Higher output from hydroelectric, wind and solar resources pushed down the cost of serving wholesale load in the California ISO area by 11 percent in the second quarter, compared with the second quarter of last year, CAISO's Department of Market Monitoring said.
The total estimated cost of serving load in the second quarter was $1.4 billion, or about $27/MWh, an 11-percent decrease from the same period in 2018, DMM said in its second-quarter report. After adjusting for natural gas costs and changes in greenhouse gas prices, wholesale electric costs fell to between $30/MWh and $34/MWh.
Generation from hydro, solar and wind resources increased compared with both the first quarter this year and the same quarter last year. The April snowpack in California was 175 percent of normal, compared with 58 percent of normal in April last year, which pushed up hydro production in the second quarter by 49 percent.
"The increase in renewable production compared to the previous quarter contributed to lower wholesale electricity prices due to the low marginal cost of renewables relative to other resources," DMM said. "The 48 percent increase in hydroelectric output is one contributing factor to this trend."
Wind and solar production also increased compared with the first quarter of this year, but decreased slightly compared with the same quarter last year even though there were capacity increases this year. Part of the reason was increased curtailment, or "downward dispatch," which reached record levels of 200,000 MWh in April and 230,000 MWh in May.
Average quarterly day-ahead prices were significantly lower than both 15-minute and five-minute prices for the first time since 2014, DMM said. Day-ahead prices averaged $23/MWh for the quarter, while 15-minute prices averaged $26/MWh and five-minute prices averaged $30/MWh.
"Average prices decreased substantially from the first quarter to levels similar to the second quarter of 2018, driven by decreased gas prices and increased hydroelectric and renewable production," the department said. "Day-ahead prices remained higher than real-time prices in most hours, but average quarterly real-time prices were driven up by real-time price spikes."
Changes the ISO made to the congestion revenue rights auction pushed down losses for transmission ratepayers, the report says. The DMM had been lobbying for the changes to the CRR auction structure, although some traders had argued the activity was not improper. FERC approved CAISO's changes to the auction [ER19-26] in November 2018.
Payments to financial entities and generation owners purchasing congestion revenue rights exceeded auction revenues by about $7.6 million and $200,000, respectively, but energy marketers paid over $1 million more in auction revenues than the revenues they received from these rights.
"The decrease in losses to transmission ratepayers from sales of congestion revenue rights, relative to [the] $17 million loss in the second quarter of 2018, is due in part to changes to the auction implemented by the ISO in 2019 which limit the source and sink of congestion revenue rights that can be purchased in the auction," DMM said.
Average natural gas prices—a significant driver of electricity prices in CAISO—in the quarter were 0.3 percent lower than in second quarter 2018.
Prices at PG&E CityGate have remained low, but as a whole were slightly higher than at SoCal CityGate during the second quarter. The Northwest Sumas gas hub in the Pacific Northwest saw a sharp decline in gas prices compared with the previous quarter, due to moderate shoulder-season demand and increased hydro.
Permian Basin gas prices were low and occasionally negative for most of the second quarter, because of a force majeure on an El Paso Natural Gas pipeline over a potential leak.
In the second quarter of last year, lower natural gas prices, higher renewables output and moderate demand tamped down wholesale electricity prices by about $3/MWh, or 10 percent, compared with the second quarter of 2017.