affordable, reliable resource that should shield us from any supply shocks, reinforcing our generation capabilities.
  3. Importantly, as Alberta signals farewell to coal for electrical generation, it’s critical to remember that we can leverage power from our neighbors (Saskatchewan, British Columbia and Montana) when needed. The interplay underscores the value of dependable generation in a time of transition.

All eyes on the opportunity

Shifting focus to natural gas prices, let’s talk numbers. AECO hiked from around $2 to $14 in just a few days, fueled by a freeze-triggered 3 BCF daily outage that constricted supply amidst soaring demand. However, don’t let this icy weather scenario fool you. Despite the surge, Alberta’s gas supply is robust, with an excess of gas waiting in storage – around 15-20% above the norm.

It’s a classic case of a perfect storm. An outage meets record demand, and the market doesn’t hesitate to reset the equilibrium through price shifts. AECO’s soaring prices serve as a reminder to all of us energy traders that even the slightest disruption can cause a domino effect.

To learn more about the long-term pricing forecast for North American natural gas, watch on demand Al Salazar’s webinar “Natural Gas Price Pathways to 2030.

In conclusion, the Alberta power outage case study serves as a goldmine of insights for traders. It underscores the significance of dependable generation and the need for market readiness amid volatility. Yet, it’s during these trying times that opportunities emerge, enabling traders to refine energy strategies and adapt to an ever-evolving landscape. As traders seek agility and precision, Enverus Trading and Risk Solutions presents itself as the ideal partner. In a world where seconds can be too late, empower your entire commodity team to execute on changing market conditions as they happen by combining accurate, real-time commodity price data sources with automation, all in one trading and risk data management and price forward curve management solution that can be customized to your specific market views.

Authors

al-salazar

Al Salazar
Senior Vice President, Enverus Intelligence® | Research (EIR) 
Al Salazar is a seasoned member of the Enverus Intelligence team, bringing more than 23 years of experience in the energy industry with a focus on fundamental analysis of oil, natural gas and power.
Throughout his career, Al has held key positions at EnCana/Cenovus and Suncor, where he honed his skills in forecasting, hedging, and corporate strategy.
Al’s 15-year tenure at EnCana/Cenovus was particularly impactful, where he contributed significantly to the company’s success. Al earned his bachelor’s degree in applied energy economics from the University of Calgary in 2000, followed by an MBA with honors from Syracuse University in 2007. Al’s academic background, coupled with his extensive professional experience, has equipped him with a deep understanding of the energy industry’s complexities and the necessary skills to navigate them effectively.

Head shot of Chris Griggs

Chris Griggs
Product marketing manager for Enverus Intelligence® | Research (EIR) and Trading & Risk. Chris Griggs leads the development and communication of the value these products provide various industries, including oilfield services, investment funds, wealth management departments, banks, E&P oil and gas departments, and midstream operators. Chris helps provide customers across the energy ecosystem with the intelligent connections and actionable insights that allow them to uncover new opportunities and thrive. 

* About Enverus Intelligence®
Enverus Intelligence Research, Inc. is a subsidiary of Enverus and publishes energy-sector research that focuses on the oil and natural gas industries and broader energy topics including publicly traded and privately held oil, gas, midstream and other energy industry companies, basin studies (including characteristics, activity, infrastructure, etc.), commodity pricing forecasts, global macroeconomics and geopolitical matters. Enverus Intelligence Research, Inc. is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.

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