California Renewable Energy Drives Fossil Fuel Plants to Close
Renewable energy in California is driving wholesale power prices to new lows and, in turn, forcing more fossil-fueled power plants to close down due to the inability to recover variable costs. Real-time power prices between 8 a.m. and 2 p.m. this spring have averaged between $0 and -$16 per megawatt hour (MWh) and the day-ahead prices have averaged -$2.56 (MWh), creating a risk that more conventional generation could be curtailed, while also creating a likely increase in the number of fossil-fueled plant retirements as the energy market collapses. Comparatively, during March 2013 thru 2015, wholesale power prices averaged between $14 and $45 (MWh).
Hydropower generators have opted to let water spill over their dams, rather than generate electricity at the low wholesale prices offered.
CAL ISO, the electrical grid operator has met with power generation owners regarding the market situation, the growth in renewable generation and the effect on the grid. But an answer to the trend in low power prices does not seem to have an upside solution for conventional power generators, with increasingly higher renewable portfolio standards (RPS) now expected to be 50% by 2030 in California.
Industrial Info is tracking 26 fossil-fueled power generators with a total capacity of 1,844 MW that are scheduled to close between June 2017 and December 2019. Eight more generators will close by December 2025.
The Southern California Edison (SCE) (Rosemead, California)-owned, 2,150-MW San Onofre nuclear power plant was closed in 2013, due to excessive wear on the tubing in newly installed Mitsubishi steam generators, which created an environment for developers to construct more natural gas-fired generation. At the same time, renewable wind and solar generation was starting to increase as well, leading to the fall in power prices.
Gas-fired power generation in California has been on a downward trend over the past five years as renewable energy has come on line, with the decline occurring mostly in the winter months, when the market share of renewable energy is higher due to lower demand. Fossil-fuel capacity is expected to continue to decline as record renewable energy pushes conventional generation to 12-year lows during both winter and summer months, with an average of around 19%. For related information, see March 21, 2017, article - Move to Renewables Puts Natural Gas-Fired Power Plants on Chopping Block.
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