Grid congestion sucks for renewables! (it kills revenue)

Congestion is causing huge $$$ losses in Texas for wind and solar assets.

The graph below demonstrates this: price differentials in 2022 between local generators and Hub North–a bellwether price in ERCOT and typically the price point demanded in Power Purchase Agreements (PPAs)–were huge for wind and growing for solar, where natural gas peakers often garner a premium price given their advantageous locations, much closer to demand.

Note: PVGR = solar, DSL = diesel, {CCGT90, SCGT90, CCLE90, GSSUP, GSNONR, GSREH, SCLE90} = natural gas, CLLIG = coal, NUC = nuclear, PWRSTR = storage

And regardless of where your wind or solar asset is based, you’re very likely suffering from some price differential. Hardest hit in 2022 were wind and solar assets in West, South and Central Texas.

Interestingly, the above graphs only demonstrate the price impact assuming 1 MW across all hours. Diving into a few example assets below (names removed) and incorporating observed production, we see how massive these $ losses can be for wind and solar (for these three assets, this revenue loss ranges from $3.4 MM – $27.0 MM over just 12 months!):

More and more, PPA counterparties are demanding pricing at Hub North (or an equivalent), and placing the congestion risk on the asset owner. While a fixed PPA price may look appealing, owning congestion risk can drive major losses for wind and solar assets. Monthly and Annual Congestion Revenue Rights contracts (CRRs) only partially solve this problem: (1) they can be expensive, (2) they’re not well-suited for renewables, only offering peak-demand and off-peak-demand blocks rather than, for example, when the sun is shining, and (3) they require accurate price predictions months or even years out.

Point To Point contracts (PTPs), in contrast, can be a much less expensive, more flexible alternative, particularly when paired with an accurate next-day price forecasting engine…

Enter Gaiascope! 👏

For wind and solar assets most hard hit by price differentials, a good PTP strategy can reduce $ impact by 20-50% (that’s $0.7 MM – $13.5 MM of revenue gain annually in our examples above!). And it can enhance a CRR strategy as well, reducing the risk of overpaying and managing volumes not covered under CRRs.

Gaiascope offers a spectrum of PTP solutions to fit your price range, from fully-customized trading strategies to simple summaries of key market drivers (for example, congestion and net load forecasts). Reach out to today to learn more.