The Effects of an Increasing Surplus of Energy Generating Capability in the Pacific Northwest

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This paper documents Council staff analysis addressing the market effects of increased renewable energy on the power system. A consequence of the rapid development of Northwest wind projects to serve regional and California renewable portfolio standards is an increasing surplus of low variable-cost energy generating capability. This surplus puts downward pressure on electricity market prices, reduces the value of surplus hydropower energy, and increases the frequency and severity of excess energy events. The paper takes a first look at the significance of these effects to inform ongoing discussions of these issues.

The principal findings of this assessment are:

  • The growing fleet of low variable-cost resources has increased the frequency of low market price events and will likely continue to do so until demand recovers from the current economic downturn.
  • Wind development beyond Northwest RPS requirements would increase the frequency of excess energy events. Changes to California‚Äôs RPS signed into law in April 2011 appear to reduce the likelihood of significant renewable resource development in the Northwest to supply California beyond contracts already in place.
  • Current RPS targets and financial incentives have led to RPS-qualifying energy production that currently exceeds load growth.
  • The average impact of lower market prices on the energy value of Northwest generation as a whole will be moderate. The value of hydropower will be particularly affected. Growth in variable generation increases market price volatility.
  • Measures are available to reduce the frequency of excess energy events, alleviate the economic and operational issues associated with excess energy events, reduce equity issues, and to use available low-cost, low-carbon energy more productively. These measures will be examined in more detail through the Wind Integration Forum.