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SPP breaks four renewable, wind records causing power prices to dip negative

Highlights

SPP wind penetration surpassed 80% for first time

Over 78 GW of renewables in interconnection queue

North Hub off-peak LMP sinks to minus $14.68/MWh

New York — Southwest Power Pool set four renewable records March 29, including wind penetration surpassing 80% for the first time in SPP history, as the surge in renewables caused wholesale power prices to plunge into negative territory.

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SPP wind penetration set a record of 81.85% at 4:33am CT March 29 and caused renewable penetration to reach a record of 84.2%, according to SPP. In addition, SPP wind generation set a peak record of 21.133 GW at 7:35am CT March 29 and caused renewable generation to reach a peak record of 22.685 GW. In addition to wind, renewables included hydro and waste.

"We expect this trend to continue as we see more and more renewables come online," SPP spokeswoman Meghan Sever said March 30. "With the continued growth of renewable generation in SPP's footprint and our proven ability to reliability integrate it, we will continue to set subsequent records. We are confident in our ability to use these resources to reliably meet the needs of the bulk electric system."

SPP has more than 78 GW of renewables in its generator interconnection queue, and in 2020 was the first RTO in the US to serve the majority of its load with wind at 32% of the total fuel mix, Sever added.

SPP is on pace to continue that trend in 2021 as wind output has averaged 36% of the SPP fuel mix so far this year, an increase from 32.7% during the same timeframe in 2020, according to SPP data. For comparison, coal-fired generation has averaged 35% of the total fuel mix year to date, up from 27.5% a year ago, while natural gas-fired generation has averaged 19% in 2021, down from 27.8% last year.

So far in March, SPP wind output has averaged 47.6%, a jump of 21 percentage points month on month and an increase of 13 percentage points year on year, according to SPP data.

The rise in wind generation has shrunk gas generation to what appears to be must-run levels over several periods during March at times of strong wind output, said Giuliano Bordignon, S&P Global Platts gas and power analyst.

"A further decline in loads anticipated for April versus March this year will continue this trend if wind output remains supported," Bordignon said. "Our current outlook assumes wind output at 13.3 GW in April, with the month-on-month increase largely offset by lower coal dispatch, in turn raising the risk of negative power prices."

Loads to be served as seasonally low in March and April, which raises the share of the load covered by wind, in turn lifting the percentage of time wind is on the margin, Giuliano said.

Turning to the Platts Renewable Penetration Indexes, SPP off-peak wind penetration jumped to 68% of the total fuel mix on March 29, the strongest level since Platts began publishing the RPI in December 2020. The corresponding on-peak also reached record high levels at 68.5%. Month-to-date off-peak wind penetration rose to nearly 50% with on-peak to about 44%, up from February's averages of 28% and 24%, respectively.

Price impact

The rise in cheaper renewable generation has caused power prices to plunge.

SPP North Hub on-peak day-ahead locational marginal prices dropped to minus $6.21/MWh for March 29, as off-peak day-ahead LMP sank to minus $14.68/MWh, according to SPP data. South Hub off-peak day-ahead LMP fell to minus $10.29/MWh. Although prices rebounded March 30, they were under $1/MWh for North Hub on-peak and South Hub off-peak, while North Hub off-peak remained negative.

North Hub off-peak day-ahead LMP has averaged about $4.25/MWh so far in March, an increase of 52% year on year, while South Hub off-peak has averaged about $5/MWh, 36% lower, according to SPP data. The change in on-peak was more subtle, with North Hub on-peak day-ahead LMP averaging about $16.50/MWh so far this month, less than 1% lower year on year, while South Hub has averaged around $18.75/MWh, nearly 1% higher.

In contrast, SPP set record high prices around $4,000/MWh last month as a winter storm blasted much of the nation.

"Risks of negative prices are increasing in the months ahead, not necessarily in the summer but over shoulder months and in the winter when wind output is typically stronger, underpinned by wind capacity that has increased by 3.4 GW in 2020 based on our capacity tracker - a level higher than that of the past 3 years - and as we expect another 3.6 GW of additions this year," Giuliano said.

The previous SPP renewable penetration record was 81.39% reached March 14, which broke a record set March 9 when the previous wind penetration record of 78.9% was reached.

The previous wind peak record was 20.108 GW reached Feb. 4, the same day the previous renewable peak record of 21.446 GW was reached.