ERCOT Release 4.1b Now Available

The new ERCOT market forecast from Ascend MI is now available in the Market Intelligence Docs module. The new forecast captures recent market dynamics and a refreshed outlook on the power supply stack, gas curves, and technology prices. Impacts of the Inflation Reduction Act to the effective CAPEX of projects and other incentives are also included in the modeling of the prices in this update. In addition to hub price forecasts and market reports, generic battery revenue forecasts at the hubs are available for download.

Webinar 3/29/23: NYISO Forecast 4.1 Preview

Join Ascend’s Dr. Gary Dorris and Dr. Brent Nelson for a webinar where we discuss Ascend’s latest market outlooks for NYISO in the midst of marginal ELCC accreditation, elevated gas prices, and IRA tax credits. This webinar will be held at 11am MT on March 29th, 2023 – access it via Zoom here. If you miss the live presentation, a recording will be posted to the Market Intelligence Hub module.

CAISO 2022 Energy Prices Recap

I. Hubs/System Level
Average Prices

On an ATC basis, CAISO average system level prices nearly doubled from 2021 (excluding Winter Storm Uri) to $80+/MWh. Prices were particularly elevated in December, when California natural gas price benchmarks breached $50/MMBtu on account of low local storage levels and pipeline constraints.


Both RT and DA volatility (2 hour cumulative top-bottom spreads shown below) increased significantly over 2021 excluding Uri, as higher natural gas prices, a summer heat wave in Aug/Sep, recovering average load trends, and increased renewable deployments all contributed to higher intraday price volatility. The declining RT volatility trend of the past several years witnessed a stark reversal, with a rebound back up to 2018 levels. DA top-bottom spreads, strongly tied to natural gas prices, set new records.

II. Regional Observations
Average Prices

Despite CAISO average hub prices changing significantly from 2021 (excl Uri) to 2022, regional relative price trends were relatively stable. The highest average DA prices (red nodes) were generally in Northern California and along the Northern and Southern Coasts, and lowest average prices (blue nodes) were in the San Joaquin Valley and Desert Southeast.


RT volatility metrics broadly increased across CAISO in 2022 versus 2021 excl Uri. In 2022, the Central Valley and the greater San Diego area remained the relatively higher volatility areas within CAISO, as in 2021 (red nodes). Summer volatility in the Central Valley was once again especially high compared to the rest of California.

The Digitalization of Power

For most of my life, music recordings had been played through mechanical devices that spun, from the phonograph to cassettes to CDs. Today, music is purely digital and the advances toward digitalization have radically changed how music is played and distributed. We no longer go to the record store to buy music and the number of artists with recordings that can be easily purchased has increased dramatically. Moreover, my CDs have become a stranded asset.

A similar transformation is underway with power supply, where generators that spin to produce electricity are being replaced by digital systems of solar plus batteries. The costs of digital power supply technology will continue to decline and displace conventional generation with technological advances. While future power systems will likely involve a significant portion of hydro and wind generation that still turn generators to produce electricity, the digital transformation of power supply has taken root. The continued advances in in digital power supply systems will provide more compelling and often unavoidable economic merit over traditional generation. This will continue to cause disruption to the power industry as inflexible thermal generation fall prey to technological advances of digital power systems and become stranded assets much like my CDs.

Dr. Gary Dorris, CEO, Ascend Analytics

ERCOT summer forward curves have crested toward $160/MWh for July/August.

ERCOT summer forward curves have crested toward $160/MWh for July and August in the wake of an ERCOT ISO report that reserve margins could be below 10% ERCOT President and CEO Bill Magness said, “A growing economy and retirements of generating units will tighten reserves available on peak summer days.”

Historically, tight reserve margins indicate a power market where generators can earn scarcity rents far above their variable cost of generation. In the past, Texas heat waves resulted in sustained price spikes near the market ceiling price for several days. However, this traditional thinking does not account for the new dynamics of renewables, which have a relatively small capacity contribution compared to their expected contribution toward energy. Yes, the ERCOT ISO is right that the capacity contribution of renewables can be small under extreme meteorology’s, but the expected energy production of renewables make the odds of ERCOT generators realizing scarcity akin to previous regimes, where reserve margins dipped below 10% a statistically extreme event. While the summer may produce select hours with high prices, the odds of having these prices persist for a sustained period such as a heat wave become a statistically extreme event.

The implications of the market fundamentals suggest that the realized average spot energy prices will fall below the monthly summer forward marks of this late spring and early summer. At the same time, we expect the volatility in day-ahead and real-time prices to continue to increase as a greater portion of the energy supply is derived from intermittent renewables.

How Will Disruptive Technology and Changing Markets Affect Natural Gas in the Future?

Here is an interesting article from which highlights the three main reasons why natural gas’s reign may come to a quick end. Three main topics explored are:

  1. Too much capacity for current and future demand
  2. Gas lacks flexibility to ramp up, down quickly
  3. Rapid advance of battery storage

Follow the link below for the full article…