Strong El Niño expected to snuff out solar, drive up wholesale power prices

Higher wholesale power prices are likely this winter in the California Independent System Operator footprint and Desert Southwest due to the strong El Niño weather forecast.

Typically, El Niño creates wetter weather in the Southern US and drier weather in the North. This year's strong El Niño conditions indicate above-normal temperatures across the US for the winter season, Amperon chief meteorologist Mark Shipham said Oct. 22 during the company's 2026-2027 Winter Weather Outlook webinar. It could be a record mild winter for temperatures, he added.

"We are in a record, historically strong El Niño," Shipham said. "That's going to imply a tremendous volatility."

Some areas may receive significant rainfall, such as Southern California, while other areas may see continued or worsening drought conditions, such as the Pacific Northwest.

"This El Niño is so strong it's overpowering everything else, so it'll be very hard for any strong, Arctic air to come down," Shipham said.

Western market expectations

In anticipation of the strong El Niño, California Governor Gavin Newsom declared a state of emergency for vulnerable regions ahead of the winter season.

"They are taking this as a serious threat and prioritizing any flood control or landslide mitigation," Amperon senior solutions consultant Arianna Goldstein said. "Areas are preparing for the worst. This region is not necessarily meant to have all of that rain at once."

Persistent cloud cover from the strong El Niño could reduce solar generation across CAISO's SP15 trading hub region, with lower solar output easing midday congestion while pushing midday locational marginal prices higher, she added.

"With less solar generation possibly expected, we could see higher LMPs this year throughout the midday times because we could see more gas burn then normal," Goldstein said. "Batteries aren't even going to be charging as much throughout the midday as a lot of that generation is going to be going to the grid instead of a lot of excess energy. So, just a risk there for the grid as we could see some higher prices, possibly in the Desert Southwest, CAISO region, especially across the midday hours. So, lots of volatility and risk going into this winter for different reasons."

Market impacts

In power forwards, Platts M2MS SP15 on-peak January 2027 has averaged about $50.25/MWh so far this month, 4.3% higher than the 2026 package a year ago, while the February 2027 contract has averaged around $37/MWh, 2% higher, according to data from Platts, part of S&P Global Energy.

In the Pacific Northwest, where drier conditions are expected, Platts M2MS Mid-C on-peak January 2027 has averaged $67/MWh, 8.8% below where the 2026 package was a year ago, while the February 2027 contract has averaged around $53.25/MWh, 8.3% lower.

In the Electric Reliability Council of Texas footprint, lower load is expected over the winter season because of warmer temperatures from the strong El Niño, Goldstein said. Although there could be cold blasts that cause momentary demand and price spikes, the overall winter season is expected to have milder weather.

That forecast is reflected in power forward activity. Platts M2MS ERCOT North on-peak January 2027 has averaged nearly $62/MWh so far this month, 24% lower than the 2026 package a year ago, while the February 2027 contract has averaged around $45.50/MWh, 27% lower.