Throughout 2021, we saw an increasing focus on transitioning to renewable energy resources and clean energy throughout the world. When Biden came into office, the US renewed its focus on efforts towards a clean energy future that had been abandoned under the previous president. While there is no denying that it is necessary to continue developing renewable energy resources, replacing thermal resources with renewables is not a one-for-one tradeoff. In addition to intermittency issues, renewable penetration may cause unintended downstream market effects. In this blog, we’ll look into the effects that increased renewable penetration may be having on power prices in RTOs.
In February 2021, a cold snap caused major outages across ISOs, several deaths, and would define the discussions that happened throughout the energy industry the rest of the year. Less than halfway through the first month of 2022, it appears that extreme weather concerns will continue - for good reason (Utility Dive 2022).
By: Jack Farley, Live Power CEO
When generators commit 100% of their capacity to day-ahead (DA) energy or Ancillary Service (AS) products, they forfeit the margin opportunity from real-time (RT) prices spikes. Conversely, when generators reserve capacity for the RT market they run the risk that RT prices clear at a lower level than DA prices. This price uncertainty is the key challenge in determining the revenue-maximizing unit commitment - do you hold back capacity or commit it all to DA
As we near the end of another year, let’s look back on the major trends that affected nodal power markets and the energy industry in 2021. Yes Energy’s Market Monitoring team, who monitor changes to every single ISO, compiled the most significant trends they’ve seen this year. Reliability and resource adequacy amid extreme weather events was the number one trend we saw this year. We’ve also seen political forces impacting markets and regulatory changes. Additionally, ISOs added many new products, and datasets continue to expand. Read more on these trends, and their drivers below!
“When people talk about decarbonization, they talk as if it’s this mysterious thing that’s never been achieved,” - Isabelle Boemeke, Brazilian advocate for nuclear power (Huffington Post, 2021)
Decreasing the use of fossil fuel generation is a topic of increasing importance as we continue into the future. Following the COP26 conference in Glasgow, it’s clear there is significant work to be done if we are to keep warming under 1.5 degrees celsius, compared with pre-industrial levels. As world leaders, policy makers, investors, scientists, and innovators work to devise solutions that will provide electricity reliably - without carbon emissions - an existing generation source has come to the forefront - nuclear power.
“The next ten years will be an era of fundamental change… Traditional utilities will shift from building asset-heavy infrastructures that provide stable and predictable electricity supply to managing flexible, decentralized energy solutions, while acquiring the skills to cope with the forces of digitization, electrification, energy transition, and decentralization.” (A.T. Kearney, 2018)
It’s no secret that digital transformation in all industries is the future of our society. In the energy utility industry, that will result in a significant shift not only in the way utilities operate, but also in the solutions they provide.
On Thursday, November 11th in SPP there were significant real-time (RT) price spikes in the morning and evening peak hours. Several factors conspired to produce price spikes over $1500, including forecast errors, ancillary service limits, scarcity pricing structures, and relatively soft day-ahead (DA) prices. We will examine these factors and ask one important question. Were there signals to provide early warning of these issues?
“The energy transition is driving a ‘decade of deep redesign’ in the energy sector, forcing utilities to adapt at an accelerated pace of business change, never seen before. During turbulent times ahead, organizations that are built for change will be better positioned than those that are built to last” - Gartner, 2021
While the energy industry is currently on a digital transformation journey, electric utilities are currently being faced with unique opportunities and challenges as the world becomes increasingly digital. As we move into the future, more data will be available to and required of utilities. As consumers connect to the grid with their electric vehicles, solar panels, and more, utilities will likely need to collect and utilize data across the entire grid, including at the individual consumer level.
World leaders met in Glasgow this week for COP26. COP26 is the 26th Conference of the Parties, a United Nations climate summit where countries in attendance discuss and share their plans to cut emissions. Due to the nature of COP26, it’s reasonable to assume that topics discussed at COP26 will indicate future trends in the energy industry, and how we live our lives in general.
If you work in nodal power markets, you don’t have to be told that it’s a unique industry. While this can lead to intriguing and lucrative opportunities, it can also make it more difficult for owners or managers of small to mid-sized trading organizations to manage their risk around their nodal power trades.