Genscape : Similar Gas Day Analysis for New York, New England & PJM

Last week, several of Genscape's market intelligence teams began releasing a winter report series offering insight into natural gas pricing. Despite the warmer conditions driven by this year's El Niño, volatile natural gas pricing continues to drive significant swings in the prices of the gas dependent markets of New York, New England, and PJM.

These twice weekly reports, issued on Monday and updated on Thursday, will utilize proprietary, Genscape data to deliver pricing estimates based on historical data for all major pipelines used across the three aforementioned regions. For NY/NE, this is AGT, TGP and Transco Z6 and for PJM, this is TETCO-M3. Genscape's in-house team of meteorologists delivers frequently updated demand forecasts based on hourly temperature assumptions at the main location in each region. Similar gas day analysis is then performed to pick the top fifty matches that best fit both the temperature and demand profile for the day; top five similar days and an average gas price are provided for the next twelve days.

To the right, an example of a single day from the New England AGT Similar Gas Day Report is shown, showing both statistical gas demand and a 2D scatter plot of statistical price. The green box plot is a plot of the distribution of 'neighbor' days and their historical consumption of gas in the region. The green box includes the nearest 50 percent of all days- the most likely range of consumption for the future day we're considering. The highest 25 percent of similar days show consumption in the range of the vertical line up, and the lowest 25 percent of similar days are in the line down. Looking at price, the 2D chart below shows the statistical pipeline price of gas for all days considered to be 'neighbors' (shown via the tic marks) and an indication of where the average falls (red dot).

This type of analysis is beneficial, particularly in New England, as natural gas fuels the majority of the region's generators and is thus the primary driver behind prices. A similar situation exists in New York, where the majority of price setting plants are fueled by natural gas. In PJM, natural gas is becoming an increasingly important part of the supply stack despite the fact that coal fired generators compose the majority of the installed capacity within the RTO. Particularly useful in PJM in terms of energy costs and congestion for WHUB, expectations for Transco Z5 (non-WGL) and TETCO-M3 will provide customers with valuable information for the natural gas facilities along the East Coast.

While the Similar Gas Day Report should not be regarded as a forecast of prices, it can be used as a good indicator of trends based on upcoming demand and temperature expectations. Genscape has seen good success thus far in close approximation of prices, and find that the nearest neighbor report performs well in identifying upcoming demand and weather driven pricing risk. This report will currently be included for clients subscribed to the Power IQ Market Intelligence service and will help drive additional insight into near and mid term pricing scenarios.

Genscape's Power IQ Market Intelligence service combines proprietary modeling technology with fundamentals based analytics to create daily reports that allow customers to make more informed buy/sell decisions in order to manage risk, minimize cost, and enhance profitability. Each day, Genscape's team of analysts, meteorologists, and technologists prepare early morning reports and interact extensively with users. Click here to learn more or request a free trial of Power IQ.