Wind Growth Contributes to Key SPP Market Challenges: MMU Report

Strong points

Negative prices, discount, congestion were issues

Gas prices spurred increase in offset payments in 2021

Increased wind capacity and high natural gas prices in the Southwest Power Pool are contributing to continued growth in negative prices, discounts, congestion and compensation payments, said the market monitoring unit of the network operator to the board of directors of SPP on April 26.

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While these trends aren’t new, they have deepened in 2021 and will continue until there are changes in the market, Keith Collins, vice president of oversight, told the board. of the market at SPP.

“We should start taking steps to address it,” Collins said.


SPP’s nameplate wind capacity reached 30,500 GW in 2021, up from 27,300 in 2020 and 22,500 in 2019, MMU said in its draft 2021 market status report. installed has increased competition for access to transmission lines, which in turn has led to a sharp increase in congestion, negative prices and discounts,” the draft report states.

Wind reductions averaged 675 GWh in 2021, compared to 130 GWh in 2019, according to the draft report. Most were automated reductions when market software reduces the allocation of wind resources to alleviate transmission constraints, according to the draft report.


Current reductions

Deeper cuts have continued through 2022, according to data from S&P Global Commodity Insights. Since the beginning of April, peak hour wind power curtailments in SPP have registered a 213% increase to an average of 16,600 MW compared to the same period last year. March curtailments also saw notable jumps, up 46% year-on-year to average more than 10,700 MW.

Renewable wind energy penetration also saw increases during the year, with peak wind energy penetration in the first quarter of this year increasing by 11.7 percentage points compared to the first quarter of 2021. , according to data from S&P Global.

The increase in wind energy penetration has driven average wind energy capture prices at the SPP North Hub year-to-date down to 19.75/MWh, compared to the average load price of year-to-date basis of $24.30/MWh.

The S&P Global Renewable Capture Price Index tracks the value that renewable energy producers capture for the electricity they produce throughout the day, based on hourly generation and ISO pricing data.


Negative prices

The draft MMU report found that negative price ranges in 2021 increased year-over-year by 70% in the daily market and 37% in the real-time market. In the real-time market, about 15% of all intervals had negative prices, compared to 11% in 2020, according to the draft report. And in the daily market, 8% of intervals had negative prices, compared to 4.5% in 2020, according to the draft report.

Congestion costs were nearly $1.2 billion in 2021, up from $450 million in 2020, according to the draft report. “This marked increase can primarily be attributed to the proximity of existing generation to load, the proximity of newly constructed generation to load, the shutdown of major transmission facilities, fuel price volatility and the winter weather event of 2021″, the draft report mentioned.

The SPP has also seen an increase in compensation payments in 2021, which are out-of-market payments to resources when market prices are not sufficient, the MMU said.

Without February, daily compensation payments totaled $75 million, up 41% from 2020, and full real-time payments totaled $116 million, up 128% from 2020, according to the draft report. Including February, daily compensation payments for 2021 totaled $978 million, and real-time compensation payments totaled $354 million, according to the draft report.

Gas resources account for about 96% of all offset payments in 2021, according to the draft report. Even with February 2021 removed from the totals, offset payments for gas resources increased 63% on the day-ahead market and 145% on the reliability unit commitment, according to the draft report. “Much of this increase can be attributed to high gas prices throughout 2021, the draft report says.

Recommendations

The MMU has made a new recommendation to expand the multi-configuration combined cycle model to include additional resource types, according to the board presentation. Today, coal-fired power plants could benefit from this model, and in the future, storage resources could use this approach, Collins told the board.

The MMU also highlighted past recommendations including updating market and blackout requirements to improve transmission congestion charge funding, improving the efficiency of a market at the other through working with the Midcontinent Independent System Operator and resolving inefficiencies when planned resources are under-scheduled in the day. market.