In our previous blog post discussing the Energy Transition Roadmap for Electrical Utilities, we looked at challenges and solutions for achieving Energy Transition objectives for the fundamental aspects of power systems – namely power generation, transmission and distribution, and customer demand. Today, we shift our focus to the technology needed to monitor and control electrical resources on the grid, and how they need to evolve in the Energy Transition journey.

There are many aspects of this Technology dimension:

• Power Production is monitored by an Energy Management System (EMS)
• Transmission Grid is monitored by a Transmission Management System (TMS)
• Distribution Grid is monitored by a Distribution Management System (DMS), and more extensively these days by an Advanced Distribution Management System (ADMS).
• Distributed Energy Resources (DERs) may be monitored by Distributed Energy Resource Management Systems (DERMS).

Providing Context - Stability through Inertia

For many decades the stability of the power system depended on the inertia of the large generators. Using reverse frequency droop settings on the governors of the generating units allowed for countering the results of faults on the system. If there was a loss of a large generator, it meant that there was more load than generation. This would cause the frequency to start reducing. The reduction in frequency would automatically cause the online generating units to produce more power to counteract the drop in frequency. This nearly immediate automatic response was then backed up by other system responses such as commanding the setpoints of other generators to increase to counteract the drop in generation. This resulted in the system remaining at a stable frequency and becoming rebalanced. On the other hand, if a large load was lost, the frequency would rise, the amount of generation would be automatically reduced, and the system would respond by lowering other generating unit setpoints.

An underlying principle of this methodology was the substantial inertia of the numerous large generating unit rotors that tended to keep spinning as required. This worked for many decades until entities began adding renewable generation, such as wind farms and solar farms - power resources that did not come with large inertia. The renewable generation resources may have had frequency control in the invertors connecting them to the grid, but in the early days of renewable generation operation, it was standard operating procedure to command them to disconnect from the system during faults. However, the loss of the renewable generation could worsen the frequency problem or make it better, depending on the fault type. If the fault was a loss of generation, then dumping more generation would make the problem worse. If the fault was a loss of load, dumping the renewable generation would make the system better.

Defining the Problem

The Renewable Energy Challenge - As the penetration of renewable generation is growing, power system engineers are modifying their approach to operating these resources. There is ongoing research and testing, and Grid Forming Inverters are being proposed as a solution. Grid forming inverters enable renewable generation resources to partly act as inertia-based resources. This means that a particular renewable generation resource can reduce generation in the event of a loss of load. However, in order for renewable generation to increase the output in response to loss of generation elsewhere, it must have some kind of energy storage that is rapidly available, such as a Battery Energy Storage Systems (BESS). A renewable resource with BESS that has enough energy stored can provide a reverse frequency droop characteristic in response to a fault on the system. Research is still needed on how the rapid frequency change is handled by the power electronics of the solar inverters or the wind farm convertors.

The key takeaway from this discussion is that as the system shifts to a large mix of renewable energy resources, it must also be built with tools that allow the power system to remain stable in response to faults.

Fault Current Detection - The other side of the question of inertia is related to faults on the system that can result in short circuit currents. Traditional rotor-based generators provide high short circuit currents into a fault because of their inherent large inertia. Renewable Energy Resources do not provide high short circuit currents in the same way, because they are connected to the grid through electronic based inverters. The lack of high short circuit currents in the event of a fault has detrimental effects on fault coordination, which is based on protection relays reading the high short circuit currents. While research is still ongoing in solving this challenge through novel protection schemes and relays, BESS could once again be a potential solution. For example, if a large solar farm also has BESS, this could enable it to shift the load and provide additional current into a fault to enable the protection systems to work.

Voltage Support - The other aspect of power systems is voltage support. The system needs reactive power to ensure that the voltage profiles of the system are within acceptable limits and that the power will flow from the resources to the loads. This means that large renewable resources have to be planned with reactive resources as required. Many Wind Farms and some Solar Farms have been built with additional Reactive and Capacitive resources. The amount needed will be dependent on the existing voltage situation in the Grid. Voltage support may require the addition of reactive resources on site at the Wind/Solar resources.

Planning & Load Balancing - The historical procedure for day-to-day planning is to perform load forecasts based on weather and factor in any planned outages. This ensures there is power available to supply the load as it varies during the day according to normally expected load curves, and when affected by weather and unusual events. A given self-contained area will ensure that it balances its load and generation throughout the day as well as its purchase/sales of power with other entities. The area interties are planned with neighbours, and these planned flows are compared with actual flows on the interties to adjust internal generation. The difference between planned interchange and actual interchange is called the Area Control Error (ACE). The North American Electric Reliability Corporation (NERC) rules require each area to keep ACE near zero and take action to return it to zero when it diverges.

To summarize, the work of monitoring, analyzing and controlling a power system network involves the following main issues:

• Generation load balancing for frequency stability
• ACE management for additional generation-load balancing
• Reactive power placement and availability for voltage stability
• Use of Generation inertia and relay protection to respond to system faults
• Ensuring that sufficient generation is available for rapid deployment for response to contingencies but also scheduled and available to follow load profiles
• Scheduling and directing generation changes to follow the load curve
• Analyzing and preparing to react to new contingencies when the system experiences a contingency and may be in an unusual state 
  

The Bulk Electrical System and Energy Transition

Renewable generation is intermittent and, while it can be predicted somewhat accurately, a bulk electrical system with high penetration of renewable generation must always have backup generation ready to replace large amounts that may be lost. It will be necessary to have bulk-level BESS or similar storage available to mitigate the effects of rapid loss or change in output levels of renewable generation. The loss of renewable generation may also mean that the replacement generation is located in different areas, changing the pattern of flow within the power system.

System Response and Contingencies

The main issue with the transmission grid is that multiple contingencies from strong storms can make system response very complex or result in a large reduction in the BESS energy available. Hydrogen is being proposed as the Energy Transition replacement for natural gas-fired generation. This requires an excess of renewable generation to manufacture enough hydrogen for use during minimal availability of renewables and limited storage.

Monitoring, Analysis, and Control on the Generation Level

It will be important to have extensive weather monitoring along with AI pattern analysis. Utilities can rely on weather forecasters to plan from 7 days to 1 or 2 days ahead, but they will need large arrays of measurement points utilized by all utilities to understand upcoming conditions for more immediate planning.

Weather Monitoring and AI Integration

Large solar/wind monitoring arrays within a utility’s footprint will allow the utility to understand local wind and cloud cover and how it is moving, enabling more accurate predictions of renewable outputs and localized temperature changes. AI will be trained to provide predictions that can be compared with actual measurements for continuous improvement. Utilities can optimize their other generation alongside more accurate forecasting of intermittent generation to better use their storage, allowing for smoother generation changes and more efficient hydrogen generation planning.

Data Collection and Simulation

Data collected from monitoring can be tested in simulations to refine a utility’s understanding of operations concerning the sun, clouds, wind, and storage, improving efficiency over time. Utilities will also be able to use simulations of faults in different places to learn how to respond effectively to different combinations of generation, storage, and load, aiding in arranging reactive power resources to support voltage as power flow patterns change.

Existing and Needed Tools

Currently, utilities use numerous tools for monitoring, analyzing, and simulating to effectively plan, operate, and respond to contingencies. These include power flow, state estimation, contingency analysis, reliability assessment, simulations, and transient stability analysis. Utilities use tools to optimize the use of generation based on cost and fuel availability, and other factors and tools for optimizing reactive resources to maintain voltage profiles.

Flexible AC Transmission System (FACTS)

FACTS devices assist with controlling reactive flow. Utilities will continue to need these tools and substation monitoring while using additional monitoring of transmission lines to enable real-time thermal ratings.

Additional Requirements

Utilities will need to add large arrays of weather monitoring for wind and cloud cover. AI tools with large capacities are required to handle the vast amount of real-time information about actual wind/solar conditions and predictions. This will enable utilities to forecast intermittent resource production and optimize storage use more precisely.

Simulation Tools for Optimization

Since weather patterns vary, utilities may also need to simulate how wind and sun resources vary based on historical data to improve storage and hydrogen production optimization. Continued use of simulation tools will help understand different faults and system responses, with research on Grid Forming Inverters to ensure they respond effectively to contingencies.

Inverter Based Resources (IBRs)

Research indicates that IBRs may respond to system issues differently depending on the problem. System monitoring (e.g. use of field Phasor Measurement Units (PMUs) with very fast communications and central processing) must rapidly understand and inform IBRs of the exact problem (e.g., a single-phase fault on Phase A) to enable precise responses (e.g., injecting extra current on Phase A to interrupt the fault). This must occur within milliseconds, utilizing the smart software of IBRs for effective system support.

Distribution System and Energy Transition

The Energy Transition will significantly impact the distribution system. The presence of substantial renewable/intermittent resources on the distribution network may result in two-way power flows. Currently, power flows from generation through the transmission system and into the distribution system on a one-way trip to customers. Adding solar/wind to the distribution system along with BESS and other storage types will radically change power flows, potentially opening an energy market at the distribution level and introducing Distribution System Operators (DSOs).

Fault Response on the Distribution System

Currently, renewable power generation disconnects from the distribution feeder during faults, typically in response to zero voltage. This means renewable power is lost unless local BESS charges up. Traditional distribution utility responses to faults involve opening breakers feeding the fault. Many utilities now use feeder reconfiguration with automated/controllable switches, identifying fault locations, opening switches to isolate the faulted section, and re-energizing unaffected segments.

Advanced Distribution Management Systems (ADMS)

Utilities use networked meter reading for hourly meter readings and last gasp detection to identify power loss or faults. Smart meters providing additional interval data within the hour would help utilities analyze and understand customer loads, facilitated by AI tools marketed by various companies.

Outage Management Systems (OMS)

Most utilities have an OMS that utilizes data from controllable switches and meters to reconfigure systems automatically or recommend switching orders to return to normal configurations. The OMS often works in conjunction with an ADMS, which uses SCADA systems for extensive data management, incorporating data from Distributed Energy Resources (DERs) and providing it to Distributed Energy Resource Management (DERMS) tools.

Virtual Power Plants (VPP)

Many entities have created VPPs, conglomerates of numerous customers creating virtual resources. These include customers allowing load control during peak times, grouping small solar or wind resources with BESS for extra utility. Combined with renewable resources, BESS, and controllable load, VPPs form versatile resources, requiring extensive communication points and data management for effective monitoring and control.

Future of the Distribution System

The distribution system of the future may exhibit varying load curves daily due to sun, wind, temperature, and market conditions. Feeder protection systems must adapt to manage resources larger than loads, with power flowing back to substations. Utilities might find it beneficial to have large BESS at transmission substations to act as buffers, smoothing out load shifts and easing transmission system management.

Comprehensive Monitoring Needs

While the transmission systems will continue to monitor substations, capacitor banks, and FACTS devices, adding BESS and advanced monitoring to handle unpredictable load curves, distribution systems must monitor, understand, and analyze a larger number of status and analog points from numerous sites, controlling more devices and issuing requests to numerous devices.

Market and Communication Integration

A market will mediate the costs of resources and loads participating in it, while working with regular loads not engaged in the market. Effective operation will require extensive communication points, high-speed data processing, and secure, corruption-free data exchange.

The Grid Edge

• Monitoring transmission and distribution facilities with intelligent measuring devices (e.g., detailed transformer monitoring, advanced line monitoring, real-time monitoring of important load/gen/BESS customers).
• Physical control: switchable line devices (breakers, smart grid switches), controllable load/gen/BESS sites.
• Utility requests: asking customers to adjust their load/gen/BESS, general requests for emergency assistance, potentially communicating directly with customers' smart controllers.
• Price Signals: sending customers distribution-level load/gen/BESS price signals.
• Transmission level: continued generation/substation/transmission monitoring with additional monitoring (e.g., using PMUs for power angle monitoring) to enable accurate instructions to Grid Forming inverters.

Control Centers:

• Increased communication connectivity to the system.
• Interaction with power markets and their price signals to predict power flow trends and load centers with more complex load profiles, learning from weather impacts on them.
• Intelligent power forecasts for wind/solar to manage changes in storage use and hydrogen generation.
• Monitoring IBR-based resources to determine fault current adequacy settings.
• Using existing power system monitoring tools like state estimation, Volt/Var system balancing, and contingency tools that account for Grid Forming inverters' responses to different system issues, and synchronous condensers.
• Rapidly responding to system contingencies with instructions to resources and loads within milliseconds.

Communications:

• Utilizing various telecom technologies for rapid data interchange, ensuring real-time data availability to all entities.
• Exchanging historical data like load, use, weather, and solar/wind patterns.

Overall, achieving effective Energy Transition goals requires a coordinated effort across all facets of the transmission and distribution systems, supported by advanced monitoring, AI integration, and robust communication infrastructure.

Acumen has a team of professionals dedicated to helping utilities create a path to enable the Energy Transition. Book a call today with experts from our Operations Technology team to better deal with the technological challenges of this once in a generation energy transition!

Critical infrastructure continues to emerge as a prime target for various types of cybersecurity breaches.

Between June and December, 2025, the widely used text editor Notepad++ became the focal point of a sophisticated supply chain attack ^[1][2]. Through communication with Notepad++'s previous hosting provider as well as help from security researchers, several network-based indicators have been discovered ^[3]. This was not a direct breach of the Notepad++ source code, but rather a compromise at the infrastructure level of its former shared hosting provider ^[4].

Investigative efforts by external experts and security firms like Kaspersky and Rapid7 have attributed the campaign with moderate confidence to state-sponsored threat actors. The campaign was highly selective, focusing on high-value organizations and specific individuals in regions including Vietnam, the Philippines, El Salvador, and Australia ^[5].

Understanding The Attack Vectors

The primary attack vector begins with the WinGup auto-updater component, allowing access to the hosting provider's environment. Attackers gained access to the shared hosting server and were able to intercept and redirect update traffic intended for the official Notepad ++ site. Even after regaining server control, the malicious actors maintained internal service credentials until December, allowing them to continue directing targeted users toward malicious update manifests ^[6]. These manifests served compromised versions of update.exe, which were often NSIS installers designed to deploy further malicious payloads.

The result of exploiting this initial attack vector allowed the attackers to utilize multiple infection chains that evolved over several months to maintain stealth.

One method involved DLL sideloading, where a renamed legitimate binary, such as the Bitdefender Submission Wizard, was used to load a malicious library named log.dll. This chain eventually executed a custom, feature-rich backdoor known as "Chrysalis" which provided the attackers with extensive control over infected systems ^[5:1].

A decomplication of malicious file alien.ini used to download malicious .dll files, provided by Kaspersky cybersecurity.

Other chains delivered Cobalt Strike Beacons via Metasploit downloaders, often hiding their activity by abusing old vulnerabilities in legitimate software or using undocumented system calls like Microsoft Warbird.

Why OT and Engineering Teams Should Care

Notepad++ is a common tool found in critical infrastructure, used for workstations in engineering, operations, maintenance, and jump host machines to reach OT networks.

A compromise on these systems is not merely a "desktop issue", these devices often host:

• Privileged Access to SCADA servers and SCADA historians
• Direct Connectivity to Programable logic Controllers, RTUs, IEDs, and plant networks
• Trusted status for critical change events and windows

A common misconception is that OT environments are not at risk due to their isolation from external traffic such as the internet. However, this incident highlights that actions such as manual software transfers are vulnerable.

In a typical workflow, an engineer downloads software or updates in the corporate IT environment, copies them to "approved" media or a staging share, and then physically brings them into the OT zone to run on an engineering workstation.

If the installer was poisoned on the IT side during the initial download, OT segmentation does not undo that risk. Instead, this process effectively carries malicious code straight through your defenses and executes it inside your most trusted zone.

Exploiting this weakness turned a simple text-editor into a sophisticated supply chain attack affecting various organizations around the world.

Indications of Compromise

Malicious Traffic Indicators

A simple starting point for your Security Operations Centre:

Please note that these Indicators of compromise may be outdated as this is a developing investigation. More technical information and IoCs can be found through Kaspersky Cybersecurity and Rapid7 Labs investigations.

The Consistent Looming Threat of Supply Chain Attacks

These events highlight the severe risks inherent in supply chain attacks, a more frequently occurring type of security incident. These types of attacks weaponize the trust between a software vendor and their various partners. These could be third-party components, service providers, or even vendor clients. By compromising the distribution infrastructure rather than the application code itself, attackers can bypass traditional security perimeters and deliver malware to targeted high-value systems under the guise of legitimate software updates.

The highly selective nature of this attack by targeting only a dozen machines out of millions of users makes it exceptionally difficult to detect. Attackers are capable of rapidly adapting their tools and infection chains to evade signature based detection. This level of persistence and stealth allows state-sponsored actors to maintain a foothold in critical sectors like government, finance, and telecommunications.

Course Correction: Notepad++'s Response

This security incident underscores that open communication and transparency between a software vendor and its third-party providers are essential for managing supply chain risks. In this case, Notepad++ actively facilitated direct communication between the third-party hosting provider and the external incident response (IR) team. Collaboration allows security experts to have the necessary access to investigate indications of compromise, and required mitigations.

In response to the discovery of this incident, Notepad++ took immediate steps to secure the project's infrastructure. The entirety of Notepad++ has been migrated to an entirely new service provider, which is stated by Notepad++ to have significantly stronger security practices.

To prevent future hijacking of the update process, the WinGup updater was enhanced in the most current release (8.8.9). Furthermore, starting with version v8.9.2, the update server began returning signed XML (XMLDSig) to ensure the integrity of the update manifests ^[7].

The release of Notepad++ v8.9.1 served as a critical security update, incorporating these enhancements to block the specific redirection tactics used by the attackers. This version also introduced a new option during the installation process that allows users to disable the auto-updater entirely if they prefer manual management ^[8].

msiexec /i npp.8.9.1.Installer.x64.msi NOUPDATER=1

Recommendations and Preventative Measures

As supply chain attacks become more frequent and harder to detect, the trust between software vendors and critical infrastructure must be stronger than it ever was before. Proactive defense is essential for maintaining operational resilience.

If your organization needs assistance with implementing the remediation steps discussed through supply chain management, firewall assessments and more, consider reaching out to our team.

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References

Electrical utilities play a pivotal role in this transition, as they hold the key to decarbonizing our energy systems. Our blog series titled "An Energy Transition Roadmap for Electrical Utilities" will explore the multiple facets that utilities must consider in the Energy Transition. This series of blogs will form a comprehensive guide discussing issues from various perspectives – including system level, technical, financial, operations and maintenance, cyber security, as well as the application of Artificial Intelligence to the Energy Transition.

Whether you're a utility executive, policy maker, or industry enthusiast, this roadmap will equip you with the insights needed to navigate the complexities of the energy transition and contribute to a greener planet.

Defining The Energy Transition

What is the Energy Transition? The goal of the Energy Transition is to move away from fossil fuel generation on the production side of the Bulk Electric System and work toward using electric power to replace the use of fossil fuels on the customer side, e.g. electric cars and ground source heat pumps.  

The ultimate Energy Transition goal for electric utilities is to have an electric power system that produces, on balance, zero or fewer Carbon Dioxide emissions from generation to customer. It allows for some emission producing resources (e.g. Natural Gas turbines for emergency use), as long as this is balanced by carbon capture and sequestration. For generation sources, this means producing almost all power using non-emitting resources that result in zero carbon dioxide production. Over time, producers of electric power will increasingly shift to non-emitting power production.

In parallel, customers will convert their processes from fossil fuel use to electricity use. For example:

1. Transportation moves from gasoline/diesel to electric vehicles
2. Space heating moves from natural gas and other fossil fuels to Air Source and Ground Source Heat Pumps
3. Industry moves from fossil fueled to electrified and hydrogen fueled processes
4. Restaurants and home/institutional kitchens move from gas cooking to electric cooking

 The energy transition presents several significant challenges. Chief among them is the need for power producers to move away from fossil fuels while greatly increasing non-fossil fuel energy production. This is necessary to meet the growing demand for electricity, as customers increasingly shift from fossil fuel-based processes to electric alternatives.

The Energy Transition Roadmap

An Energy Transition roadmap for an electric utility is to define rational and achievable objectives that enable the utility to transition away from fossil fuels by continually increasing its emission free generation as its customers move to all electric processes. 

 There are many dimensions to an Energy Transition plan:

• Dimension 1: The Power System Dimension -  Generation, Transmission & Distribution and Customers
• Dimension 2: Technical Dimension - Power System Monitoring and Control
• Dimension 3: Financial Dimension - Producers and Customers Market and Money Rules
• Dimension 4: Cyber Security Protection
• Dimension 5: AI Applications for the Energy Transition
• Dimension 6: The Details of an Energy Transition Roadmap

 The rest of this blog discusses Dimension 1. Future blogs will cover the other dimensions.

Dimension 1: The Power System Dimension

 Dimension 1 includes the following:

1. Electricity production and storage
2. Evolving customer electricity needs, including shifts in the technologies they use and how this can be controlled to assist the stability of the electric power system.
3. Changes to the transmission and distribution system to enable the electricity to flow from its sources to its customers, including electric power sources/storage at the transmission, distribution, and customer level. 

Dimension 1a: Electricity production and storage

 How do you get from your current resource mix to a non-emitting mix of generation and storage? There are a lot of organizations around the world that are actively pondering this question and coming up with many scenarios. Some of them only focus on ensuring there is enough power capacity without considering the reliability issues. One can easily build a production system that is non-emitting with enough capacity to provide enough electricity. However, the problem is that there are sometimes long periods of time when the wind isn’t blowing and the sun isn’t shining. There must be a mix of resources that are available and controllable to ensure that power is available when needed, and that there are backup resources available for contingencies. 

Most utilities currently have a mix of resources that involves some or all the following:

• Water power
• Fossil power
• Renewable resources (wind, solar, geothermal, wave)
• Nuclear
• Direct load/demand control
• Voluntary load/demand reduction
• Storage (Battery Energy Storage Systems or BESS, pumped water storage, other)
• Geothermal (in its beginning stages in most places, but California has 800 MW of it)
• Third party Virtual generators (that combine small renewables with customer load control and storage into a reliable capacity resource)

The following are emerging resources that are not yet available but are the focus of significant investment totalling billions of dollars:

• Hydrogen based generation – Some utilities are experimenting with a mix of natural gas and hydrogen at this time. The goal in future would be to have hydrogen made from renewable energy and stored for use in electric generation to provide power during intervals when the sun don’t shine and wind don’t blow. While the sun shines and the wind blows and there is too much generation, you make hydrogen and store it.
• Hydrogen would also be made for use in long distance trucking and for industrial high temperature processes.

There will also be a need for carbon sequestration facilities to not only remove carbon dioxide from the gas output of natural gas plants but to also remove it from the air. The article “Clearing The Air” in the November 2023 issue of National Geographic looks at many different approaches to removing carbon dioxide from the atmosphere and storing it somehow. Some of these systems are running on a smaller scale, but there are problems with them that are still being worked out.

Each utility needs to look at their current mix and envision what a future feasible mix would be, based on proposed plans, projections and industry research. The main objective is to plan for a resource mix that does not include fossil fuels, except as an emergency resource.

The second step is to look at what the projected costs would be for various scenarios of resource mixes. There are many BESS facilities in existence, so projecting costs for such facilities would not be difficult. Wind and solar can be easily costed. Nuclear power is in a transition phase where large plants are costing billions, and small modular plants are not yet built and working. The projected cost of those has gone up as well. Recent new Hydro facilities have also been very expensive.

There is much work being done and large sums of money being spent to figure out how to make it work.

Dimension 1b: Customer Load

Determining the amount of capacity that will be needed to support customer load is another facet of the future plan. There are many good methods for projecting load growth for normal customer activities. However, there are new uncertainties related to the conversion of customer fossil based loads to electric loads. There is some experience and efforts to estimate the resources needed to support electric transportation. There is also now research available that estimates the capacity needed for switching from fossil fuel heat to Air Source Heat Pumps (ASHP) or to Ground Source Heat Pumps (GSHP) (which are more expensive but require less electric capacity). The uncertainty lies in multi-unit residential buildings and commercial and industrial facilities. However, there are ways to estimate these.

The much larger challenge is planning how to replace the fossil fuel energy used in industrial and institutional processes with electric energy (e.g. electric Arc furnaces) or to use Hydrogen, which requires electric resources to produce. 

One of the goals of the customer estimate is to have a geographically based load and demand forecast. This may be more complex as more distribution customers add renewable resources, battery storage and load control. There are already many virtual power plants in existence using these resources at the distribution level. Virtual power plants can act like a production resource as well as a load control resource. This means that a feeder may have a forecastable load based on the customers’ electricity needs that should be considered the base load. This is the electric energy and maximum demand each customer will require when their Distributed Energy Resources (DERs), including generations sources, storage and controllable loads are not in service. The utility then must determine the capacity and location of DERs on the feeder. A given customer may have a maximum load consisting of their base load plus the load for charging their BESS when no other DERs are available. A customer’s minimum load would be their base load minus their DER supplied energy minus controllable load minus BESS discharging. The difference between maximum and minimum load could then be quite large. As customers electrify their transportation and add EV charging and electrified heating, this will greatly increase the load.

The main issue at the distribution level will be that the combination of load, renewable resources and BESS (large and small) will make it harder to predict the load profile over time. It may be relatively easy to project the peak loads and the valley loads, but how they vary over time will be complex. There may be market forces in place that send price signals that greatly vary how customers use their production and storage resources versus their own load. Cloudy days with no solar will likely mean higher loads, while sunny times may mean clients charge up their BESS and this may not result in lower loads. Many of the customers with renewables and BESS will participate in a Virtual Power Plant (VPP) that brings some discipline to how the customers will act.

In order to gain some control of the loads and resources, there will need to be a market that involves VPPs and complex customers not part of VPPs, as well as simple load-only customers (however, they may also have controllable loads). 

Dimension 1c: Transmission and Distribution

 For a long time, the power system consisted mostly of large power plants and some small ones outside of populated areas with transmission that connected from the plants to these areas. This power was then distributed to the loads in the populated areas. Now there may be many power resources away from the populated areas and many power resources within the populated areas.

There will be a need for many new transmission lines. Some of these will be for large renewable resources to transmit power a long way and may be DC transmission lines. There may be a need for trunk transmission lines around a large city to ensure that power can flow where it needs to. There will also be a need for BESS systems and perhaps synchronous condensers to provide for system stability.

Many customers are going to require an increase in the amount of electricity in order to replace the fossil fuels previously used. This may require upsizing the distribution system to handle the increased loads. However, it will also require handling two-way power flows within the distribution system. The distribution resources will consist of numerous small local solar facilities, some with local storage. There will also be controllable loads. Some distribution level industrial, commercial and institutional (ICI) facilities may have large controllable loads in addition to renewable facilities plus storage that can greatly affect the amount and direction of the local power flow.

The utility may need to upsize the substation transformers and customer transformers while greatly modifying the protection systems and safety procedures to handle the two-way flows. Subdivisions with electric cars, house charging facilities, and ASHPs may need upsized power cables. New subdivisions may be built with all houses having solar roofs, car chargers, ASHPs and local battery storage. Such houses may have large loads in winter when the sun isn’t shining, the battery isn’t charged while the ASHP is working, and the EVs are being charged.

Each distribution utility will also need to increase the capacity of each feeder to handle the maximum load and to have the flexibility to handle the minimum load and even two-way flows.

It will be harder to schedule generation resources when the load pattern is erratic or doesn’t follow a consistent pattern over the seasons. Markets may be put in place to smooth out the load. However, large amounts of storage may be able to smooth out the load enough to sustain grid reliability. One possible solution would be for every Transmission Substation to have a large Grid forming BESS (e.g. a storage resource that can support system reliability). This TS BESS would be used primarily to smooth out the distribution load profile while enabling the local distribution power market to function. The TS BESS would also be able to contribute to Grid reliability when there are contingencies (e.g. a system fault that means a large loss of generation or load) that affect the stability of the Transmission Grid. Grid operators will need to develop new approaches to responding to contingencies; having the TS BESS could be part of this.

The Energy Transition is not just an aspirational goal for electrical utilities—it's a critical imperative for the long term future of our planet. As we have outlined in this roadmap, the Energy Transition is complex and multifaceted, requiring a blend of innovative technologies, strategic planning, and collaborative efforts. For utilities ready to embark on this transformative journey, the right support and expertise are essential. Acumen specializes in guiding utilities through every step of the Energy Transition, from initial assessment and strategic planning to implementation and continuous improvement.

AI demise?, NERC Reliability, Behind the Meter

Energy Market Update Week 17, brought to you by Acumen.

Over the past year, you've needed to look no further than the pages of the WPO to read about some of the impact of Compute power on the electric grid be it capacity, grid reliability, market pricing, etc. Over the past month or so, the early euphoria in datacenter build and power needs has started to be muted or talked down. Well, as the great football coach and commentator Lee Corso often says, "not so fast my friends". Just when it seemed like every earnings call and research report coming from Wall St was discussing the slowing of AI and data centers, CNBC is reporting on comments from a Powering AI event held by the Hamm Institute for American Energy at Oklahoma State. Executive from both Nvidia and Amazon have said they don't see significant changes and there might have been some "tea leaf reading and extrapolating to strange results". Regardless of the near-term headlines, both are saying the future is AI which means power growth needs to keep up.

As an aside, the Hamm Institute was founded by Harold Hamm. Mr. Hamm is known as the founder of Continental Resources. While hydraulic fracking has been around for years, Hamm and Continental, are among a few given credit for innovating to current use. The Bakken in North Dakota is said to owe its growth the Hamm and fracking.

NERC and FERC released a joint report on the winter reliability of the grid for the 2025 season. The report is detailed and gives a lot of information on various topics ranging from natural gas pipeline performance to ISO load forecasting errors. We aren't going to do a deep dive on these pages but suggest a quick browse. If more interested in the conclusion.....

During the January 2025 arctic events, the natural gas and electric systems performed well, as measured by no manual load shed, and benefitted from improved practices and procedures. Nevertheless, both systems continue to see
challenges from the extreme cold weather conditions, exposing continued gaps.

Report | January 2025 Arctic Events A System Performance Review FERC, NERC, and its Regional Entities: A Joint Staff Report

Federal Energy Regulatory Commission

When speaking about electricity market long term potential drivers of volatility and demand, things like compute power, the just in time nature of natural gas, and future LNG usually make our list. While we've never really addressed it, maybe behind the meter generation needs to make the list. This week ISO-NE released data showing that Easter Sunday's sunny skies and mild temps drove demand for electricity to its lowest level ever.

Preliminary data shows that power system demand fell to 5,318 megawatts (MW) on the afternoon of April 20, 2025, as temperatures averaged 58°F across the region. This trend has been increasing as more behind the meter generation has come online. The ISO estimates a peak of around 6,600 MW of BTM PV production early Sunday.

New England grid sees new record low for system demand |

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Market Moves, Natural Gas Drivers

Energy Market Update Week 15, brought to you by Acumen.

The above announcement earlier in the week from EIA perfectly sums up this week.

Interestingly enough, when EIA did release the STEO this week, there were plenty of caveats about modeling on old data when it comes to economic outlooks. It's hard to blame them as the situation at best is....fluid.

When we speak about the electricity market, and it first derivative natural gas, we always speak broadly. For instance, if this happens, it's fair to assume this could happen. We know people love price targets and predictions, but to us, that's a losing game. Not to mention, if we were any good at it, we'd be ordering a Corona on a beach this morning before our daily massage and golf game having just divested from our billion-dollar hedge fund.

Rather than try to be market prognosticators, we are more interested in plans that are designed to take advantage of market movements, regardless of the driver. The chart below is a good example. This is the May contract for natural gas. Within the span of a month, you could have been a seller and a buyer and gotten your price target. Market commentary always has some weather commentary, maybe some storage (in fairness, we comment on storage a lot), and perhaps an oddball talking point. Over the last month, you could visit any trading desk that deals in natural gas or electricity, and not one trader would be able to tell you the 6-10 weather forecast....it just doesn't matter. We would argue, and it's just our guess, the mid-March rally was an unwind of the popular long oil/short gas trade. All the trader knows is he has buy tickets, more driven by margin clerks than meteorologists. Fast forward two weeks and the trader has sell tickets, again nothing to do with fundamentals, but a sell everything and get liquid trade from those holding natural gas contracts for speculation. So, if you have a price target in your plan and you're a buyer of natural gas, you can sit back, feel and look good just like Billy Ray and Lewis (must be of a certain age to get the reference).

Now that we've pooh-poohed fundamentals, let's take a look at a few things that have changed this week. In our conversations about what is going to drive gas pricing we talk about LNG and fungible markets, load growth which is mostly driven by compute power, and supply of gas. We aren't going to dive deep into all of these, but some things are worth mentioning.

The EIA STEO did come out this week and in their natural gas assumptions for 2025, they ramped up US consumption driven by exports as more LNG export capacity comes online quicker. Their demand number now stands at 116 Bcf/d led by growth in LNG. What isn't mentioned, and maybe worth at least noting, there have been some quiet mentions that trade deficits by some countries can be made up by importing US natural gas. If natural gas becomes a currency in trade disputes, it's possible the number could be higher.

A huge story for the last year has been load growth, specifically data centers. It's made gas and electric participants listen to investment conference calls of big tech. This week Microsoft announced they were "slowing or pausing" some of their data center construction. Specifically, a $1 billion dollar project that was slated for Ohio. While this may be temporary, there have been rumblings the datacenter build has gotten ahead of itself. We shall see.

Finally, each week EIA releases storage data, and as mentioned before, everyone comments on it and that includes us. Most market commentary concentrates on the demand side of the equation. We've tried to look at supply, because there is no doubt the US has plenty of gas, it's all about the price. As oil has been trading just north or south of $60, more and more reports of breakeven prices have emerged for producers. Right now, the consensus is $50 is the breakeven for fields like the Bakken in North Dakota and once the market gets around $45, a lot more fields come into play. This is relevant to gas as producers may shut down oil and gas production given the price. Supply/Demand.

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Tariffs and Natural Gas?, FERC 2222

Energy Market Update Week 14, brought to you by Acumen.

Welcome to the weekend. Not much to report this week as the news flow has been slow, reminiscent of a nice late summer week.

Ok, so some "stuff" happened. Over the last couple days, we've been asked about tariffs, electricity, and natural gas. Our response has gone something along the lines of, 'we aren't tariff experts, and frankly, anyone that claims to have a grasp right now is making it up as they go'. Obviously, there has been a lot of prognostication and comments over the last couple days. We try not to get caught up in every opinion and tend to let the markets give us insight. One of the most interesting things we've seen is the European gas market come off. As pointed out in this article by Reuters at the beginning of the week, Europe needs extra cargo to fill their storage this year after some winter draw downs. While this should be bullish, it was offset by the thought that the war might be ending, and Russian gas could be flowing by fall. After yesterday, adding to the narrative is if China and the US get into a big trade dispute, it would hurt China's gas demand making ample LNG available to Europe.

The US gas market has sold off today with the overall commodities market. European demand and the US ability to export LNG are the big talking points for bulls. It's fair to say those are all in wait and see mode now.

This week, FERC approved filings by two National Grid subsidiaries in MA to allow distribution fees for energy storage while participating in the ISO-NE wholesale markets through order 2222. The MA attorney general, and the Alliance for Climate Transition, filed an argument against. Their case basically said that asset owners should not be allowed to pass along fees to customers while also participating in the wholesale market's ancillary programs. They stated that FERC 841 exempts storage from being charged transmission fees when acting on ISO ancillary dispatch signals, so the reciprocal should be true for charging fees. FERC sided with National Grid saying that "rates reasonably reflect the costs of serving customers".

This is just another of the many issues FERC will be asked to clarify regarding order 2222. While the FERC approved, we found interesting Chairman Christie's response on X.

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Natural Gas, Grid Testimony, Eskom

Energy Market Update Week 13, brought to you by Acumen.

The EIA storage data reported an injection of 37 Bcf vs the estimates of 25 Bcf. There seemed to be some measured normalcy to the natural gas market this week after a lot of headlines and what we'd assumed was plenty of speculative money in the market. The May contract has rolled to the front month and this morning is trading well below $4 MMBtu.

As seen in the maps below, the weather forecasts are calling for a flip flop as the west looks colder than normal, while the east is looking at above average temps. It appears we are firmly in the shoulder season and markets are reflecting such.

This week, the Energy Subcommittee held a hearing titled Keeping the Light On: Examining the State of Regional Grid Reliability. Attached is the three-hour YouTube link should you not be a college basketball, baseball, or warm weather fan for the weekend.

If by chance, three hours is a bit much, perhaps we can help. Representatives from all seven RTOs were in attendance, and the PJM CEO Manu Asthana pretty much summed up the message, “I want to be clear, renewable generators play an important role and we want them to come onto the grid, but they are not a one-for-one substitute for the fossil fuel generators that we are replacing,”.

If you've followed us for a while here at the WPO, you know that every so often we add a little context into the US grid by posting some things from the South African utility, Eskom. We post these because some of them are kind of comical, but also to remind that running a utility is not easy. Eskom has plenty of issues we don't face in North America, and one of the biggest is the constant theft of plant and equipment. Imagine having to construct an email to ratepayers letting them know some time tomorrow the power will resume, if nothing else is stolen.

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Injection Season, Data Center Trip, Captive Gas

Energy Market Update Week 12, brought to you by Acumen.

The natural gas market has had an interesting few weeks as digestible data points have been flying in daily. European storage, on again off again US winter, LNG shipments being diverted because of demand, and market speculation have been just a few things hitting headlines.

Yesterday was the unofficial start of injection season as EIA data pointed to 9 Bcf of natural gas being injected into storage. The estimates had ranged from small injections to small withdrawals and the market took this as bearish. The April contract was trading well into the $4.20s per MMBtu and quickly headed to the $4 level. We aren't necessarily market prognosticators, but if we were, we'd be on the side of more news volatility ahead. That could provide opportunities for both buyers and sellers of electricity....so be ready.

Not a week goes by when we can't include a good data center story or some commentary on it. Compute power is here to stay so these stories are more and more relevant. This week, a story by Reuters was passed around plenty on social media. This story focuses on an event that got a little coverage last summer, but data centers were just starting to be daily headline makers, so the story was here and gone with little fanfare. The article gives a little insight into what happened last summer when a large swath of data centers went into protect mode as a voltage surge was detected following a defect in a surge protector. Roughly 1500 MW of electricity was suddenly left with nowhere to go forcing PJM to quickly shut down generation. The article states this "near miss" almost led to cascading power outages. A ERCOT incident is also mentioned which just points out what we already know, data centers are going to present a host of new challenges for generation and grid operators.

One of our discussion points on drivers for future market volatility has been the coming fungible nature of natural gas markets made possible by LNG. Basically, as gas becomes more able to find markets, cheap US domestic gas will find more lucrative world markets.

This week, one of RBN Energy's blogs gives us a look at this, sort of. As an aside, RBN Energy is a must subscribe as they put out fantastic free content. Anyway, the article linked talks about the price discrepancies of the Alberta natural gas relative to other North American markets. Basically, the Albertan gas is locked by a lack of pipelines able to move it. This is a microcosm of what the US market has been over the last decade plus as the market has been captive keeping prices low to the benefit of US domestic users, including electric generation. When reading the article, think of what might happen to the price of gas in Alberta if sufficient pipelines were constructed to get it to other markets. Now take that picture and insert US gas and LNG.

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EIA STEO REVIEW

Energy Market Update Week 11, brought to you by Acumen.

Every so often we get questions about why we are so keyed into natural gas as electricity folks. It's a good question and a reminder to explain. It's pretty simple, natural gas sets the marginal price for electricity almost all the time in every ISO. In short, when the ISOs price the day ahead electricity prices they start from cheapest to most expensive when meeting load expectations with generation. More times than not, natural gas units offered price to generate MWs establishes that equilibrium. That's why, as gas goes, electricity tends to follow.

Anyhoo. Let's get on to some natural gas conversation. Within the next reporting week, we will be wrapping up what is typically withdrawal season and heading back into injection, where natural gas storage is replenished. This week saw the EIA storage report show a withdrawal of 62 Bcf, which was above the 40 Bcf expectation. The 62 Bcf now puts us at the second highest cumulative withdrawal season in the last fifteen years, only behind the 13-14 polar vortex year.

This week EIA released their latest Short-Term Energy Outlook (STEO). Followers know we love this report as it has a lot of great information. With that, we are going to take a little shot at EIA this week. Their estimates on gas and electricity are moving like an old sell side bank analyst following a tech stock moving price targets daily. The chart below shows the updated Henry Hub spot price estimates against last October's winter outlook. To be fair, as we've touched on above, there has been a big draw down in storage. That said, EIA is taking their estimates from just a month ago for 2025 from $3.80 to $4.20 which is roughly an 11% increase which is pretty interesting for month over month.

As prices move higher, history has shown that natural gas supply tends to come online. The second chart below shows EIA production numbers ramping. Some of this is explained with LNG exports along with domestic demand.

EIA also does some forecasting work on electricity consumption. As shown below, they care calling for an increase to C&I, while residential stays flat to trending down next year. The explanation for residential is basically winter won't be as harsh next year and return to normal. As would be expected given all the talk, C&I is a lot of data center talk.

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Natural Gas Rally, Data Center Rates, Tariffs

Energy Market Update Week 10, brought to you by Acumen.

Another winter storm has come and gone and spring feels like it might be springing as we head into moving our clocks ahead. If you look at the price of natural gas and electricity, it might look more like November with a brutal winter ahead.

As shown below, electricity futures continue to move higher as natural gas has continued its rally. As we have been noting, the natural gas domestic fundamentals have been shifting from ample storage supplies to below trend as we head into the build season. Throw in some tariff uncertainty and the market has caught a bid and settled above $4 MMBtu. Interestingly enough, the EU fundamentals have turned a bit. This week EU gas fell to a four-month low on the back of a possible peace deal, weak Asian demand allowing LNG to find a home in Europe, and some consideration of storage requirements being eased. We've seen in the past where the market in Europe can drive the US market, which makes keeping an eye on Europe a must.

One of the things we talk about from time to time is how speculative money can find its way into the gas market. Over the years, a very popular trade has been long oil and short gas. We aren't saying that is playing out right now, but the inverse market direction of the two is worth nothing. In the past, when we've seen these unwinds, it can get a little extreme for a bit as the market tends to extract the most pain, especially when leverage is funding the trades. Stay tuned

AI's load growth, and potential profit growth, for utilities has already bumped up against outcries from legacy ratepayers about funding the growth. Already there have been cases in front of FERC being asked to comment or rule on some of these issues. Utilities are trying to navigate the waters of new tariffs as it pertains to data centers.

This week, Ari Peskoe and Eliza Martin presented a paper on this topic. Instead of trying to give a book report, we are including the link and, while not everyone will agree with all the methodology, it's worth the time.

Speaking of tariffs, there appears to be some back and forth between ISO-NE, NYISO, and Canada. Canada has threatened some roll back of exports while the US ISOs claim they have enough supply. Ultimately this probably gets worked out as the Canadian exports are hydro and they can't just store the MWs out back in the parking lot. That said, this could get interesting as the conversations move forward.

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Gas Pullback, Coal Plant Life Extended, Datacenter Drama

Energy Market Update Week 9, brought to you by Acumen.

The EIA natural gas storage report didn't disappoint as 261 Bcf was pulled in the week ending February 21. This was right in the middle of estimates and has now put the lower half of the 5-year minimum for gas storage within in a pitching wedge. Last year that this time, gas levels were setting the top end of the 5-year historical range. Natural gas has pulled back from overbought levels as the concern for early March cold has faded with below normal temperatures still possible, but another ice bowl unlikely.

Wednesday PJM put out a press release talking about how the board has approved new transmission to support reliability. Buried toward the bottom of the note was this tidbit. PJM revised the cost to shut down Talen owned Brandon Shores coal and oil plant in Maryland. Interestingly, the cost is going from roughly $740 million to $1.5 billion. The plants were scheduled to shut down this spring, but have been given new life to the end of the decade. According to a Power Magazine article earlier this year, Talen will be guaranteed $180 million a year in fees. These included negotiated and extended capacity payments.

This plan needs to be approved by FERC, which should make for some interesting debate.

When we started the WPO a few years back, we were aware that compute power was a thing and that its growth was inevitable. That said, we have to admit that a Wall Street analyst commenting on Microsoft's data center spend, and the company's response would be front page news stuff for the electricity world was on our bingo card.

Monday, the semiconductor analyst team at TD Cowen released a note talking about some lease cancelations by Microsoft and other possible scale backs related to datacenters. Microsoft hit the finTV airwaves to let everyone know that wasn't the case and all was normal. By the time the dust settled, Microsoft's message was something along the line of, 'we aren't reducing datacenter spend, we might just move it around to different projects.'.

Wednesday night, Nvidia cleared it all up for us. They released numbers for 1Q25 with datacenter revenue of $22 billion. That was a 23% rise from the previous quarter and 427% from the same quarter last year. For now, it appears datacenter spend is alive.

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More Cold?, FERC Data Center, FERC Capacity

Energy Market Update Week 8, brought to you by Acumen.

The recent, winter isn't over just yet, event swap across the mid and eastern US this week sending Day-Ahead electricity prices soaring. As seen below, there were plenty of triple digit prices this week for on and off peak.

Natural gas also reacted to the weather as some early rumblings of another round of polar vortex was imminent for the beginning of March. That chatter has slowly faded, and looking at the 10-day forecast, it seems like we are back to more normal conditions. There are still some models that are showing colder temps a little further out.

The EIA storage report showed a draw of 196 Bcf. This puts storage at 386 Bcf below last year and 118 Bcf below the 5-year average. If we do get another cold spell, we will dig into the number a little further as we start build season.

As mentioned above, some models are showing a quick warm up followed by another cold snap in March. Natural gas futures are reacting to that as the big move higher has held its ground after some profit taking yesterday. While the weather may be holding futures higher, there does seem to be a whiff of speculation in the market as the commodity markets continue to spin money from one resource to the next.

This week was a big FERC and we could have dedicated the whole WPO to it. Instead, we will just point out a couple of interesting things. Yesterday, FERC released action on co-location of data centers in PJM, meaning they have voted to launch a review of some of the issues associated with data centers on sight. This became a topic late last year as transmission arguments arose about who and how to pay. Chairman Christie stated, “Co-location arrangements are a fairly new phenomenon that entail huge ramifications for grid reliability and consumer costs. Given these ramifications, the Commission truly needs to ‘get it right’ when it comes to evaluating co-location issues.”    

Also, FERC announced they will host a technical conference in June to address resource adequacy in RTOs. This has been a big concern of Chairman Christie over the years as he has argued for more transitional planning along with renewables. FERC commented that "issues to be explored" include:  "current and impending risks to resource adequacy; the efficiency and effectiveness of capacity markets in ensuring resource adequacy at just and reasonable costs; design and performance comparisons between capacity markets and alternative resource adequacy constructs; and states’ desired role in managing resource adequacy.".

This statement should not be taken lightly. Given the issue of capacity in some of the ISO's, particularly PJM, this is a biggie. As we recall, ISOs and their market monitors have been at odds over the years on capacity and it might be fair to characterize FERCs involvement as all bets are off and options are on the table.

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Winter is Alive, EIA STEO, Baseball is Back!

Energy Market Update Week 7, brought to you by Acumen.

Here we go again! Pitchers and catchers are reporting so here comes spring? While the afternoon commute is no longer in the dark, the calendar still does read February.

ISO alerts are already pinging for cold weather heading our way next week. PJM has already called for conservative operations along with cold weather alerts. This one looks to be a multiple day event in the middle of the week when loads are highest.

March natural gas futures have jumped from around $3/MMBtu at the start of the month to $3.75 as the forecast has drawn the cold further south. The EIA storage report for the week ended February 7th, showed a withdrawal of 100 Bcf, which was higher than the 90 Bcf estimates. This is the third week in a row that showed a higher draw than estimated. As the chart shows below, storage levels are now working below the 5-year average as we head into what should be another big week.

Speaking of natural gas, this week EIA released their monthly short-term energy outlook. There are a couple interesting data points in their forecast in the charts below. As shown in the first chart, the expectation is for storage heading into next winter will be substantially lower than this year. Ironically, according to the bottom chart, the forecast for natural gas driven electricity generation is expected to be lower. This is based on pricing as EIA sees 2026 prices for natural gas rising to $4.20/MMBtu. They are also taking their 2025 price target to $3.80/MMBtu. This is an increase to estimates of $0.65/MMBtu from the month-old January report. That's almost Wall Street tech stock price target moving.

As mentioned above, the annual spring rebirth is upon us as pitchers and catchers reported this week. It might be cold, it might be overcast with snow flying in our back yards but take heart. Somewhere beer is cold, grass is freshly mowed, and the cracking of leather on leather, and leather on wood is almost here!

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Nat Gas, Plans for Headline Risk, Gold

Energy Market Update Week 6, brought to you by Acumen.

Natural gas had another rollercoaster week ending pretty much where we started. Electricity futures have followed the ride as they pointed higher to start the week as a new chill was in the air....maybe Phil from PA? Gas headlines were a mixture of bullish and bearish headlines as colder forecasts were offset by higher production with a bit of higher LNG export forecasted.

After the previous week delivered a big drawdown, this week's EIA data representing the week ending January 31, showed a withdrawal of 174 Bcf which was slightly higher than expectations. Storage has now dipped below the 5-year average as we finish out winter. This shouldn't be too alarming given the production numbers, but more cold weather with larger withdrawals will get some attention.

This week we had more than a couple headline grabbing questions on tariffs, department cuts, and even some European law. We were presented with Canadian oil pipeline maps, ISO statements, and LNG shipping prices, all with a "what do you think?".

Our response, as always with this sort of thing, "yup, those are interesting". We don't mean to be flippant, and we do have some thoughts, but if you've followed us for any period of time you know our response is something like, "if we knew, we'd be running a 5x30 (5% management fee, 30% of profits) hedge fund and be happy to send you the onboarding papers.".

Given the barrage of news this week, it might be a good time for a refresher. Obviously, we have thoughts and opinions on news and market reactions, but we've always been way more interested in controlling risks through hedging or procurement plans. In our opinion, it's always been way more productive to plan for how we would react for a given market move, instead of trying to predict the move. In our opinion, planning risk tolerance, time and volume allotment, and budget strategy within given market moves is a better use of time than trying to figure out what happens at EPA if 250 positions are eliminated. We know this isn't easy, and someone will say the ole Mike Tyson, "everyone has a plan until they get punched in the face.". Our response to that is always the same, if you got into the ring without the possibility of Mike Tyson punching you in the face, it's a bad plan.

Staying on topic, sort of....One of our pillars of energy volatility when we speak on the subject, is investor/trading speculation. For us in the electricity world, this usually shows up in the natural gas market. Sometimes moves in the market have nothing to do with fundamentals and everything to do with speculative actions. Over the past couple weeks, we've been seeing an example of this in gold. Gold isn't in our day-to-day electricity lexicon, but it's worth looking at for context of what can happen in commodities markets which includes natural gas.

According to the FT, borrow rates for gold on the London exchange have reached annualized levels of 10% instead of the normal 2% and lower. What does that mean? Let's say you borrowed gold to short $10,000 worth and held the position for a year. Regardless of the price of gold, you would owe $1000 just to hold the position. Now imagine if you borrowed money, leveraged, to place this trade. That means you have a finance cost on top of borrow cost and somewhere a margin clerk with two eyes laser focused on you. The fact that the borrow cost is 10% is the proof that there is a scarcity of gold to borrow, probably because lots of folks have the same trade on....you see where this is going? Over the past month, the most stable commodity in terms of trading range has moved 10% which is nothing for a semiconductor stock, but huge for gold. Over speculated positions with leverage can lead to one-way trades. Remember the old commodity trader saying, the market can remain irrational longer than you can stay solvent.

The title of our weekly publication isn't the Weekly Goldbug, so this isn't meant to be any call on gold. This is another look of what can drive prices and how having a hedging plan in place can keep your emotion out, or at least in check, of plan execution. Somewhere someone needing to be long gold isn't chasing the market, and conversely, someone has some gold to sell at these levels. All according to, or because of their plan.

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Winter is Over!, PJM Load, ISO Cold Weather

Energy Market Update Week 5, brought to you by Acumen.

This Sunday, the most famous prognosticator of the likelihood of winter continuing will take center stage, sniff the air, and take a bow while grown men in capes and top hates debate about a shadow....

Well, we are here to declare winter OVER! using an arguably more nuanced and aggregated method. Thank you, natural gas for the update....

This week the natural gas futures market rolled over to make March the front month. Above is the March chart showing the impressive rollover. Thursday EIA reported a 321 Bcf withdrawal during the cold spell last week. This was in line with expectations and the market quickly went back to supply fundamentals which continue to be strong. Looking at electricity prices below, there is ample red week over week as weather moderated.

Oh baby! PJM

There is no question we are not above the occasional congratulations slap on the back, so here goes! Over the course of the last two years, we've been invited to speak on the state of the electricity market on multiple occasions regarding, and noted on these pages, the changing electricity landscape and potential volatility. We have been consistent on saying don't worry about net-zero (doesn't make sense economically), don't be concerned about EV load ($110k for electric Silverado, good luck), and no need to worry about electrify everything (doesn't make sense). Two of the biggest drivers for us have been LNG potential to make natural gas markets around the world fungible, and compute power.

This week, PJM released their 2025 Long-Term Load Forecast and, clear throat here, H-O-L-Y cow! The PJM press release is worth the read, and as expected AI is the primary reason for some increased projections, but take a look at the middle and right-hand columns below, that's a revision from just a year ago on summer and winter peaks.

As an aside, given the above information, it might be of note that this week the P (Pennsylvania) in PJM reached an agreement with the ISO to set a limit on capacity in the next two auctions. As might be expected, other states are jumping on as well. This statement might be a bit controversial, but a load growth that seems to be exponential and price caps on the mechanism to incentivize new generation might not be setting up for the best outcome.

Last week we included posts from some of the ISOs announcing they'd made it through the first real big winter storm/cold of the year. We thought it only fair to share PJM's slap on the back post as well. In fairness to them, at press time last week, they were still working through the last of the storm. Here you go PJM, here's to you pulling through also.

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