Less than Zero: Renewables Push California Energy Prices Down

May 15, 2017

Utility Dive:

  • California wholesale power prices fell 9% in 2016 to rest at $34/MWh, spurred by a decline in natural gas prices, improved hydropower conditions, and about 1,900 MW of new peak summer generating capacity from solar resources, according to California ISO’s market monitor report released earlier this week.

The ongoing bout of negative pricing events this spring is partially due to seasonal influences, like low demand and higher hydro generation, California stakeholders told Utility Dive, but the market monitor report shows the underlying conditions of low gas prices and increased renewables pushed down market prices throughout 2016 as well.

Renewable generation, excluding hydropower, accounted for 20% of total CAISO power supply in 2016, the report notes.

“Renewable generation increased significantly in 2016 and is expected to continue to increase in the future. This will continue to drive the need for market and operational mechanisms to increase flexibility of resource schedules and ramping capability,” said Eric Hildebrandt, Director of Market Monitoring, in a statement.

Expansion of the Western Energy Imbalance Market, particularly adding Nevada utility NV Energy, helped boost the efficiency of dispatching generation and manage the intermittency of wind and solar on the grid, the market monitor noted.

Natural gas continues to be the primary resource on the grid, serving 32% of load. Even so, that number dropped from 40% in 2015, reflecting more wind, solar and hydro.

Utility Dive:

The dynamic is not new — negative pricing has occurred sporadically across the country for decades. But now, expanded renewable energy production, especially in the West, is prompting a new round of more consistent negative pricing.

“Negative pricing is driven by a hard-to-fathom dynamic in any efficient market,” said Jeff Bladen, the Market Services Executive Director for the Midcontinent Independent System Operator (MISO). “At times, it is more efficient for energy producers to give energy away free or even pay consumers to take their power plants’ generation than to curtail production because the shutdown and startup of the plant may cost them more.”

To counteract overproduction and negative pricing, grid operators can order the curtailment of utility generation, thermal or renewable.

The negative pricing threatens market revenues for traditional generators, sparking concern from some that flexible gas plants needed to balance out wind and solar production may have to shut down, as the La Paloma plant did last year. Combined with the desire to maximize renewable energy output lost output of renewable energy to curtailment, the concerns have policymakers discussing ambitious market fixes to keep power prices in the black.

Enbala Power Networks:

What exactly is curtailment? The National Renewable Energy Lab (NREL) defines it as “reduction in the output of a generator from what it could otherwise produce given available resources, typically on an involuntary basis. NREL’s report titled Wind and Solar Energy Curtailment: Experience and Practices in the United States notes that, “Curtailment of wind and solar resources typically occurs because of transmission congestion or lack of transmission access, but it can also occur for reasons such as excess generation during low load periods that could cause baseload generators to reach minimum generation thresholds because of voltage or interconnection issues or to maintain frequency.”

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2 Responses to “Less than Zero: Renewables Push California Energy Prices Down”

  1. peterangelo Says:

    Sorry, using the Less then Zero Meme is a very poor choice, a movie about drugged out (millennials of their day) where one dies is not appropriate. I think you could have chosen better on this one.


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