West Tracker: Higher gas prices drive up power prices, despite milder weather

Higher natural gas prices drove up US Western wholesale spot power prices an average of 63% year on year in November despite lower demand and milder weather, as winter power forwards are about double year-ago packages on higher gas forwards.

California Independent System Operator peakload dropped 12% year on year to average 27.923 GW in November, according to CAISO data. CAISO population-weighted average temperatures were 60.8 degrees Fahrenheit, up 6.6% year on year, leading heating degree days to be 32.5% lower than a year ago and 29% lower than normal, according to CustomWeather data.

Bonneville Power Administration peakload was little changed year on year, averaging 6.55 GW, according to BPA data. Population-weighted average temperatures were 6% higher than normal at 47.3 F leading heating degree days to be16.3% below normal, according to CustomWeather data.

Spot prices

Higher gas prices continued to drive up power prices.

NP15 on-peak day-ahead location marginal prices averaged $60.61/MWh for November, up 50.2% year on year, while on-peak real-time LMP climbed 61.7% to average $53.57/MWh, according to CAISO data.

On-peak day-ahead LMPs reached as high as $76.67/MWh on Nov. 1 as solar generation dipped to 9.6% of the total fuel mix, down 5 percentage points day on day, leading gas generation to climb nearly 10 points on the day to 47.7% of the mix, the highest level during the month, according to CAISO data.

PG&E city-gate spot gas jumped 59.3% year on year to average $6.080/MMBtu in November, according to S&P Global pricing data.

Mid-C hourly on-peak prices averaged $46/MWh in November, 66.7% higher year on year, according to Platts pricing data.

Generation mix changes

Thermal generation decreased about 2 percentage points year on year but still led the generation stack with an average of 36.2% of the total fuel mix for November, according to CAISO data. Gas generation dipped as low as 26.4% of the mix Nov. 28 as imports reached a 10-month high of 34.8%.

Overall, imports slipped 2.3 points year on year to average 25.2% of the mix in November. November imports peaked at 10.774 GW at 8:38 pm PT Nov. 30, according to CAISO's latest Key Statistics report. The all-time imports peak record is 11.894 GW reached Sept. 21, 2019.

Solar-powered generation increased 1.3 points year on year to average 13.1% of the total fuel mix in November. November solar peaked at 11.323 MW at 11:04 am PT Nov. 5, according to CAISO's latest Key Statistics report. The all-time solar peak record is 13.205 GW reached May 21. Solar accounts for 58% of CAISO's total installed renewable resources.

CAISO has added 1 GW of solar this year and anticipates adding another 2.2 GW by June 2022, CAISO President and CEO Elliot Mainzer said Dec. 9.

Forwards

Power forwards continued to trend higher as the six- to10-day forecast indicated below-normal temperatures are more probable, according to the US National Weather Service. The three-month outlook shows mixed temperature probabilities in the West.

Mid-C on-peak November rolled off the curve at $56.50/MWh, 53.3% above where the 2020 package ended last year, according to Platts data. The January package is currently in the mid-$60s/MWh, 87% above its 2021 counterpart a year ago after averaging 107.4% higher in November trading. On-peak February is in the upper $50s/MWh, 81% higher.

Palo Verde on-peak January is currently in the mid-$50s/MWh, 75% above the 2021 package last year after averaging 104% higher in November trading. On-peak February is currently in the upper $40s/MWh, 59% above where its 2021 counterpart was a year ago.