Reduced Levels of North Atlantic Blocking & Transition toward El Nino Conditions Suggest More Northern/Western Focused Heat
Andover, MA, May 22, 2012 — WSI (Weather Services International) expects the upcoming period (June-August) to be slightly cooler than normal across the southeastern US and the Pacific Coast states, with above-normal temperatures elsewhere. The largest positive temperature anomalies are expected from the Southwest into the central and northern Plains (MISO power region). The WSI seasonal outlooks reference a standard 30-year normal (1981-2010).
“As we head into summer, it may appear that the prolonged stretch of above-normal temperatures across the US will never end. However, although we are expecting a continuation of the warmth across a majority of the country during the first half of summer, the emerging El Nino would suggest increasing odds of more widespread, below-normal temperatures later in the summer; and our August forecast reflects that. The big story for the summer, however, is the expected reversal of the summer pattern from recent years that favored very hot temperatures across the south-central and southeastern US. This pattern was driven by the extreme levels of North Atlantic atmospheric blocking that we’ve seen during the past four summers. There are no indications that these levels of blocking will occur again this summer, so those in the South should expect a much cooler summer this year,” said WSI Chief Meteorologist Dr. Todd Crawford. “We are predicting that the year-over-year change in summer temperatures will be particularly noticeable in the Texas-based ERCOT power region, which suffered through a brutally hot and dry summer last year. We expect the warmest summer temperatures, relative to normal, to be found from the southwestern US into the central/northern Plains, with the MISO power region the most likely to be impacted by anomalous heat, especially during the first half of summer.”
In June, WSI sees the monthly breakdown as:
Northeast* – Warmer than normal
Southeast* – Cooler than normal
N Central * – Warmer than normal
S Central* – Warmer than normal
Northwest* – Cooler than normal, especially coastal areas
Southwest* – Warmer than normal, except coastal southern California
According to Chris Kostas, Senior Power and Gas Analyst at ESAI, “Warmer-than-normal June temperatures in Midwest ISO (MISO) and western PJM could create a volatile situation for power prices in those regions, as summer power demand begins to kick in and drive afternoon cooling loads higher. Low gas prices and overnight wind generation could also help to squeeze coal plants in those regions. This would support higher on-peak implied market heat rates in Northern Illinois and MISO. Lower coal-fired generation could also create short periods of high power prices in PJM-East, NY, and New England, due to the slightly warmer-than-normal temperatures that are expected in those regions. Firm on-peak implied market heat rates could also be seen in Texas (i.e. ERCOT) in June, though the warmer-than-normal temperatures are expected to be less pronounced there. California and the Northwest, on the other hand, could see very low power prices and implied market heat rates, due to the expected higher-than-normal Columbia River run-off (i.e. above-normal hydro generation) and the low gas price environment. The Southeast will also likely experience soft power pricing in June due to low gas prices and cooler-than-normal temperatures.”
In July, WSI forecasts:
Northeast – Warmer than normal
Southeast – Cooler than normal
N Central – Warmer than normal
S Central – Cooler than normal
Northwest – Cooler than normal
Southwest – Warmer than normal, except CA/NV
“Mild July temperatures along the West Coast and in the South (extending to Texas) combined with the expected soft gas prices should keep power prices subdued in those regions. California and the Northwest will also benefit from higher-than-normal Columbia River runoff, which will provide ample hydro generation this summer. Mild temperatures and softer-than-normal loads in Texas (and the South) will likely place added pressure on coal-fired generators in those regions. This would support on-peak implied market heat rates despite the lower-than-normal cooling loads. Slightly warmer-than-normal July temperatures are expected in MISO, PJM and the Northeast and should support electrical loads in those regions. Power prices could be soft in general, but very volatile during brief warm periods. Implied market heat rates are expected to be very high throughout the summer (east of the Mississippi) due to the continued pressure on coal plants and coal-to-gas switching. While increased shale gas production has been beneficial in keeping power and gas prices subdued; the extraordinarily mild winter and the record seasonal inventories have accelerated the economic pressure on coal-fired plants and will likely keep power prices volatile this summer,” Kostas noted.
In August, WSI forecasts:
Northeast – Cooler than normal
Southeast – Cooler than normal
N Central – Cooler than normal
S Central – Warmer than normal
Northwest – Warmer than normal
Southwest – Warmer than normal, except coastal California
“With cooler-than-normal temperatures expected across the Mid-West and Mid-Atlantic regions in August, natural gas prices could see early autumn price weakness; as gas inventories approach last year’s record level. Below-normal summer loads usually translate into lower implied market heat rates. But against the backdrop of low gas prices this year, implied market heat rates could be firm, if coal-fired generators continue to struggle against efficient gas-fired plants. We expect implied market heat rates will be firm in MISO, PJM and the Northeast due to soft gas prices and below-normal cooling load. California power prices are likely to be relatively soft in August due to mild temperatures and soft loads. ERCOT, on the other hand, could see some power price volatility due to the slightly warmer than normal temperatures in Texas and the Southwest,” Kostas added.
WSI provides customized weather information to energy traders. It will issue its next seasonal outlook on June 26.
*To view the map defining WSI’s US regions, click here.
WSI (Weather Services International) is the world's leading provider of weather-driven business solutions for professionals in the energy, aviation and media markets and multiple federal and state government agencies. WSI is a member of The Weather Channel Companies and is headquartered in Andover, Massachusetts with offices in Birmingham, England. The Weather Channel Companies are owned by a consortium made up of NBC Universal and the private equity firms The Blackstone Group and Bain Capital.
Since its inception in 1984, Energy Security Analysis Inc. (ESAI) has been dedicated to monitoring, analyzing and synthesizing information about world-wide energy markets. Tapping the talents of its senior-level staff, ESAI provides clients with unparalleled insight into where the markets have been and where they are headed. ESAI provides ongoing systematic analysis of energy prices in the oil, natural gas and energy markets. For more information on ESAI services, see www.esai.com.
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