The burgeoning supply of natural gas in the U.S. and record gas storage levels produced lower gas prices and resulted in reduced wholesale power prices during 2015, with gas-fired generation exceeding coal-fired generation in output during seven months of 2015, FERC staff said March 17.
The gas price outlook for 2016 continues to point to low prices, with pipeline additions increasing the transportation network to bring shale gas supplies to market, FERC staff said in their presentation of the “State of the Markets Report” for 2015 at the March 17 FERC meeting.
The lower natural gas prices have driven some generation resources out of the market in ISO New England and PJM Interconnection, with coal and nuclear plants struggling for revenue, FERC staff said. Pressure from lower natural gas prices and environmental requirements have led to tightening power supplies in both regions, which has resulted in higher capacity prices in both markets.
The higher capacity prices have produced higher “all-in” costs in PJM, which include energy, capacity, transmission and ancillary services, to increase by 5% between 2013 and 2015, according to the presentation.
Commissioner Cheryl LaFleur asserted that ancillary services will become more important as renewable resources contribute more to the generation picture.
The Midcontinent ISO (MISO), California ISO (Cal-ISO) and Southwest Power Pool (SPP) saw significant gains in renewable power projects, with solar facilities making big in-roads in California and wind projects in MISO increasing to 15 GW in capacity in 2015 from 13.7 GW in 2014.
In November 2015, wind projects in MISO set a new hourly peak of 12.6 GW, or 5.8% higher than the 2014 peak, and 2,234 MW of wind capacity is expected to come online in MISO in 2016, pushing installed wind capacity beyond 17 GW by the start of 2017.
SPP also set a record for renewable generation in 2015, with output exceeding 2014 levels by 1.5 million MWh, FERC staff said.
Even with the gains in renewable resources, that slice of the generation “pie” is still relatively small, with wind generation from utility-scale facilities increasing from 4.1% in 2013 to 4.6% in 2015, FERC staff noted.
The developments illustrate how FERC will need to concentrate on certain regions, such as the plains states for wind power and southwest for solar power, as it examines integration of such resources and the impact they’ll have on the grid, Commissioner Tony Clark noted.
Hydropower production in the West was below historical averages in 2015, largely because of reduced snowpack and drought conditions, with net generation at 23 plants across the Pacific Northwest 18.4% lower than in 2014 and 6.9% below the 12-year average, FERC staff said.
Hydropower conditions in 2016 are improving, with snowpack conditions higher than last year and February production levels in line with historical averages, according to the presentation.