SPP: Expanding wind energy, cheap natural gas tamps down power prices
A rise in wind power, combined with sustained low gas prices, has sent power prices on the SPP grid spiraling in the last two years.
“The lengthy decline in gas costs continues to have a major impact on energy markets,” according to a report from the grid operator’s market monitor. “Historically gas prices and Real-Time prices have been highly correlated in SPP. Workably competitive markets should experience highly correlated gas costs and energy prices in general.”
The average gas cost at the Panhandle Hub this spring was $1.68/MMBtu, compared to $2.46/MMBtu in spring 2015 and $4.66/MMBtu in spring 2014.
Additionally, “the three months of the spring 2016 season saw the lowest percentage of generation by coal resources since the start of organized markets in Southwest Power Pool in 2007,” the monitor reported. Coal generation is now roughly 40% of the grid’s power, down from 65% 2007, the first year SPP operated as an organized market.
Wind generation continues to increase, and accounted for over 20% of all energy produced in February, March and April of this year, and almost 19% in May.
“In total, wind accounted for 21.5% of all energy produced in Spring 2016, compared to 15% in Spring 2015,” the report said. “As has been the pattern the last several months, most congestion in the SPP
footprint can be found in the “wind alley” of the Texas panhandle, western Oklahoma and western Kansas. Cleared virtual transactions continue to increase and are now close to the
typical level experienced in other markets at about 10% of reported load.”