Trading and Risk

Power Price Volatility to Rise in 2020 as Renewables Gain Market Share

byRob Allerman

The influence of renewable energy in power generation is rising across the U.S. Growing adoption is creating an increase in wholesale price volatility, which we expect will expand in importance with the new decade.

Much of the uptick to price volatility is caused by a reduced dependence on thermal units. These units are power stations that convert heat into electric power, often via steam-powered turbines.

The new sources of renewable energy have also led to increases in congestion on transmission lines. These bottlenecks can also be a source of higher price volatility, as seen in markets that are adding solar and wind power to their grid.

From California to Texas to the Midcontinent, Enverus’ power analytics have detected increases in price volatility. Let’s start our study in California, where the local ISO (CAISO) reduced renewable generation from August to September created higher supply/demand in September, and stronger prices with hotter weather.

Renewable Power and Wholesale Price Volatility in California

In California, we expect to see an ongoing solar build-out. The state’s Energy Imbalance Market (EIM) is leaned on more and more to balance the grid with more renewables, and the Southwest Power Pool’s (SPP) movement westward could ease CAISO’s ability to balance the grid.

From Aug. 1 to Sept. 30, 2019, CAISO wind and solar generation dropped by 0.15% and 0.03%, respectively.

As noted in the chart above, SP-15 peak load hours from 7 p.m. to 9 p.m. in September are close to the peak load observed in August. Meanwhile, solar generation is very low – nearly zero – during these hours in September.

The chart above shows how natural gas peaking units are needed to meet load as the sun goes down and solar generation drops. This demonstrates the impact of high load in September when the sun goes down earlier in the day.

Renewable Power and Wholesale Price Volatility in Texas

Prices will swing to extreme levels in the summer and the winter as reliance on non-dispatchable renewables continue to grow. In Texas, or the ERCOT market, power prices are trending lower as more renewables penetrate the wholesale market. This is making it harder for ERCOT to attract new gas plants, and companies that own coal and high-efficiency gas plants will continue to lose money.

In August of 2019, ERCOT wholesale power prices ballooned as loads hit a record-high throughout many days in August.

Wind generation came to the rescue at that time, greatly reducing wholesale power prices even when the load stayed relatively high. The same phenomenon was observed in September, as shown in the chart below.

Southwest Power Pool Migrates West, Wholesale Price Volatility Elevates

As the SPP expands to the west, CAISO’s ability to balance the grid becomes more challenging. Within the SPP, which covers the midcontinent from North Dakota down to the panhandle of Texas, wind generation has grown significantly.

SPP off-peak average wind production more than doubled between 2015 and 2019, rising to 10,000 MWs. The result of the increase in wind production was an increase in volatility, which was most prominently observed in April 2019, as shown below.

In 2019, increased wind generation in SPP created negative pricing 70 times in April 2019, versus four the previous year. From 2015-2017, there were zero instances of negative pricing. The price range in April was widest among the five years studied; prices ranged between -$14.43/MW to $50.81/MW. The previous year, the range was tighter between -$2.50/MW to $46.60/MW.

Accurate Load Forecasting is More Important Than Ever as Renewable Market Share Grows

With such unruly volatility in three major U.S. ISO markets, it’s more important than ever to have the most accurate load forecasting the market has to offer.

As we enter a new decade with rekindled efforts to rally around expansion of clean and renewable energy, it’s a great time to trial the PRT Forecasts that have led the market for more than 25 years. As pioneers in the AI analytics space, our team started using machine learning in the 1990s to more accurately forecast power loads. Now we are taking our analysis to a greater level with deep learning. We’re getting more granular with our data and utilizing stronger computing power to give our customers the most accurate forecasts in the market.

To learn more or receive a free trial, please visit us at https://www.enverus.com/ft/cds-prt-e-loadforecast-free-trial/.

Picture of Rob Allerman

Rob Allerman

Rob Allerman is Senior Director of Power Analytics at Enverus. Before joining Enverus, Rob was Head of North America Power Analytics at EDF Power Trading in Houston, Texas, and spent many years as a power analyst at Deutsche Bank. Rob also worked in the western U.S. for nearly 10 years at Power Utilities and started his career as a Hydrologist for the Federal Government.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

Enverus Intelligence Research Press Release - Upstream M&A sails to $17 billion in 1Q25
Energy Transition
ByAmyra Mardhani

Exxon Mobil (XOM) inked a pivotal offtake agreement with Marubeni to supply 250,000 tonnes of low-carbon ammonia annually to Japan’s Kobe Power Plant for cofiring. The deal helps to derisk XOM’s hydrogen facility planned at its Baytown complex in Texas...

Enverus Press Release - Lessons learned from Eaton and the risk of wildfires spread by transmission lines
Generative AI Minerals
ByTemi Oyetayo

The energy industry thrives on data-driven decisions. For more than 25 years, Enverus has delivered transformative solutions that streamline workflows and enhance efficiency. As part of our commitment to revolutionizing land management, we are proud to introduce Instant Analyst™ –...

Enverus Press Release - E&Ps with natural gas + CCS pave way for model data center development
Energy Transition Power and Renewables
ByElliot Ryland

PJM, CAISO and MISO have all experienced significant spikes in capacity market prices. The last auction in PJM cleared at $269.92/MW-day, increasing ~834% from $28.92/MW-day. In CAISO the resource adequacy price saw a similar increase, jumping from $160.60/MW-day in 2020...

Enverus Intelligence® Research Press Release - OPEC+ cuts and Trump tariffs force price downgrade
Minerals
ByPhillip Dunning

Managing minerals and non-op interests should be straightforward; but for most, its far from that. The reality? Royalty and non-op management is drowning in inefficiencies. Address changes turn into endless paperwork. Revenue statements pile up in scattered formats. Reconciliation feels...

Enverus Press Release - Enverus releases Investor Analytics: Refined, actionable financial insights at your fingertips
Energy Transition Power and Renewables
ByCarson Kearl, Enverus Intelligence® Research (EIR) Contributor

China’s electric vehicle (EV) industry is making headlines with the rollout of fast chargers capable of recharging a vehicle in just five minutes. Leading this transformation are BYD, the world’s largest EV manufacturer, and CATL, the biggest battery producer, with...

Enverus Press Release - Enverus honored as one of Alberta’s leading employers
Business Automation
ByEnverus

Discover how Enverus RFx streamlines procurement for oil & gas operations. Learn key insights from our webinar on efficient bidding and supplier management.

Enverus Press Release - DUC Hunt: What the 2025 drawdown means
Analyst Takes
ByAl Salazar, Enverus Intelligence® Research (EIR) Contributor

In a recent conversation with Loren McGinnis, host of CBC’s Calgary Eye Opener, I, Al Salazar of Enverus Intelligence® Research (EIR), analyzed the fragile state of the global economy and its ripple effects on energy markets. We explored the sharp...

Enverus Press Release - E&Ps with natural gas + CCS pave way for model data center development
Power and Renewables
ByEric Palmer

Master PJM & MISO transmission constraints with Enverus real-time grid analytics and congestion analytics for smarter power trading.

Enverus Intelligence® Research Press Release - Delayed data center demand response: How quickly can ISOs add new loads?
Power and Renewables
ByAshton Dirks

In today’s volatile energy markets, traders need instant access to accurate data to power their workflows. Whether you’re navigating nodal pricing, forecasting renewable output or managing risk in markets like ERCOT or PJM, the Mosaic API seamlessly delivers grid analytics...

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Register Today

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert