Tag: Market Report

Q3 2022 State of the Renewables Market Report

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.

Carl Ostridge

Carl Ostridge
SVP of Analytics Services

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.

Figure 1: Price basis vs emissions basis for wind and solar projects in ERCOT and PJM (Jan-Jul 2022)

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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Q2 2022 REmap Report

REsurety creates the REmap-powered State of the Renewables Market report every quarter to provide readers with data-driven insight into the emerging trends and value of renewables in U.S. power markets. We combine our domain expertise in power markets, atmospheric science, and renewable offtake to analyze thousands of projects and locations and summarize key findings here. All of the data behind this analysis is available via our interactive software tool, REmap. Please fill out the form at the bottom of the page to access the full report, the Editor’s Note is below.

Blair Allen, director, software customer success, REsurety

Blair Allen
Director, Software Customer Success, REsurety

Editor’s Note:

Node to hub basis* is rapidly becoming one of the most prominent financial risks for renewable developers and clean energy buyers alike. Although not a new issue, it has recently become more visible for two reasons: first, it is getting much worse in many areas with a lot of renewables, and second, clean energy buyers are increasingly taking on basis-risk exposure through contractual terms in PPA agreements. While basis used to be a risk only borne by project developers and investors, now corporates are sensitive to it as well.

In Q2, a handful of renewable-rich regions saw generation-weighted (AsGen) basis worsen by double digit values relative to the 4 year Q2 average. In many cases this was most prominent in areas that were already no stranger to negative basis. In ERCOT South Hub, for example, the average AsGen basis for operating wind projects in Q2 over the last 4 years was -$11 – in 2022 it declined to -$34. In the NP15 region of CAISO, the average AsGen basis for operating solar projects dropped from -$9 over the last 4 years to -$27 in 2022. And in SPP South Hub, operating wind projects saw their 4 year average decline from -$9 to -$31 in 2022.

But hub-level average values only tell part of the story, since basis is inherently a project-specific concern and can vary considerably not only within hub boundaries but across projects only miles apart from each other. For instance, when considering the projects within SPP South Hub last quarter, REmap shows project-by-project AsGen basis values that varied from as low as -$48 to as high as $26. The same extreme divergence played out across different ISOs and hubs, driven by subregional constraints driving a wedge in value between locations on either side of congested areas.

Basis warrants so much attention because it is extremely volatile and has a large impact on investment returns. In addition, it is hard to solve: investment into transmission infrastructure takes years and is extremely expensive. Developers screen for viable greenfield locations to avoid it, investors pore over model results to price it, and now energy buyers are turning to their advisors or tools to understand it better as well. The basis risk sharing clauses increasingly present in PPAs link the developer and clean energy buyer to the project’s basis performance in ways the two groups weren’t before, and the mechanics of that linkage aren’t always well understood. Although its impact ultimately depends
on the counterparty and the project-specific contract details that can either worsen or improve exposure, one thing is clear: basis should be on everyone’s radar.

In this Q2 REmap report, we analyze a number of metrics including: shape, capacity factor, and AsGen value of power for renewables domestically. REmap users have real-time access to these metrics and more, including basis analysis, through the map-based SaaS offering.

*AsGen basis is defined in this report as the difference between a project’s AsGen nodal price ($/MWh) and its hub price ($/MWh), where the hub is assumed to encompass the area where the node is located.

Q2 2022 REmap Report Download

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Media Advisory: Prolonged periods of negative pricing in Q1 set new record

Blair Allen

REsurety’s REmap Q1 State of the Renewables Market report presents generation-weighted value, shape value, and capacity factor for major U.S. hubs

BOSTON, MAY 10, 2022 – The U.S. power grid saw record lows in the first quarter of 2022, REsurety’s REmap Q1 2022 State of the Renewables Market Report finds, with prolonged negative pricing in Texas expected to ease this summer.

Unlike the soaring prices of last year during the Texas energy crisis of February 2021, this year the ERCOT power grid saw record lows in Q1. It was another turn in a developing plotline REsurety commented on last quarter. 

One example: In February 2021, ERCOT West Hub (among others) settled at the market price cap of $9,000/MWh for three days; in February 2022 ERCOT West Hub saw a two day period where prices never rose above $0/MWh. Mild demand coupled with sustained periods of high wind and solar generation created the conditions for this negative pricing event, though these conditions weren’t isolated to only those few days. In fact, by the end of the quarter, West Hub more than doubled the number of negative-priced hours than were seen in Q1 the year prior.

REsurety creates the REmap-powered State of the Renewables Market report every quarter to provide readers with data-driven insight into the value and latest emerging trends of renewables in U.S. markets. The team uses its knowledge in power markets, atmospheric science, and renewable offtake to analyze thousands of locations, and summarize a few key findings, using the data that is available via its interactive software tool, REmap.

Key components in the report to be used to analyze trends in a given ISO, sub-regions of an ISO, or hub, are:

  • The generation weighted value, or the realized value of the wind and solar projects 
  • The shape value, or the relationship between the generation value and the simple-average market price
  • The net capacity factor for operating wind and solar projects 
Blair Allen, Director, Software Customer Success, REsurety
Blair Allen

“Using the modeled energy in REmap, which tells us how projects could have performed based on underlying wind/solar resource availability, last quarter West Texas solar projects saw anywhere from 20 to 30% of their potential hourly production for a given month happen in negatively priced hours. However, in reality, these projects weren’t operating at their potential capacity in these intervals, and either shut down or significantly ramped down production,” reports Blair Allen, Director, Software Customer Success, REsurety. 

Over the next quarter as the weather starts to transition to summer conditions negative pricing is expected to decline. With an increase and shift in demand, Q2 will likely be a transitional period, with the frequency of negative pricing hours remaining high to start before subsiding more materially by the end of the summer in mid Q3. 

The power of REmap lies in the historical and predictive modeling for renewable energy projects across the United States, as well as the ability to analyze hypothetical installations. Learn more by reading the Q1 report

About REsurety

REsurety is the leading analytics company empowering the clean energy economy. Operating at the intersection of weather, power markets, and financial modeling, we enable the industry’s decision-makers to thrive through best-in-class value and risk intelligence, and the tools to act on it. For more information, visit www.resurety.com or follow REsurety on LinkedIn

Contact:  Allison Lenthall, [email protected], +1-202-322-8285


Disclaimer.

Q1 2022 REmap Report

REsurety creates the REmap-powered State of the Renewables Market report every quarter to provide readers with data-driven insight into the emerging trends and value of renewables in U.S. power markets. We combine our domain expertise in power markets, atmospheric science, and renewable offtake to analyze thousands of projects and locations and summarize key findings here. All of the data behind this analysis is available via our interactive software tool, REmap. Please fill out the form to access the full report, the Editor’s Note is below.

Q1 2022 State of the Renewables Market Report

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Blair Allen, director, software customer success, REsurety

Blair Allen
Director, Software Customer Success, REsurety

Editor’s Note: As the first quarter of 2022 concludes, we reflect on historic highs and historic lows. Another record in ERCOT marks the quarter’s passing, just as one did a year ago following the market events of February 2021. However, unlike the soaring prices of last year, this record involves a prolonged period of negative pricing, and another turn in a developing plotline we commented on last quarter. Please fill out the form below to access the report.

Consider this comparison: in February 2021 ERCOT West Hub (along with others) settled at the market price cap of $9,000/MWh for three days; in February 2022 ERCOT West Hub saw a two day period where prices never rose above $0/MWh. Mild demand coupled with sustained periods of high wind and solar generation created the conditions for this negative pricing event, though these conditions weren’t isolated to only those few days. In fact, by the end of the quarter, West Hub would more than double the number of negative-priced hours than were seen in Q1 the year prior.

One impact of this increasing frequency in negative pricing is rising levels of curtailment, particularly among solar projects which, unlike wind, don’t benefit from the production tax credit and are less likely to operate below $0/MWh. For example, using the modeled energy in REmap, which tells us how projects could have performed based on underlying wind/solar resource availability, last quarter West Texas solar projects saw anywhere from 20 to 30% of their potential hourly production for a given month fall in negatively priced hours. However, in reality these projects weren’t operating at their potential capacity in these intervals, and either shut down or significantly ramped down production.

Another important angle to consider: whereas for the last few years hourly negative prices at West Hub were evenly split between on-peak and off-peak hours during this time of year, this year saw that balance shift to 60/40 in favor of on-peak hours. The cause for this shift is clear: increasing amounts of solar capacity means that low pricing is no longer just following the production profiles for wind, and is coinciding more regularly with the rise and fall of solar energy.

Looking ahead, as seasons change into summer conditions so too do we expect a change in the volume of negative pricing. An increase and shift in demand– which will steadily move more towards the mid afternoon as air conditioning ramps–and a decline in wind production at the same time should converge to steadily mitigate on-peak negative price frequency. Q2 will likely be a transitional period, with frequency of negative pricing hours remaining high to start before subsiding more materially by the end of the quarter.