Lower energy costs seen during first half of 2020 providing relief to consumers
Wholesale electrical prices were lower the first half of this year than they were the same time in 2019, and that metaphorically feels like a cool breeze on a hot summer day.
The data comes from the Southwest Power Pool, the regional transmission organization that oversees the operation of 66,000 line miles of electric grid that supplies power to utilities, cooperatives and other power consumers across Oklahoma and all or parts of 13 other states stretching from the Red River all the way to the U.S.-Canadian border.
Pool administrators report wholesale energy prices during the first six months of 2020 on its day-ahead demand market were 36% lower, year-over-year.
While they attributed that in part to additional wind capacity that has been installed across the system so far this year, they also nodded toward dramatically cheaper natural gas prices as a key factor impacting those market prices.
“The majority of that comes from the reduction in natural gas pricing, which was off 34%, year-over-year during that same time frame,” said Lanny Nickell, SPP’s chief operating officer. “But you also can attribute some of that to the addition of new renewables. We have added about 5 gigawatts of wind so far, and expect to see a total of about 7 gigawatts added by the end of the year.”
The regional transmission organization and the consumers it serves have benefited from that growth.
On one morning in February 2017, the pool observed a record of 52.1% wind penetration, marking the first time an organization of its type had relied upon renewable energy to support more than half of its load.
This year, the system has 24 gigawatts of wind capacity connected to the grid, so far.
Natural gas prices, meanwhile, have been impacted by reduced energy demands resulting from the shutdown of the nation’s economy in an attempt to blunt the spread of COVID-19 through its nearly 330 million inhabitants.
In March, the Henry Hub spot price for the fuel fell to below $2 per million British thermal units and stayed there until last month, when it finally climbed out of the basement, at least for now.
Meanwhile, more and more utilities and other entities that generate power have turned to using natural gas-fired plants over the past decade to help meet the grid’s electricity demand, given they can be more quickly brought online or idled to meet fluctuating energy needs, compared to coal-fired generating stations.
Lower costs for that base fuel used to generate the electricity, SPP officials explained, translates into lower overall pricing for the product.
That, they said, benefits the system’s consumers, something that played out recently for customers of both of Oklahoma's investor-owned utilities.
Public Service Co. of Oklahoma has reduced fuel costs for its customers twice in the past year. The first time, effective in October, reduced an average residential customer's monthly bill by $3.68. The second, effective in May, cut the average residential customer's monthly bill by another $9, officials said.
Oklahoma Gas and Electric, meanwhile, obtained regulator approval to reduce its monthly electric bills for its Oklahoma customers to compensate them for the affordability of the energy it provides in a cut that took effect in June, saving an average residential customer in Oklahoma about $5.
Wind growth continues
Renewable energy growth continues to make strides across the nation. The American Wind Energy Association’s Wind Powers America report stated operators added a second-quarter record of 2.5 gigawatts of wind energy involving 14 projects across nine states to grids across the country this year.
Nationally, about 109.9 gigawatts of wind-generated power supplies energy to consumers.
Oklahoma, the report said, has 8.2 gigawatts of wind capacity connected to the grid, more than any other state in the nation except for Iowa (about 10.7 gigawatts) and Texas (about 30 gigawatts).
Wind power development and construction activity also remained resilient during the second quarter, given completed projects added then were already nearing the end of the years-long development process and had the materials and components on hand to complete construction before the COVID-19 pandemic began to create supply chain disruptions for the broader American wind industry.
While new federal guidelines provided wind developers with near-term tax flexibility, COVID-19 continues to present significant challenges for U.S. wind development, the association noted, adding the industry is working with Congress and other renewable energy leaders to address the impacts of the pandemic.
“American wind power is immensely proud of its 120,000 workers who have fought to bring additional clean, reliable electricity to American citizens, even in the initial stages of the global pandemic,” Tom Kiernan, the association’s CEO, stated.