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ISO Outlook 2019: CAISO renewable capacity additions offset gas retirements


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ISO Outlook 2019: CAISO renewable capacity additions offset gas retirements

Capacity outlook

The California ISO could see a net 505 MW of generating capacity added to its grid this year, in addition to 128 MW of battery storage capacity. According to an analysis by S&P Global Market Intelligence, the retirement of 1,577 MW of gas-fired capacity will be more than offset by solar capacity additions alone.

AES Corp. owns all of the capacity scheduled to retire in CAISO in 2019, composed of units from three gas-fired facilities. This includes 845 MW at the Alamitos facility, 226 MW at the Huntington Beach plant, and a 506-MW unit at Redondo Beach. Alamitos and Huntington Beach will retain some operating units beyond 2019 to fulfill power purchase agreements with Southern California Edison Co. that run through 2020. The California Public Utilities Commission approved the contracts in 2017 to help ensure that the western Los Angeles Basin has adequate generation resources.

Renewable energy capacity dominates planned additions in CAISO, at 2,077 MW, led by solar at 1,587 MW. The largest planned addition is the 200-MW Wright Solar Park, owned by private equity firm Centaurus Capital LP. The facility is under construction in Merced County and is scheduled to begin operating in November. The output will be sold under a long-term power purchase agreement to community choice aggregator Peninsula Clean Energy.

The only nonrenewable generating capacity addition scheduled for 2019 is the Bolthouse Farms Fuel Cell CHP, a 6-MW gas-fired fuel cell owned by FuelCell Energy Inc. Bolthouse Farms, which grows fruits and vegetables for beverages, will buy the output.

Six stand-alone storage facilities are scheduled to begin operating this year. One of these projects, the 14-MW West Los Angeles Basin Battery Storage Project (HEBT WLA 1) owned by Macquarie Group Ltd. is under construction in Orange County and is slated to begin operating in February. As California continues to provide incentives for storage additions and investor-owned utilities continue to plan more storage projects, the state is expected to continue to be a leader in overall U.S. battery storage deployments.

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Supply-demand analysis

Between 2013 and the end of 2018, CAISO saw available operating capacity increase by 8,713 MW. During the same period, the annual average peak load was 46,537 MW, peaking at 49,909 MW in 2017. In 2018, peak load declined 6.9% to 46,487 MW. With capacity additions over the past six years outpacing retirements and peak load hovering in the mid- to high 40,000-MW range, CAISO's supply-to-demand ratio increased to 64.90% in 2018 from 51.24% in 2013. The ratios were determined by calculating the difference in unadjusted total operating capacity per year and peak load reported by the ISO and dividing that difference by the same peak load. The calculation is not meant to reflect discounted reserve margins.

Low demand growth and increasing penetration of renewables have continued to put pressure on both existing and planned gas-fired generation in the region. During 2018, 1,279 MW of gas-fired capacity shuttered, accounting for the majority of retirements in the region. In late 2018, SoCalEd shortlisted energy storage over gas projects for a capacity solicitation, and NRG Energy Inc. canceled plans to build a 262-MW gas plant in Oxnard, Calif. The future of gas capacity within the state was further limited in September 2018, when then-Gov. Jerry Brown signed a bill requiring all electricity in the state to be generated with 100% zero-carbon energy by 2045.

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Commodities outlook

Around-the-clock monthly power forwards for 2019 delivery as of Jan. 14 at CAISO's NP15 and SP15 locations followed a similar pattern, peaking in the summer months. The average price at NP15 for January through December was $40.36/MWh, while the SP15 average was slightly higher, at $41.79/MWh. Prices at both locations hit their peak in August, with NP15 reaching $56.75/MWh and SP15 hitting $61.80/MWh.

Gas forwards for 2019 delivery at SoCal Citygate as of Jan. 14 show February having the highest price, at $6.06/MMBtu. Summer prices also breach the $5/MMBtu mark, putting them on the level with winter prices.

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About the data

S&P Global Market Intelligence guarantees comprehensiveness and accuracy on power projects on units over 1 MW and supplying more than 50% of power generated to the grid. Projects included in this article are those that will be dispatching power to the ISO once online and/or are physically located within the ISO.

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