Some US power prices higher than last year as summer approaches
The North American power pricing team takes a coast-to-coast look at the US electric power landscape, including forecast demand, generating capacity and prices for ERCOT, Cal-ISO and the PJM Interconnection. Kassia Micek, Charles Noh and Jeff Zhou evaluate how the power markets are shaping up as hot weather and high demand start to set in.
Some US power prices higher than last year as summer approaches
KASSIA: Renewables are clouding the West, Texas demand is soaring, and the largest US grid operator appears to have ample generation as things start to heat up for summer.
Welcome to the Commodities Spotlight Podcast from S&P Global Platts. I’m Kassia Micek, with the Platts North American power pricing team, based out of the Platts Houston office. And I’m joined by my two colleagues.
CHARLES: I’m Charles Noh, with the Platts North American power pricing team in Houston.
JEFF: And I’m Jeff Zhou, also based in the Plats Houston office and covering North American power prices.
KASSIA: Today, we’re going to discuss how the US power markets are shaping up for summer. We’ll start in Texas and if everyone remembers last summer, it was hot and demand soared. So Jeff, how’s Texas looking this year?
JEFF: Well, down here in Texas, this year could be much like last year as we could see another year of soaring electricity demand.
ERCOT, which manages about 90% of the state’s electric load, recently put out its summer outlook which called for power demand near 73 GW.
If ERCOT reaches this level, it would beat the previous record set last summer on August 11 by 2 GW.
CHARLES: So what about generation resources? Does the market have enough capacity?
JEFF: Barring any outages, the Texas grid operator expects to have plenty of generation capacity to meet summer cooling needs.
Total available generation capacity, according to ERCOT, is estimated at nearly 82 GW, leaving the reserve capacity at around 9 GW.
Even under the most extreme scenario, ERCOT expects capacity to still exceed demand by around 2 GW.
CHARLES: What does this all mean for prices? How is the ERCOT market shaping up ahead of the heat?
JEFF: ERCOT North Hub July-August on-peak power package prices have averaged in the low $50s/MWh this month.
This is well above where spot markets were valued last summer.
KASSIA: Besides the anticipation of strong demand, any other factors influencing power prices?
JEFF: Yes, putting some upward pressure on power prices appears to be a rise in the natural gas markets.
CHARLES: Now let’s shift from the Lone Star state to the Wild West. Kassia, what are you seeing in the California market?
KASSIA: In the West this year, winter precipitation set up sizeable mountain snowpack, which should to translate into strong hydro generation throughout summer.
So far this year, we have seen near record levels for hydro generation in parts of the west.
JEFF: What is that doing to power prices?
KASSIA: The strong hydro generation, combined with the renewables buildout in the region, has been weighing on wholesale power prices. California on-peak June and July packages month to date are below where day-ahead prices were for those months last year.
https://www.platts.com/podcasts-detail/spotlight/2017/may/us-summer-electric-power-markets-052317
