Mike Zaccardi, CFA, CMT

Springtime is exciting in the electric utility world with regards to green energy. The nation transitions from ‘heating degree days’ to ‘cooling degree days’, wind power peaks, solar generation is near its height, hydro power runs strong with snow run-off in the Pacific Northwest and heavy rain for the Midwest. This season, we have already seen interesting milestones reached for renewable power generation across the country.

The Southwest Power Pool (SPP) regional transmission operator (RTO) broke records for their renewable generation output in the last several weeks. Back on April 27, SPP notched a whopping 73.2% of ‘wind penetration’ – that is the amount of generation produced to service demand across the footprint. Total renewable penetration was 78.2% care of a little hydro too.

The California Independent Service Operator (CAISO) actually faces risks with so much green energy being produced. CAISO gets a lot of energy from solar. A potential problem arises during the late morning when demand is relatively soft while solar generation surges. They have too much cheap power!

The supply/demand dynamic can drive real-time power prices negative. For natural gas power plant operators, they are priced out of the market. If those plants are priced-out for longer periods of time, they may just shut down, reducing reliability. Natural gas plants are needed during the evening and overnight (and wintertime) when solar generation is not available.

Just recently, the New England ISO is starting to encounter a similar issue as CAISO. On May 2 NE-ISO hit a record amount of ‘behind the meter’ solar generation. Behind the meter is a term for generation that occurs on site to where it is used, not necessarily reported to the RTO or ISO market. The NE-ISO is also starting to see a more pronounced ‘duck curve’.

The ‘duck curve’ is an hour-by-hour chart of net-demand once solar generation is subtracted from power demand. Demand jumps a little in the morning, solar ramps up during the late morning, then falls in the afternoon and evening as demand peaks for the day in the early evening.

So while green energy is great, it causes its own risks for the power markets. More technology is needed to harness wind & solar (batteries, anyone?) and to promote a more stable grid.

Chart via New England ISO