Category: Report

A view of Q3 2024 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. Please fill out the form to access the full report, the Editor’s Note is below.

Editor’s Note:

AI Introduces Unprecedented Power Needs: How Will Clean Energy Markets Be Impacted?

The landscape of U.S. power markets is being dramatically reshaped by an unprecedented wave of data center development, driven largely by artificial intelligence (AI) and cloud computing demand. The headlines are alarming: hyperscalers are announcing tens of billions of dollars of investments this year in data center infrastructure, ISOs are forecasting supply shortfalls and/or reliability concerns, and load forecasts are off the charts relative to historical growth rates.^1-3

With a historically reliable power supply and low-latency fiber network, the PJM region is currently a priority for digital infrastructure development – with more than 4GW already in Northern Virginia alone. PJM’s latest load forecast report forecasts a 1.6% annual growth rate for summer peak demand and 1.8% for winter peak demand, represented in Figure 1. Both growth rates are multiples larger than what we have seen historically, doubling from the estimates released last year with data center growth cited as a major contributor.

To put these numbers into perspective, summer peak demand in PJM is expected to increase above this year’s peak by almost 42GW in 2039 – representing a 28% increase. The winter peaks are forecasted to be 31% higher than last winter’s. This dramatic expansion puts grid reliability at risk, and also limits coal retirements in the next few years.²

What does this all mean for clean energy buyers or investors trying to plan for the future? Our guidance has generally fallen into one of three categories:

First, start with the historical facts on the ground.

All too often, we see forecasts – whether about future power prices, intra-day price volatility, wind/solar capture rates, congestion and curtailment, or emissions impacts – that are disconnected from historical realities. We find that this sort of discontinuity is very rarely warranted in power markets, even in a time of accelerated change (such as today).

Figure 2 shows the historical and REsurety’s forecasted generation supply (colored bars) and peak load (line) in PJM. While the market will be tight over the next few years, after that we expect load growth to be more balanced with supply growth.

The result of this will be elevated prices in peak winter and summer months over the next few years, followed by smoother seasonal profiles in later years. Overall, our forecasted PJM power pries are increasing over the next 20 years in all of our modeled scenarios.

Second, get back to fundamentals.

While AI-driven load growth is a new variable to consider when evaluating the future, it is not the only variable in power markets. Fuel prices, renewable energy penetration, hourly weather conditions, and congestion continue to dominate the value story for renewables, and likely will for some time. Consider solar capture rates in ERCOT this summer: while ERCOT set a new peak load (thanks in part to the 7+ GW of data centers in Texas), the summer capture rate for solar projects in Q3 hit a record low, dropping below 100% for the first time ever due to the rapid continued buildout of solar in Texas (Figure 3). Wind capture rates, meanwhile, have actually increased, as solar balances out the renewable mix. Our forecasts see this trend continuing into the future, with the average solar capture rate over the next decade at ~60%, as solar penetration continues to increase in ERCOT.

Third, do not underestimate the impact of transmission.

This is relevant to multiple areas in the era of AI load growth. Data centers are increasingly struggling to get load interconnection agreements in place, causing delays and/or relocations of planned investments. This is already acting as a brake, all else equal, slowing AI-driven load growth. Additionally, congestion is on the rise, resulting in renewables getting bottlenecked and becoming undeliverable to load.

This has both financial and environmental implications: project owners and corporate offtakers with basis-sharing provisions will be financially impacted, and the emissions benefit of the clean generation will be significantly reduced. Our recent study found that 10 million metric tonnes of CO₂e were emitted in ERCOT alone last year as a consequence of transmission congestion (Figure 4).⁴ When developing a clean energy purchasing strategy, accurately evaluating the “deliverability” of the generated clean energy is an increasingly critical consideration.

The intersection of AI-driven load growth and clean energy development presents unprecedented opportunities, but success demands strategies grounded in historical data, fundamental market drivers, and realistic infrastructure constraints – and not over-reacting to headline growth numbers. At REsurety, we remain committed to providing the analytical tools and expertise needed to navigate these complexities and make informed decisions in this rapidly evolving market landscape.

Sources:
1. Bain & Company. Technology Report 2024. https://www.bain.com/globalassets/noindex/2024/bain_report_technology_report_2024.pdf, 2024.
2. PJM Resource Adequacy Planning Department. PJM Load Forecast Report. https://www.pjm.com/-/media/library/reports-notices/load-forecast/2024-load-report.ashx, 2024.
3. Gelles, D. A.I.’s Insatiable Appetite for Energy. https://www.nytimes.com/2024/07/11/climate/artificial-intelligence-energy-usage.html, 2024.
4. Sofia, S.; Dvorkin, Y. Carbon Impact of Intra-Regional Transmission Congestion. https://resurety.com/carbonimpact/, 2024.

Q3 2024 Report Download

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A view of Q2 2024 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. Please fill out the form to access the full report, the Editor’s Note is below.

Editor’s Note:

Deliverability: Can Clean Energy Reach Consumers?

Clean energy generators are the fastest growing sources of new energy on grids across the country. But if the impact of those new projects is going to be maximized, and utilized meaningfully in hourly matching carbon offset techniques, the country also needs to invest large sums in improving transmission infrastructure to get the clean energy to load centers. There have been a couple of recent announcements aiming to speed up the development of much-needed transmission (e.g. FERC Order 1920 and Department of Energy TSED funding), but how much of a problem is transmission currently?

To answer this question, we’ll use the concept of “deliverability” – in other words, how much clean energy can reach consumers in a given location. The concept of deliverability is already built into the market prices that system operators publish. There are three components to Locational Marginal Prices (LMPs); energy, congestion, and line losses. Line losses tend to contribute relatively little to the overall prices, and so we can use the difference in LMPs between two locations to estimate the deliverability of the energy. When the LMP at a generator diverges materially from the LMP at the load center, this is a sign that the location is experiencing congestion – either high prices that encourage generation, or low (even negative) prices resulting in renewable generator curtailment.

For this analysis, we’ve defined power as “deliverable” if the LMP at the generator is within 10% of the LMP at the load center. Renewable generation output during periods with greater than 10% LMP divergence is likely subject to congestion, and is therefore considered undeliverable. This is a somewhat simple metric, but it aims to boil down a complex issue into something digestible and relevant; after all, deliverability is a key component in the developing hourly matching frameworks.

In Figure 1, the 12-month trailing average of deliverability is shown for clean energy generators in ERCOT and PJM and load centers in Houston and Chicago, respectively. Historically, only between half and two-thirds of clean power is “deliverable” to these major load centers. This highlights that transmission congestion has been, and still is, a meaningful issue. It’s also notable that despite higher penetration levels of wind and solar in ERCOT, the deliverability of clean energy to Chicago has dropped more rapidly since the start of 2021.

When we look a little deeper at the ERCOT deliverability, separating the results for wind and solar projects, the story of the flatter deliverability trend becomes clearer. The deliverability of wind in ERCOT has been trending downwards over the past few years, while solar has trended upwards. There are two factors in favor of solar’s better deliverability: timing and location. Solar’s on-peak generation coincides with higher load, leading to fewer congestion issues. Furthermore, the operational solar fleet is more geographically dispersed compared to the wind fleet, meaning fewer solar projects are subject to major transmission constraints (such as in the Texas Panhandle and Gulf Coast).

Of course, these trends will evolve over time as more clean energy is added to the grid, thermal generators are decommissioned, energy storage capacity expands, gross and net load profiles evolve, and transmission either stays constant or gets upgraded. This metric is just the beginning of our efforts to analyze this complex issue. A REsurety whitepaper on deliverability is in the works, covering more regions and diving deeper into the underlying causes and resulting carbon impacts.

Q2 2024 Report Download

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A view of Q1 2024 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. Please fill out the form to access the full report, the Editor’s Note is below.

Editor’s Note:

Record-Breaking Winter for Solar: Behind The Scenes

Solar output in ERCOT has been in the news as of late, with the buzz around the record-breaking 17.2 GW peak on February 19th amplified by the 18.7 GW peak on March 28th. While impressive, these records are actually not broken as often, or by as much, as one might initially expect given the amount of recent solar buildout. The current generation record would be 300 MW higher were it not for the complex interactions between the weather, transmission infrastructure, and tax incentives.

First, and perhaps most obviously, the weather impacts renewable generation and demand, and when there’s too much of the former and not enough of the latter, renewable projects are curtailed. Net load (total load minus renewable generation) is a useful metric to highlight this behavior. Figure 1 shows solar curtailment as a function of net load for Q1 2024. It’s clear that as net load drops below 20 GW, solar generation starts to be curtailed, increasing quickly as net load reduces further. These grid-wide supply and demand balancing issues that lead to renewable energy curtailment also play out on a local level, caused by transmission constraints. Even if there’s enough demand overall on the grid, if the renewable energy is located behind a transmission constraint, curtailment will still happen. Finally, there’s the tax incentives – wind projects tend to receive the Production Tax Credit (PTC) while solar projects tend to receive the Investment Tax Credit (ITC). Since the PTC is earned on a per megawatt-hour basis, many wind projects continue generating even when wholesale prices are negative. On the other hand, ITC-qualified solar projects will curtail as soon as wholesale prices become negative.

So, in terms of setting solar generation records, there needs to be an alignment of these variables – high solar generation potential, relatively low wind generation, relatively high load, and no meaningful transmission constraints. Figure 2 shows two days in February with different conditions and different outcomes. The first is February 19th, when there were favorable conditions and a new record was set – the skies were clear, wind output was low during the day, and net load stayed above 20 GW. A few days later on February 24th, conditions were not as favorable – skies were clear in the morning, but wind output was increasing and net load dropped below 20 GW. This meant solar projects were curtailed and while a new solar generation record 300 MW above the February 19th level could have been set, it was not.

It’s also important to note the seasonality in these trends. The time of year makes these solar output records more unlikely – the first quarter of the year tends to be windy and load levels are on the low side too. As the summer approaches, wind generation will be lower on average and load will be higher. More solar projects will also likely be commissioned by then, so expect more records to be broken (and perhaps more frequently). Looking further forward, it will be interesting to see if some of the new solar projects elect for Production Tax Credits and therefore start to operate during periods of negative prices. If so, expect even more records to be set.

However, lost generation due to curtailment isn’t all doom and gloom. By definition, renewables make up a large proportion of the grid’s generation during periods of low net load and curtailment. For corporate buyers measuring their impact in emissionality terms, this means the ‘lost’ emissions impact due to curtailment is relatively small – most of that curtailed energy would have displaced other clean fuels (rather than fossil generators). This is especially true during periods of low net load, where high wind generation will keep marginal emissions rates low regardless of the level of solar curtailment. Figure 3 shows the average ERCOT Locational Marginal Emissions rate declining as renewable energy curtailments increase.

As always with power markets, there’s a lot more going on behind the headlines of record breaking solar output.

In addition to downloading the report, you may want to watch a recording of a webinar on the Q1 report that we hosted in May, with the editor, Carl Ostridge, and lead analyst, Devon Lukas. They shared findings, insights, and hosted a live Q&A.

Q1 2024 Report Download

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A view of Q4 2023 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. Please fill out the form to access the full report, the Editor’s Note is below.

Editor’s Note:

Emissions (Rates) Ignore (ISO) Borders

As of the end of 2023, Locational Marginal Emissions data is available for all seven deregulated ISOs in the U.S. That additional data coverage is reflected in the later parts of this report. Here, we’re going to dig into what the data can tell us about the current state of the different ISOs and how it can shine a light on the current hydrogen-hourly matching debate.

All the data included in this analysis is for the period November 2022 – October 2023.

1. Renewables projects in CAISO, and particularly solar, had the lowest environmental impact.

There’s already a lot of solar power installed in California, and that means during the day when the sun is shining, solar power is often the marginal generator. That means incremental solar generation is displacing clean megawatt-hours from other solar projects, not fossil-based generators. The average renewable energy project in CAISO during this 12-month period displaced only 234 kgCO₂e/MWh. That’s less than half the emissions impact of the average renewable energy project in PJM.

2. PJM is where renewable energy has the biggest environmental impact.

A combination of relatively low penetration rates for renewables and fewer transmission constraints means there’s an outsized impact for any new wind or solar project in the PJM footprint because it is often displacing fossil-based generators and rarely displacing other renewables. On average, a renewable energy project in PJM displaced 25% more CO₂ than an equivalent project in SPP and almost 40% more than projects in ERCOT.

3. There is a huge range of emissions rates within most ISOs.

It’s perhaps more intuitive to make sense of the differences in average emissions impacts between ISOs – each has its own unique generation stack, load profile, and set of connections with neighboring regions, resulting in different emissions rates for renewables. However, there’s an even bigger range of emissions rates within these regions. This is primarily driven by the unique local transmission constraints within each region and how each of these constraints affects the ability of renewable generation to meet load. Two examples of localized variability in emissions impact are shown in figures 2 and 3. In both southern Oklahoma and western Minnesota, the emissions impact of wind projects is reduced due to local transmission constraints and congestion.

This last point about intra-regional variability is interesting for a number of reasons, but one to specifically call out here is the current debate around the IRS guidance for hourly matching of renewables for hydrogen electrolyzers under Section 45V of the Internal Revenue Code. The latest IRS proposal requires hourly matching of electrolyzer consumption with renewable energy procured within the same ‘region’. While the hourly matching regions don’t precisely match ISO boundaries, they’re pretty close. Therefore, the intra-regional variation in emissions impact for renewable energy projects would likely translate directly to the real-world emissions associated with ‘green’ hydrogen. An electrolyzer could procure renewable energy from a high-performing project in the region and avoid a lot more carbon than the electrolyzer consumes. The more worrying possibility is the opposite scenario – buying power from an underperforming project could mean that the hydrogen produced is actually far from ‘green’.

In addition to downloading the report, you may want to register to attend a webinar on the topic on Wednesday, February 7 at 1pm ET with the editor, Carl Ostridge. He’ll share findings, insights, and host a live Q&A.

Q4 2023 Report Download

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A view of Q3 2023 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. Please fill out the form to access the full report, the Editor’s Note is below.

Editor’s Note:

A Tale of Two Technologies

When I think of Southwest Power Pool (SPP) I think of wind. Wind met almost 40% of SPP demand in 2022 and new output records have been consistently set over the past couple of years. When I think of SPP I don’t think of solar, though. Solar met less than 0.5% of SPP demand in 2022. And I’ve always found that a little surprising considering the southern SPP footprint has some of the best solar resource in the country (ref: NREL). Maximum solar output this summer in SPP was only 30 MW higher than 2022 while the equivalent metric in ERCOT increased by more than 3,500 MW.

The abundance of wind generators and the lack of solar also means the two technologies look very different when considering two important metrics – the monetary value and the decarbonization impact of each MWh.

Figure 1 shows the capture rates (the value of the wind or solar-weighted MWh compared to around-the-clock MWh) for both price and emissions intensity. We see similar trends in both – wind is capturing less and less of the available monetary value and avoiding less and less CO₂ while the opposite is true for solar.

To understand what’s causing this we can look at the month-hour average prices and emissions rates over the past four years. We see that both prices and emissions rates are highest during the summer afternoons. During these times load is high and often wind output is low, meaning the marginal unit is a thermal generator with higher emissions rates. Of course, these are the same hours when solar output is peaking and that correlation leads to high solar value (in $ and CO₂ avoidance terms) compared to an around-the-clock generation profile. Conversely, the low prices and low emissions rates are occurring (not coincidentally) in hours of high wind output and this drives the prices and emissions rates lower.

On the face of it, this means adding solar to SPP would be a win-win, it would capture relatively high value power prices and would displace thermal generators more often, avoiding more carbon emissions. In Q3 of this year, solar was worth more than $50/MWh at South Hub while wind was worth closer to $20/MWh. During the same period, solar generation also had a 40% larger emissions reduction impact compared to wind.

So why aren’t more solar projects being built? There are a number of challenges, but transmission is a considerable one. The interconnection queue is long and growing thanks to the IRA, and getting an interconnection agreement often requires developers to share large upgrade costs. Further, this analysis reflects the hub values for prices and emissions. Wind projects in SPP suffer some of the worst price basis in the country with some projects seeing $10-20/MWh annual nodal discounts vs. the hub. Investment tax credit (ITC)-qualified solar projects would likely need to curtail output as soon as prices reach negative territory while production tax credit (PTC)-qualified wind projects tend to continue operating far beyond that point.

There’s currently value available for solar in SPP but only if project developers can navigate the complex issues related to transmission, interconnection, and congestion.

Q3 2023 Report Download

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A view of Q2 2023 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. We use our domain expertise in power markets, atmospheric science, and renewable offtake to analyze thousands of locations and summarize key findings here. All of the data behind this analysis is curated by REsurety’s team of experts and available via our software products. It includes aggregated metrics for wind and solar projects operating in the U.S. All summaries are calculated using hourly-level data, and all energy-weighted price metrics are calculated using concurrent weather-driven generation and energy price time series. Please fill out the form at the bottom of the page to access the full report, the Editor’s Note is below.

Editor’s Note:

June in Texas: High Heat, Not So High Power Prices

I recall the buzz during the summer of 2019 when power prices in ERCOT reached $9,000/MWh for a few hours and the speculation about how prices may have been lower with more solar on the grid. Fast forward to 2023. The hot topic to start the hot summer is instead how power prices may have been even higher without the observed solar generation. Solar energy’s contribution to grid resilience during this summer’s heat waves has even become mainstream news, with headlines about the absence of the power supply scares of previous summers.¹

Indeed, solar capacity in ERCOT has grown over the last few years. Observed hourly solar generation regularly approached 13,000 MWh heading into this summer, compared to a maximum of approximately 10,000 MWh the same time last year (Figure 1). However, despite record breaking demand and a few hours of scarcity prices in June, the average monthly prices remained below the values from last summer (Figure 2). The average power price in June 2023 at ERCOT North Hub was $2 less than in June 2022 despite exceeding the monthly peak demand record by over 4,000 MW.²

REsurety estimates that the average power price in ERCOT this June would have been nearly double the observed value without the additional solar generation. We also estimate that solar resources would have captured 27 percent more of this higher average monthly price, while wind resources would have captured 14 percent less.

Continued growth in solar capacity is expected to further degrade the capture rates for solar in ERCOT, while supporting capture rates for wind and keeping average prices lower for consumers. REsurety’s Weather-Smart fundamentals power price model shows reductions in solar value as solar buildout ramps up and the highest price hours are pushed out to the early mornings and evenings. At the same time, the reduction in power prices during afternoon hours also helps to limit downside risk to wind generation value. The lowest wind capture rates tend to occur in months that experience periods of low wind resource coinciding with periods of high demand from high temperatures.

We continue to watch how solar energy resources will perform with more hot weather still to come. Regardless of how the rest of this summer turns out, the impact that increasing solar penetration is having on markets like ERCOT is already apparent, and increasingly suggests that the near future is fundamentally different from the recent past. We will keep sharing our data findings in these quarterly reports as well as trends and thought leadership on our corporate blog.

Footnotes:

1. The U.S. Power Grid Withstands the Heat, So Far: Electric supplies from renewable energy, hydropower and batteries bolster vulnerable parts. The Wall Street Journal, July 23, 2023.
2. Based on available peak demand records for June 2023 reported by ERCOT.

Q2 2023 Report Download

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A view of Q1 2023 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. We use our domain expertise in power markets, atmospheric science, and renewable offtake to analyze thousands of locations and summarize key findings here. All of the data behind this analysis is curated by REsurety’s team of experts and available via our software products. It includes aggregated metrics for wind and solar projects operating in the U.S. All summaries are calculated using hourly-level data, and all energy-weighted price metrics are calculated using concurrent weather-driven generation and energy price time series. Please fill out the form at the bottom of the page to access the full report, the Editor’s Note is below.

Editor’s Note:

Ups and Downs on the Power Market Rollercoaster

For me, the story of 2022 was the high average power prices across the U.S. Emphasis on average because the high prices were not driven by individual large weather or market events like Winter Storm Uri in 2021. Yes, there were some weather-linked events, but these really didn’t move the needle at the annual level. The real driver in 2022 was the underlying price of natural gas – Henry Hub prices started the year at ~$4/MMBtu (already high compared to the last few years) and peaked close to $9/MMBtu in the summer. That’s by far the highest natural gas price seen in the post-shale era of the last 14 or so years.

Natural gas is often the marginal fuel in many regions and there’s a strong correlation between natural gas prices and power prices as shown in Figure 2. The historic natural gas prices during 2022 also resulted in power prices reaching their highest annual average in at least the last decade (Winter Storm Uri’s influence in February 2021 excluded).

Those high prices led to large payouts to merchant projects and clean energy buyers. For example, a typical 100 MW wind project with a $30/MWh PPA settling at ERCOT West would’ve paid more than $2M to their buyer by the end of the year. An equivalent vPPA settling at SPP South would’ve paid out more than $3M.

Now, fast forward to Q1 2023 and the world looks very different. Gas prices have dropped more than 50% compared to Q4 2022 and 40% compared to Q1 2022. Power prices in most markets have seen similar decreases, down 20-50% compared to Q1 of last year. That means the same vPPAs that were paying large sums to buyers throughout 2022 are now back to paying the projects. In some cases, buyers cut checks to projects in Q1 that exceeded the checks that they received during the whole of 2022.

The volatility seen in commodity and power markets in the past 18 months is expected to continue. Natural gas fundamentals, new generation interconnection, supply chain challenges, geopolitical turmoil, and increasingly extreme weather are expected to continue causing large ups and downs in the markets and that, of course, means ups and downs for those buying and selling power.

To understand the contributions of the three primary drivers of changing prices and volatility – grid composition, commodity prices, and weather – REsurety publishes Weather-Smart fundamentals power price forecasts each quarter. For the next 20 years the forecasts account for multiple commodity scenarios and for each of those scenarios models how the grid and market will reach under weather conditions representing each of the past 40 years. For example, we forecast this summer’s prices under ‘mid’, ‘low’, and ‘high’ gas scenarios and if the heat of 2011 or the relatively mild weather of 2007 was repeated (and every set of summer conditions in between). This provides a unique view of how both the commodity prices and weather drive market outcomes.

The model predicts there’s approximately a 3x range between the highest and lowest prices averaged for the remainder of 2023. That’s the difference between having a vPPA pay out to the buyer at similar levels to 2022 or continue to pay out to the project in line with Q1 of this year. With this level of volatility, the clichéd investment disclaimers certainly ring true – “past performance is not a guarantee of future performance and prices may go up as well as down.”

At REsurety we’ll be keeping a close eye on how both the commodity markets and weather unfold over the coming months and keeping our Weather-Smart forecasts up to date with the latest data.

Q1 2023 Report Download

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A view of Q4 2022 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. We use our domain expertise in power markets, atmospheric science, and renewable offtake to analyze thousands of locations and summarize key findings here. All of the data behind this analysis is curated by REsurety’s team of experts and available via our software products. It includes aggregated metrics for wind and solar projects operating in the U.S. All summaries are calculated using hourly-level data, and all energy-weighted price metrics are calculated using concurrent weather-driven generation and energy price time series. Please fill out the form at the bottom of the page to access the full report, the Editor’s Note is below.

Editor’s Note:

For Renewables, Timing is Everything

The final quarter of 2022 closed out with some extreme weather across most of the country and while lots of comparisons were quickly drawn against 2021’s Winter Storm Uri, December of 2022 also provided useful insights into the changing dynamics of power markets as renewable energy penetration rates increase. While the impact on market prices was smaller overall compared to Uri, one of the most interesting outcomes from the winter weather was present in ERCOT and highlighted the fact that timing is everything when it comes to capturing value from renewable energy assets.

The map in Figure 1 shows the “capture rate” potential of solar assets across the ERCOT footprint in December, 2022. Capture rate is the ratio of generation-weighted price and simple average price during the period in question and shows how much of the average price is ‘captured’ by, in this case, solar assets. Immediately visible is the interesting geographic trend across the ERCOT footprint, with the highest solar capture rates occurring in the east and west extremities while the lowest capture rates occur in the center. To understand what’s driving this, we need to look at the underlying data for one specific day.

Figure 2 shows the hourly average real-time market prices on December 23rd, 2022 as well as the generation of two hypothetical solar assets; one in west Texas and another close to the Houston area. The highest prices during this day occurred early in the morning and in the evening, meaning that most of the solar output during December 23rd did not coincide with the high prices. This leads to the very low overall capture rates in December, ranging from ~45-60% across ERCOT. But importantly, the lower prices during the day are not actually a coincidence – peak solar output has more than doubled since 2020 and there was approximately 8 GW of solar generation during the middle of the day on December 23rd, 2022, enough to move the grid out of scarcity pricing mode and back to more “normal” prices. This dynamic also creates values for locations with early sunrises (in the east) and late sunsets (in the west). The difference in sunrise and sunset times in Midland and Houston on December 23rd was approximately 30 minutes, but that was enough to secure an additional $50/MWh of value. Solar assets located close to Houston would have been able to capture the value of the high market prices before the sun came up on most of the existing solar assets further west and prices fell. That $50/MWh difference might not sound like a lot, but considering that solar capacity in ERCOT is predicted to exceed 20 GW by 2025, this type of ‘duck curve’ where solar generation serves to systematically reduce prices during the day is likely to happen with increasing frequency. Therefore, siting solar assets in locations able to naturally take advantage of the ramp hours may become increasingly valuable.

Finally, this shift in ERCOT’s grid mix, price dynamics, and subsequent drop in solar capture rates is predicted by REsurety’s Weather-Smart Fundamentals modeling. REsurety models ERCOT’s grid in 5 different future states, including high storage and net zero, and computes outcomes based on weather data representing the past 40+ years to derive the data in Figure 3 below.

The average solar capture rate in ERCOT is forecast to drop below 100% by 2024, driven by the type of event we’re highlighting here – solar generation is high enough to reduce prices during the day and scarcity pricing is moved to the early morning and evening hours. As ever, timing will be the key to renewable energy value.

Q4 2022 Report Download

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A view of Q3 2022 U.S. renewable energy performance

REsurety creates the State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and emerging trends of renewable generation in U.S. power markets. We use our domain expertise in power markets, atmospheric science, and renewable offtake to analyze thousands of locations and summarize key findings here. All of the data behind this analysis is curated by REsurety’s team of experts and available via our software products. It includes aggregated metrics for wind and solar projects operating in the U.S. All summaries are calculated using hourly-level data, and all energy-weighted price metrics are calculated using concurrent weather-driven generation and energy price time series. Please fill out the form at the bottom of the page to access the full report, the Editor’s Note is below.

Editor’s Note:

Grid Congestion Hurts Project Economics & The Environment

Project developers know well the perils of transmission constraints and grid congestion when it comes to their project’s economics. If you locate your project at a point on the grid with limited availability to move clean electricity to where it will be consumed, local power prices will be much lower than average prices across the wider grid. This phenomenon is often referred to simply as “basis” but we’ll be more specific here and call it “price basis”. Price basis is bad for project economics for two reasons – first, the project’s merchant revenue (the value of electricity sold to the system operator at the point of interconnection) can be vastly reduced and second, if the project enters into a financial agreement to sell their electricity at a hub price (an aggregate across a large grid area) they may end up owing large sums of money that their merchant revenue cannot support.

The magnitude of price basis is hard to predict and, without investment in transmission or energy storage, tends to get worse over time as more wind and solar projects are added to the grid in locations with high resource availability. Developers and consultants spend lots of time, money and effort building models to analyze historical basis and forecast future scenarios to decide where to build projects and inform their economic outlook.

However, the transmission constraints and congestion that drive price basis also lead to what we’ll refer to as “emissions basis”. When a transmission constraint binds in a region with plentiful wind and solar generators, incremental clean energy (behind the constraint) often curtails other existing clean generators rather than carbon-emitting thermal generators elsewhere on the grid. This leads to emissions basis – wind and solar projects subject to transmission constraints avoid fewer tons of carbon emissions per MWh generated than the grid-wide average. In the absence of additional transmission or energy storage infrastructure, building additional wind and solar facilities in these regions has a diminishing environmental impact. Each new facility contributes less and less to the ultimate goal of decarbonization.

The strong correlation between price basis and emissions basis is highlighted in the plot below. Each point represents a wind or solar project in ERCOT or PJM and the values of price and emissions basis is calculated for the period January to July 2022. It’s clear from the plot that the projects with the highest levels of negative price basis have the lowest environmental impact while those with positive price basis tend to displace significantly more carbon emissions from the grid. Of course, there are many nuances to the data beyond this high-level correlation – trends based on location, technology, time of day and season – that REsurety’s Locational Marginal Emissions data can expose.

REsurety calculates Locational Marginal Emissions values at the nodal level with hourly resolution to provide the information necessary for project developers, investors, and offtakers to make informed decisions about where to build or invest in new projects to maximize their revenues and environmental impact.

We’ve expanded this report to provide information on both the financial and environmental value of wind and solar generation in the U.S. We hope you find this report informative.

Q3 2022 Report Download

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