The Southwest Power Pool (SPP) on Jan. 22 said that its Market Monitoring Unit’s (MMU) recently released Quarterly State of the Market Report for the fall 2017 period shows that energy prices were low, with October 2017 prices averaging around $18/MWh, and that while the percentage of generation provided by wind resources continued to climb, generation provided by coal-powered resources continued to decline.
According to the report, during last fall, the average day-ahead and real-time prices were $20.22/MWh and $20.53/MWh, respectively. The October 2017 prices, averaging around $18/MWh, were the lowest monthly average prices in the SPP market since spring 2016, the report said.
In terms of monthly real-time generation by technology, coal-powered resources continued their downward trend with 45% of energy produced in the fall 2017 period, compared to 50% in fall 2016, and 52% in fall 2015, the report said. Wind generation continued its upward trend, with 26% of energy produced in fall 2017, compared to 20% in fall 2016, and 15% in fall 2015.
The report also noted that workably competitive electricity markets are expected to see highly correlated gas costs and electricity prices in general. Historically, gas and electricity prices have been highly correlated in the SPP market, the report said, adding that while that correlation is generally observed over time, some periods exhibit divergence.
Average gas prices have been relatively stable with average monthly prices at the Panhandle Eastern hub ranging between $2.50 and $2.80/MMBtu since July 2016, with the exceptions of December 2016 and January 2017 when prices went above $3/MMBtu, as well as November 2016 when gas prices dropped to around $2.25/MMBtu. The report added that gas prices decreased by 1% from fall 2016 to 2017, from $2.61/MMBtu to $2.58/MMBtu.
Lower prices are more prevalent in the north due to less expensive generation in the area, as well as in the west-central part of the footprint due to abundant low-cost wind generation in that area. Generally, the report added, the areas seeing the highest congestion and thus the highest average prices, include the area south of the Texas panhandle, northwest Oklahoma near Woodward, northwest Kansas near Hays, and in the tristate area of Missouri, Kansas, and Oklahoma.
Factors that can influence congestion and resulting prices are transmission bottlenecks, generator and transmission outages, weather events, differences in fuel prices and cost of generation, and differences in temperatures across the footprint, the report said.
High prices in the Missouri/Kansas/Oklahoma area can primarily be attributed to congestion on the “Neosho-Riverton for the loss of Neosho-Blackberry” flowgate, the report said, noting that some reasons for congestion in that area are high levels of internal and external wind generation, and external north to south flow. The report noted that there were also generation and transmission outages during the period, such as the Delaware to Northeast 345-kV line, which was out for most of October and November 2017.
The report also noted that SPP began the market-to-market (M2M) process with the Midcontinent ISO (MISO) in March 2015 as part of a FERC mandate to be implemented one year after go-live of the SPP Integrated Marketplace. The M2M process under the joint operating agreement allows the monitoring and non-monitoring RTOs to efficiently manage M2M constraints by exchanging such information as control indicators, as well as by using the RTO with the more economic dispatch.
The report added that review of the M2M process in the first year of operation resulted in discussions between SPP and MISO to address issues mainly involving constraint volatility or power swings. That resulted in a memorandum of understanding being developed to enhance M2M coordination, the report said, noting that the memorandum, which was executed last June, included criteria to exclude some M2M flowgates that pass coordination tests, but are not significantly impacted by the non-monitoring RTO’s market flows in real-time.
That criteria, the report said, initially resulted in the removal of more than 50 of the approximately 230 M2M flowgates on Aug. 1, 2017. Those tests are now routinely performed, which can result in flowgates being added or removed from the M2M designation.
The report also noted that each RTO is allocated property rights on M2M constraints known as firm flow entitlements (FFE), and each RTO calculates its real-time usage, known as market flow.
Exchange of money – M2M settlements – for redispatch is based on the non-monitoring RTO’s market flow in relation to its firm flow entitlement, the report said. The non-monitoring RTO will receive money from the monitoring RTO if its market flow is below its FFE and will pay if above its FFE.
The sharp increase in total M2M payments in October and November 2017, the report added, is almost exclusively due to the “Neosho-Riverton for the loss of Neosho-Blackberry” flowgate, which was highly congested during those months, resulting in increased payments from MISO to SPP during that time.
Among other things, the report noted that overall, average monthly generation during the fall period has increased slightly each from 2015 to 2017. Wind capacity in the footprint, for instance, continues to steadily grow, with wind capacity increasing from 12,200 MW at the end of November 2015, to 15,700 MW in November 2016, and to 17,400 MW in November 2017.
The report noted that with the prolific growth of wind generation in the SPP market, the frequency of intervals experiencing negative prices continues to increase. On an annual basis, the total percentage of negative price intervals the real-time market has increased from 2.6% in 2015, to 3.5% in 2016, and to 7% in 2017 (through November).
The report said that that MMU is concerned with the marked increase in the frequency of negative price intervals, noting that while negative prices may not be a problem in and of themselves, they do indicate an increase in surplus energy on the system.
In the SPP market where there is an abundance of capacity and significant levels of renewable resources, negative prices can occur when renewable resources need to be backed down in order for traditional resources to meet their scheduled generation, the report said.
Furthermore, unit commitment differences, due to wind resources not being in the day-ahead market and then coming online for the real-time market, can create differences in the frequency of negative price intervals between the day-ahead and real-time markets. That disparity between the markets negatively impacts the efficient commitment of resources, the report added.
“Thus, the growing frequency of negative prices indicates the potential need for changes in market rules to address self-committing of resources in the day-ahead market and the systematic absence of some forecasted variable energy resources in the day-ahead market to improve market efficiency,” the report said.