Multiple renewable records in March drove wind generation back to the top of the Southwest Power Pool fuel stack and to the highest monthly average on record, as wholesale power prices averaged below $20/MWh on warmer weather month on month and dipped into negative territory as wind surged on the grid.
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SPP power prices dropped an average of 97% month on month following record winter weather that led to record-high prices, generation shortages and rotating power outages. However, the year-on-year price change was split as South Hub prices rose but North Hub prices fell.
South Hub on-peak day-ahead locational marginal prices averaged $19.22/MWh in March, an increase of 12.3% year on year, despite falling as low as minus $2.66/MWh March 8 as wind averaged 63% of the fuel mix, according to SPP data. Real-time off-peak prices sank to minus $21.53/MWh March 8 and averaged negative prices on 11 days throughout the month.
Likewise, Texas-Oklahoma Panhandle spot gas climbed 81% year on year to average $2.288/MMBtu, according to S&P Global Platts pricing data.
Meanwhile, North Hub on-peak day-ahead LMP averaged $16.87/MWh, down 6.2% year on year, as prices reached as low as minus $6.21/MWh March 29 as wind penetration surpassed 80% for the first time in SPP history.
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%, while 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.
"As wind capacity continues to grow, the number of negative hours will increase, especially during seasonally lower load, namely in the spring and fall," said Giuliano Bordignon, S&P Global Platts gas and power analyst.
Wind reclaims top spot
Wind-powered generation set multiple records in March and returned to the top of the fuel stack, averaging 47.7% of the total fuel mix in March, up 13% year on year and a jump of 21.2% month on month, according to SPP data.
Natural gas-fired generation fell to a four-year monthly average low of 14.5% of the total fuel mix, down 13.5 percentage points year on year and down 8 points month on month. Coal-fired generation increased 3.5 points year on year to average 27.8% of the mix, down 13 points from February.
"With coal virtually remaining a baseload technology -- the share is almost flat year on year, similar to nuclear -- a shrinking thermal gap due to higher wind generation affects primarily the technology at the margin, gas in this case," Bordignon said.
Peakload slipped 19% month on month to average 29.321 GW in March, as population-weighted average temperatures across the footprint climbed 75% from February, according to CustomWeather data. Heating degree days fell 54% month on month and were 21.5% lower than normal.
Power forwards curve
Power forwards continue to trend above year-ago package levels, with North Hub on-peak April rolling off the curve at $23.40/MWh, 22.5% higher than where the 2020 package ended.
The North Hub on-peak April package averaged $23.86/MWh, 13.2% above where the year-ago package averaged, according to Platts data. Likewise, Texas-Oklahoma Panhandle April averaged $2.353/MMBtu, 85% higher than its 2020 counterpart, and rolled off the curve at $2.306/MMBtu, 115.3% higher than the 2020 contract.
The trend continued down the curve as North Hub on-peak May averaged $25.76/MWh, up 6.2% from the 2020 package average, while on-peak June averaged $29.96/MWh, a jump of 19% from the year-ago package.
The trend was even more obvious in gas contracts, with Texas-Oklahoma Panhandle May averaging $2.339/MMBtu, up 77%, as the June contract averaged $2.392/MMBtu, up 71%.
"The fact that gas is the marginal technology means that overall prices are strongly impacted by fuel prices," Bordignon said about higher forward packages. "This means that some of this premium will translate into higher power prices, although the increase in wind capacity -- and therefore output -- clearly softens the upside."
In addition, the three-month outlook indicated a greater probability for above-normal temperatures through June, according to the US National Weather Service.