For several years now European wholesale power prices have been crashing into the negative, as baseload generation is unable to keep pace with changed conditions caused by higher penetrations of wind and solar PV.
Such phenomenon are also coming to the United States, with falling wholesale power prices in markets such as California. However, on Tuesday the results of an auction at the nations largest grid operator showed that solar PV may also be impacting future capacity prices.
PJM Interconnections auction for capacity – firm power to meet reliability needs – for the 2019-2020 year resulted in prices of US$100 per megawatt-day for the majority of its 13-state area in the U.S. East Coast and Midwest. This represents a 40% fall from the previous year. Prices in the ComEd region in Northern Illinois were double this, but these also fell.?
PJM notes a number of factors for the decline in prices, including both 5 GW of new combined-cycle gas generation, and a lower load forecast than the 2018-2019 year. The grid operator reports that 1.5 GW of energy efficiency cleared in the auction, along with 335 MW of solar generation, nearly double the level of the previous year.
GTM Research Grid Edge Analyst Elta Kolo warns that it is inherently difficult to parse out the impacts of solar PV among these changes, as multiple behind-the-meter solutions including distributed solar impact the lower demand forecast.
It doesnt necessarily mean that people are consuming less, GTM Research Grid Edge Analyst Elta Kolo told pv magazine. It means our appliances are getting more efficient and people are installing generation closer to their home.
Kolo also says that part of the change may be due to different rules at PJM. "From what I understand PJM this year changed their forecast methodology," states Kolo. "It now more accurately accounts for energy efficiency and solar production."
However, any role for solar PV is a remarkable development for PJM Interconnection, as New Jersey is the only large solar market in the region, and has slowed significantly in recent years.
The impact on the falling prices has been damning for conventional generation, particularly nuclear power. Exelon Corporation reported that two of its nuclear power plants did not clear the auction, and warns that the combination of this and low wholesale power prices – which are also impacted by wind and solar – may cause it to shut down two plants.
The capacity market alone cant preserve zero-carbon emitting nuclear plants that are facing the lowest wholesale energy prices in 15 years, said Exelon President and CEO Chris Crane. Without passage of comprehensive energy legislation that recognizes nuclear energy for its economic, reliability and environmental benefits to Illinois, we will be forced to close Quad Cities and Clinton.
A 2015 report by the MIT Energy Initiative states that older coal-fired plants will be the first to close down in the United States as a result of increasing penetrations of solar PV. However, as coal plants are retiring at a record rate and new ones are not being planned, nuclear generation may not be far behind. In this way, the United States is following the lead of Europe.
You are seeing disruptions already, states GTMs Kolo. Obviously (solar and demand-side solutions) are impacting the revenues of other conventional generation.