Fleets of new renewable resources, fewer thermal-fired resources and California's voracious energy demand will drive midday prices on the Mid-Columbia spot market into negative territory by 2041, according to the Northwest Power and Conservation Council's preliminary price forecast for its 2021 Northwest Power Plan.
Zero-fuel cost resources, such as wind and solar, will largely push natural gas out of the market during midday when the sun is shining and the wind is blowing. Some natural gas resources will have to operate midday to ramp up for the evening demand peak, Council planning/analysis manager John Ollis said in an interview.
"I think we've finally hit the threshold where things are going to get crazy," he said while presenting the preliminary forecast at the Power Committee's Aug. 11 meeting.
The forecast's daily price curves still resemble today's shape, with peak demand prices in the morning and evening on either side of a midday valley. The model projects Mid-C market prices to decline over the 20-year forecast, so peak demand prices in 2041 are lower than those forecast in 2025 (in inflation-adjusted terms).
Clean energy policies fuel the forecast's surge of renewable resources' nameplate capacity. Solar and wind, including wind paired with energy storage systems, are the biggest new resources in the projection. The modeling expects the vast majority of renewables nameplate capacity added in the West by 2025 to be built outside the Northwest. However, the model has the Northwest adding considerable wind and solar by 2040, albeit less new capacity than in California, the Southwest and Mountain West.
The model projects only a small amount of new renewable resources due to economics.
The forecast includes government clean energy mandates and utility targets, such as Idaho Power's pledge to rely on 100 percent clean energy by 2045. Every Western state except Idaho and Wyoming has renewables portfolio standards (Utah's is a nonbinding goal). Four states—California, Colorado, New Mexico and Washington—have adopted binding clean energy standards, and Nevada passed a nonbinding clean energy goal. Three states—California, Oregon and Washington—have adopted future bans on coal-fired resources.
Increasingly restrictive clean energy policies and renewables standards, and the largely siloed resource planning prevalent in the Northwest, will encourage utilities to build an excessive amount of renewable resources in the forecast.
"Not only do you have to build new resources, you have to build specific resources [due to those policies and mandates]," and because they are intermittent resources, utilities will have to build more of them to ensure adequate capacity, Ollis said.
That intermittency is likely to keep natural gas-fired resources operating in the WECC footprint, according to the projection.
The forecast's model does not consider energy efficiency or demand response, and it likely projects more new natural gas resources than will actually be built, he said.
The final forecast likely will include fewer new gas-fired resources, Ollis said.
Nonetheless, the addition of natural gas resources in the forecast "is a legitimate signal that shows what we all know: Gas is cheap, and if you need to meet reserve margin, it is a good solution," he told Clearing Up.
Declining energy prices would mean much of that capacity would sit idle until demand outstrips the available renewable resources' capacity.
"We're going to see little-used resources, because [utilities] will need steel in the ground to meet reserve margins," he said.
"Some plants will be running out of the money during the midday drop in prices in order to provide flexibility later in the day" when demand picks up, he said. "That is part of what would drive up prices later in day" in order to "recover costs during the negative pricing period earlier in the day."
Demand shifting will help ameliorate demand price spikes and substantial need for natural gas-fired resources, Ollis said.
The model assumes climate change will decrease hydropower generation and increase demand during summers in the Northwest.
Coal retirements across the West are a major contributor to increased demand for renewable resources as well as additional natural gas capacity. WECC territory contains about 35 GW of coal-fired capacity in 2020. That is slated to drop to 15 GW by 2030, based on planned retirements. About 40 percent of that retired capacity lies within the Northwest Power Pool.
The final price forecast, which Ollis plans to present to the Council this fall, will be used in the 2021 regional plan's portfolio model.