Earlier in the summer, we pointed out how it might become interesting for MISO if we saw warmer temperatures into late September into October. We noted that as the sun begins to set earlier in the afternoon, solar generation will be offline as on peak load ramps higher. We are starting to see that scenario play out as we've seen some warmer fall days across the mid US over the last week. The chart below shows solar generation dropping off quickly around the four o' clock afternoon hour and dropping to zero in the early evening. Looking at the Day Ahead hourly energy prices, we can see the evening hours reaching triple digit pricing as more expensive generation is required to meet the demand.

While we would welcome a slap on the back for our prognostication, the fact is MISO is just repeating something we saw a few years back in ERCOT. ERCOT had this same issue as heat lingered with the falling sun setting up for some generation scarcity. ERCOT's predicament was a little more serious as they faced real generation, where as of now, MISO's issue is having to bring on expensive peaking generation to make up for shortfalls.

No sooner has the ink dried on our paper and operations teams throughout MISO got an email with the following heads up (bold added by us)......

MISO is evaluating elevated uncertainty and tightening reserve margins for the entire MISO footprint on Monday, October 6th.

Basically, MISO is giving us all the heads up they are getting close to not finding enough generation. Fair disclosure, we'd be shocked if that were the case and we don't see an ERCOT situation, but it's worth taking note with a mild concern. By the way, to add fuel to the proverbial fire, MISO neighbor SPP has issued a Resource Advisory Warning for Monday. The advisory is "being declared due to potential low output from wind and other variable energy resources leading into peak hours.".

Click on your favorite browser and type in "natural gas prices". The results from a two day period are nothing short of amusing. If you look at the gas chart below, you can almost guess some of the headlines as a the week started with a rally, peaked on Wednesday, and slide back the last couple of sessions. Over the last 48 hours, gas has 'rallied on colder forecasts for late fall', 'slumped because of warmer weather expectations this fall', pulled back on 'storage data', etc. Perhaps our favorite narrative, was the rally earlier this week was being driven by the government shutdown which would mean EIA storage data would be delayed. The thought was traders would be blind of data so speculators were flattening out positions and trying to get their books neutral. Actually, while we chuckled at that last reason, it might be the most plausible.

This headline speculation in the gas market is the reason we are such proponents of hedging/marketing plans. The markets provide all kinds of opportunities that aren't always coupled with fundamentals or rational reasoning. We aren't saying this is necessarily one of those massive moves driven by speculation, but it is an example of how the narrative can change on small data points.