November 8, 2017 Read More →

Report: Wind and Solar Are Reshaping U.S. Electricity Markets

GreenTech Media:

Renewables have grown powerful enough to alter the workings of power markets, which will in turn affect the future growth of wind and solar.

This unprecedented collision course creates uncertainty for the markets, but also opportunity, according to the combined insights of GTM Research, Wood Mackenzie and MAKE Consulting. The key will be thinking through the unintended consequences of the wind and solar acceleration and adjusting behavior accordingly.

Renewables already compete on price with conventional generation

Wind already beats coal and combined cycle gas plants on levelized cost of energy. That number is expected to drop another 12.7 percent over the next five years, while solar costs sink 31.5 percent.

“Renewables have become so much more competitive versus traditional fossil-fuel generation sources in the United States,” said Dan Shreve, head of Americas at MAKE Consulting, in the opening address of the Power and Renewables summit in Austin, Texas. “With all the gains that have been made over the last decade, there’s still more to come.”

While wind and solar still rely on federal tax credits, they’ve shifted away from government mandates.

In 2013 and 2014, more than 80 percent of utility-scale solar demand came from state renewable portfolio standards. Of the current pipeline, state mandates drive only 24 percent.

Voluntary procurement by utilities, PURPA contracts, corporate renewables procurement and community-choice aggregation have risen as drivers for procurement. Those trends will accelerate.

“You end up building this stuff out over a much wider array of markets,” said Shayle Kann, head of GTM Research. “It’s not just state actors anymore.”

At least 46 cities and 112 major corporations have committed to 100 percent renewables procurement. That’s just the beginning.

It’s starting to affect power markets

The implications of this growth spurt are starting to ripple out through the power markets. One early manifestation: a spike in periods of low prices over the last three years, as well as a drop in periods of high prices. The researchers here defined low pricing as a locational marginal price less than $10 per megawatt-hour and high pricing as LMP greater than $100 per megawatt-hour.

This trend is playing out to varying degrees across North America as renewables, with zero fuel costs to operate, bring more power onto the grid.

“As we see price trends going downward, it obviously puts stress on fossil fuel assets,” said Prajit Ghosh, head of Americas research at Wood Mackenzie Power and Renewables.

More: The Rise of Renewables Creates Uncertainty in US Power Markets, But the Transition Doesn’t Have to Be Scary

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