This market driver alert (MDA) investigates bearish fundamentals in CAISO, from natural gas price levels to large energy storage additions. Could this summer be different for CAISO?
Despite facing the most bearish fundamentals in the last five years, forward markets have cleared at heat rates twice last summer's levels. Historically, the California Independent System Operator (CAISO) has been a summer importer of on-peak power (Figure 1); however, this summer could be different.
The bearish fundamentals CAISO is facing this summer include much lower natural gas price levels, flat net loads, higher in-state hydro levels, and large energy storage additions. Temperatures, which could be bullish or bearish, are the only wildcard.
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