California's solar market is wreaking havoc on power prices, with an increasing duck curve causing daytime prices to plummet and evening prices to spike as solar resources stop generating. Wind generation, however, is maximized in the same evening hour when the prices peak. S&P Global Market Intelligence Power Forecast produces hourly curves of solar and wind generation that can be aligned with hourly prices to understand the economic value of each resource type.
To meet the aggressive clean energy standard in California, Market Intelligence forecasts 24.3 GW of solar, 8.3 GW of wind and 4.2 GW of battery storage will be constructed by 2025 and 31.2 GW of solar, 13.8 GW of wind, and 6.1 GW of battery storage by 2030 in the California ISO. While the growing amount of storage somewhat mitigates the impact, the forecast expansion of renewables will further accentuate the duck curve of power prices on peak demand days, with SP-15 monthly average hourly power prices peaking at $107/MWh in August 2030 and dropping to $0/MWh in many hours in spring and fall. By 2032, annual average on-peak pricing will be lower than off-peak pricing.
Though the capacity and generation of wind and solar both increase throughout the next 10 years, peak power prices align well with peak wind generation in the evenings. The hourly revenues of wind and solar react in opposite directions, with solar earning progressively less with more build out of capacity, while wind gains a larger revenue even as capacity grows. In springtime, when hourly prices bottom out and solar is curtailed, solar revenue decreases in the middle of the day as solar capacity increases. California is also unique in that the maximum capacity factors of both solar and wind coincide with high prices in the summer months.
Generation-weighted power prices for wind and solar tell the conclusive story that wind increasingly benefits as renewables expand. The difference in August weighted solar and wind prices increases from 2021 through 2030, with wind generating $55.86/MWh against estimated solar revenue of $39.82/MWh in 2030.
The relationship between hourly solar generation and power price shows the great potential for hybrid solar-plus-storage resources to benefit from the cheap daytime prices to charge from solar and then discharge during the expensive peak hours. Battery dispatch in evening hours will undercut gas, which is predominantly on the margin during peak net demand hours. Even with the growth of battery storage throughout the forecast horizon, gas and oil are still needed to meet the increasing peak net demand, allowing the steep duck curve to benefit battery storage and wind resources. Therefore, even with higher forecast penetration of wind and batteries along with solar, the duck curve may be here to stay.Generation-weighted power prices for wind and solar tell the conclusive story that wind increasingly benefits as renewables expand. The difference in August weighted solar and wind prices increases from 2021 through 2030, with wind generating $55.86/MWh against estimated solar revenue of $39.82/MWh in 2030.
For wholesale prices and supply and demand projections, see the S&P Global Market Intelligence Power Forecast.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
The following analysis incorporates our Q3-2020 Power Forecast findings. Learn more how our Power Forecast solution can help you understand the outlook of U.S. power markets and conduct power plant valuations effectively.
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