Despite delayed shelter-in-place mandates across the Great Plains, social distancing orders issued over the last couple of weeks in response to the novel coronavirus have contributed to notable impacts on electricity demand, generation, and price within the Southwest Power Pool (SPP).
Similar to other Independent System Operators (ISOs) across the country, SPP has experienced slight demand destruction throughout the on-peak period (hour-ending [HE] 7-22). Kansas City is the largest load center within SPP and was the first major city in the ISO to institute social distancing restrictions on March 24, after which we began to observe a small, but notable, decrease in electricity demand.
Using an analog forecasting technique, our SPP meteorologist, Eldon Lopes, estimates that on-peak demand in the second week of April averaged 2-3% lower than days with similar weather conditions in the spring of last year. It’s important to note that SPP estimated that COVID-related demand destruction in early April has been closer to 5-10% using a slightly different analog method that includes days with similar temperatures spanning the entire year, in contrast to our study of historical load in only March and April. The small amount of demand degradation that we have estimated is consistent with the relatively limited measures taken across the region in response to COVID-19, as shown in Figure 1 above. Should the remaining regions without government mandates for social distancing enforce such measures, demand destruction may intensify.
Another notable change to power demand thus far is a more gradual morning ramp that leads to a later load peak than typically observed in the early spring. This can be attributed to more people working from home, which enables them to get out of bed later in the morning and in turn, start consuming power later.
The response to the pandemic has also affected power supply in SPP. As Figure 2 below illustrates, the daily capacity of generation on outage over the last couple of weeks has averaged nearly five gigawatts (GW) below the average levels of generation on outage from 2017-2019. While April typically features an uptick in generator outages as plants conduct maintenance in the spring “shoulder season,” generator outages have actually declined in April 2020. This is suspected to be the result of coal and gas generators delaying or shortening the duration of outages when possible in order to comply with social distancing restrictions. Though there are reports of delayed nuclear outages in other power markets, there are only two nuclear plants in SPP, and neither of them had refueling outages scheduled for this spring.
As is typical during the spring shoulder season, wind generation continues to make up a significant portion of the SPP supply stack, even setting a wind penetration record of 72% at 1:56 AM on April 2. It is important to recognize that this record was achieved not only as a result of wind farm builds within SPP over the last year, but also because of atypically low levels of power demand that stemmed from abnormally mild weather and COVID-related demand destruction.
The net effect of higher wind capacity and weaker demand has led demand-net-wind in the first twelve days of April to average about three GW lower than that of the same period in 2019. These especially low levels of demand-net-wind have triggered increased economic wind curtailments within the real-time (RT) market, which have had important implications for the cost of energy. Dispatching wind generation down can lead wind farms, which may offer power at a negative price, to set the energy cost. Historically, this phenomenon is most common overnight, when demand is lower and wind speeds are stronger. However, the incidence of on-peak hours pricing below zero rose sharply in March and April of this year, as shown in Figure 3 below.
As Figure 3 demonstrates, negative real-time hours during the daytime were already abnormally high prior to the pandemic response as a result of mild weather conditions and growing wind capacity in SPP. Still, the steep increase observed in late March and early April is notable and coincides with COVID-related demand destruction and reduced capacity on outage.
In addition to increasingly frequent negative pricing, higher supply and weaker demand have driven a general decline in energy price, as shown in Figure 4. Though it is difficult to quantify the impact of the coronavirus response on price given especially cheap gas and growing wind capacity, it’s clear that social distancing directives have weakened prices.
Transmission and Congestion
So far, there has been no indication that transmission outages have been affected in SPP. Irrespective of coronavirus, transmission outages are moved all the time without explanation. It is therefore challenging to conclusively attribute changes in the SPP transmission outage schedule to the pandemic response, even as other markets like ERCOT have linked transmission outages specifically to coronavirus. As the situation continues to unfold, our SPP team is monitoring news reports and press releases regarding the effect of social distancing measures on transmission work.
To date, SPP congestion appears to continue to closely correlate with wind production. For the remainder of the windy spring months, congestion risk is expected to maintain its typical shoulder season strength. However, Greentech Media, our sister company, has reported the potential for slowed wind farm development, which is an important driver of continued congestion in SPP even as transmission upgrades alleviate congestion risk. If transmission work continues as scheduled while wind development declines, congestion risk in SPP may weaken in the long-term.
Our team continues to monitor the effect of COVID-19 on the SPP market. As the coronavirus pandemic continues to develop, we will be providing clients with cutting-edge insight. To learn more about our services or to speak with an expert, please click here.