US West power hubs find record highs as heat wave boosts power demand

Houston — US Western power prices could set back-to-back record highs on continued record-breaking temperatures driving up power demand and leading to threats of power outages, as the California Independent System Operator footprint remains under a flex alert and restricted maintenance operations.

Cal-ISO is on restricted maintenance operations through Aug. 21 and a flex alert for 3-10 pm PT each day through Aug. 19. A flex alert urges consumers to voluntarily conserve energy when power demand could outstrip supply, while restricted maintenance operations require generators and transmission operators to postpone any planned outages for routine equipment maintenance, ensuring all grid assets are available for use.

"California's record-breaking heat wave has put extraordinary strain on the ISO electric system, as air conditioners are working harder and longer to keep spaces cool during the high temperatures," the ISO said in a statement late Aug. 17.

Power prices reach record highs

Palo Verde on-peak day-ahead for Aug. 19 delivery traded near $1,650/MWh on the Intercontinental Exchange Aug. 18, a day-on-day jump of more than $330 from the record high of $1,310.56/MW reached for Aug. 18 delivery, according to S&P Global Platts pricing data.

SP15 on-peak day-ahead for Aug. 19 delivery traded at just under $500/MWh on ICE, a day-on-day drop of nearly $200 from the record high SP15 on-peak LMP of $697.91/MWh reached for Aug. 18 delivery, according to ISO data.

Likewise, NP15 on-peak day-ahead traded around $225/MWh on ICE, a drop of more than $165 from the previous settlement.

Near-term packages showed continued strength.

SP15 on-peak balance of-the-week was bid at $125/MWh and offered at $325/MWh in ICE, compared to the previous settlement of $300/MWh.

Likewise, balance-of-the-month packages were trending higher as the six- to 10-day CustomWeather forecast indicated continued above-normal temperatures forecast.

SP15 on-peak bal-month was bid at $200/MWh and offered at $290/MWh on ICE, compared with the previous settlement of $270/MWh, while NP15 on-peak bal-month was bid at $135/MWh and offered at $250/MWh, compared to the previous settlement of $233.89/MWh on ICE.

Palo Verde on-peak bal-month was bid at $425/MWh and offered at $790/MWh, well above the previous settlement of $370.20/MWh on ICE, as Mid-C on-peak bal-month traded in the low $90s/MWh, a more than $10 jump from the previous settlement on ICE.

Meanwhile, power forwards showed signs of leveling off with temperatures forecast to gradually weaken in the coming days, according to the US National Weather Service.

SP15 on-peak September traded in the mid-$60s/MWh on ICE, steady day on day.

Palo Verde on-peak September traded in the mid-$80s/MWh on ICE, more than $10 above the previous settlement.

High temperatures driving up demand

High temperatures will soar well beyond the century mark, with many locations surpassing 110 degrees Fahrenheit in the US Southwest, and isolated spots exceeding 120 degrees Aug. 18, according to the National Weather Service. Hot and dry conditions will lead to elevated fire danger, especially for the interior northwestern US where lightning strikes associated with isolated afternoon and evening thunderstorms could ignite wildfires.

"Because of high heat and limited energy supplies, rotating power outages still are likely over the next two days," an ISO news release said .

Cal-ISO forecast peakload at 50.5 GW Aug. 18, which would set a new all-time peakload record, with the forecast easing to around 48.8 GW Aug. 19, which is still above the summer peak forecast of 45.907 GW that the ISO announced before the season started. Peakload is forecast to fall near 45.7 GW Aug. 20 and 45 GW Aug. 21, according to ISO data.

The all-time peakload record is 50.27 GW, reached July 24, 2006.

Further escalating the situation, solar and wind generation has been weak in recent days as the Cal-ISO grid needs more power to meet the demand on the system from prolonged above-normal temperatures across the region.

Solar generation averaged 3.4 GW over Aug. 13-17, 25% lower than the Aug. 1-12 average, while wind generation averaged 994 MW over Aug. 12-17, 60% lower than the Aug. 1-13 average.

Solar generation is forecast to average 3.9 GW Aug. 18-22, while wind generation is forecast to average 2.2 GW during the same time, according to Cal-ISO data.

ISO takes additional measures

The ISO is soliciting any available capacity using its Capacity Procurement Mechanism authority in order to address system needs caused by the current heat wave, according to an ISO notice. Scheduling coordinators with available capacity not offered into the intra-monthly CPM competitive solicitation process should immediately contact the ISO if they will accept a 30-day CPM designation at the soft offer cap of $6.31/kW-month.

In addition, the Cal-ISO suspended convergence bidding for trading day Aug. 19, temporarily halting the ability of all scheduling coordinators to submit virtual bids

"As a result of the record breaking heat wave that has led to load curtailments, the California ISO has determined that convergence bidding is detrimentally effecting the ISO's ability to maintain reliable grid operations," the ISO notice said .

Background

The ISO declared a stage 2 emergency Aug. 17 with expectations of having to implement rotating outages to take strain off the system. Power outages of up to 1.5 GW were anticipated between 6-7 pm PT. However, demand came in lower than forecast, which the ISO credits to conservation efforts and cloud cover, and the stage 2 emergency was cancelled at 7:30 pm PT Aug. 17 without the need for power outages, according to the ISO.

For the first time since 2001, Cal-ISO ordered utilities to implement rotating power outages Aug. 14 and Aug. 15 as part of a stage 3 emergency to protect grid stability after the unexpected loss of power generation.

California Governor Gavin Newsom issued a state of emergency proclamation Aug. 14 due to the extreme heat event leading to power outages. It is set to run through Aug. 20.

The ISO first noticed the developing situation a week ago and started issuing notices to the market to return any power that was offline and reschedule any work that would take generation offline.

A stage 2 emergency occurs when the ISO has taken all mitigating actions and is no longer able to provide its expected energy requirements. It requires ISO intervention in the market, such as ordering power plants online.

A stage 3 emergency means the ISO is unable to meet minimum contingency reserve requirements and load interruption is imminent or in progress. Utilities are notified of potential electricity interruptions.

The Sacramento Municipal Utility District is also asking customers to limit electricity usage during the heatwave to avoid power shortfalls, especially from 1-9 pm PT. As a member of the Balancing Authority of Northern California, SMUD is not required to participate in rotating outages ordered by Cal-ISO.