The SPP Market Monitoring Unit (MMU), the independent market monitor for the Southwest Power Pool (SPP), found that the SPP market footprint experienced an increase of about 10% in both generation and load in 2015 with the addition of the Integrated System (IS).
The MMU has writtenan annual market report covering 2015 that was filed on Aug. 25 at the Federal Energy Reguatory Commission.
With the IS, the SPP market now covers most of North and South Dakota and parts of several adjacent states. This expansion occurred on Oct. 1, 2015.
Average monthly natural gas prices were generally flat at about $2.50/MMBtu through September and then declining to below $2.00/MMBtu in December. Monthly average electricity prices (LMP) in the Integrated Marketplace for 2015 were generally flat with some variation in the $20 to $25/MWh range with the annual average all-in price of $23.48/MWh. The cost of operating reserves represented about 1% of the total all-in price, with Make-Whole Payments representing only about 1.3% of the total price of electricity. The total price is comparable to prices in other markets in the region and the non-energy components compare favorably with other wholesale electricity markets.
In 2015, installed generation capacity increased slightly to 67,251 MW from 67,095 MW in 2014. This increase in installed capacity, along with a slightly lower system peak load compared to 2014, resulted in a slight increase in the market resource margin to 49% in 2015 from 48% in 2014. The market expansion resulting from the addition of the Integrated System did not impact the resource margin figure because the expansion occurred after the system peak.
Generation in the market by fuel type is changing as a result of two primary factors: 1) increased installed wind generation capacity and output; and 2) declining natural gas prices. Wind-sourced generation continues to increase and represented almost 20% of total SPP generation in November and December. On the other hand, coal generation has declined from a historical average of 60–65% to an annual average of 55% in 2015, with November coal generation representing only 45% of SPP total generation for the month.
In 2015 ,year-end installed wind generation capacity in the SPP market increased by 44%, from 8,606 MW of registered capacity in 2014 to 12,398 MW in 2015. Because actual generation resulting from new capacity does not show up in the market for several months after registration, the full impact of this nearly 4,000 MW of new wind capacity in 2015 will not be felt until 2016. Initial results from 2016 indicate that at times generation is approaching 50% of total load. This is a substantial increase from 34% in 2015 and 33% in 2014.
Total generating capacity in the SPP Integrated Marketplace was 84,943 MW in 2015, representing an increase of 13% over the first year of the Integrated Marketplace. The addition of the Integrated System added more than 7,600 MW to the Integrated Marketplace with hydro capacity being the largest category at almost 2,600 MW. Natural gas-fired generation still represents the largest share of the SPP market at 42%, with coal being the second largest type at 34%.
Wind continues to see an increase as the result of new construction. Excluding approximately 1,000 MW of wind capacity added with the IS, wind still saw a 33% increase in 2015.
In 2015, SPP reserve margin was up 1% from 48% in 2014, which amounts to four times the SPP’s Annual Planning Capacity Requirement of 12%. This relatively high reserve margin has positive implications for both reliability and for mitigation of the potential exercise of market power within the market.
In 2015, about 11,345 MW of new generation capacity was added to the SPP market, which includes the capacity associated with the IS. Most of this capacity was wind at 34%, followed by hydro at 24%, coal at 21%, natural gas at 17%, and oil at 4%. Of this capacity, only 2,689 MW were new construction, all belonging to the wind category.
In 2015, the SPP market also experienced generation retirements amounting to 337 MW in installed capacity, of which 271 MW (80.4%) was gas-fired, 60 MW (17.8 %) was coal-fired, and 6 MW (1.8 %) was oil-fired. The bulk of the retired capacity was 1950s, 1970s, and 1980s vintage coal-fired units followed by 1950s, 1960s, and 1970s vintage gas-fired units.