Market Reports

The Altenex Market Report – Spring 2017: CAISO Market Overview

The report is authored by the Edison Energy Supply Team: Emily Williams, Director of Supply; Mary Kate Francis, Energy Supply Associate; and Charley Hildt, Energy Supply Analyst.

This article is adapted from the Altenex Market Report – Spring 2017, a comprehensive assessment of the policy, technology, and pricing developments shaping the North American renewable energy market.

About CAISO: The California Independent System Operator (CAISO) coordinates the movement of electricity through 80 percent of California’s, and a small part of Nevada’s, power grid.

CAISO transitioned to an LMP pricing model in 2009 and implemented nodal virtual bidding in 2011.

As the figure demonstrates, wholesale power prices in CAISO dipped to record lows in 2016, but have since ticked upward. Around-the-clock pricing at CAISO SP15 averaged $26.32/MWh in the past twelve months, and is expected to average $28.00/MWh in 2017, based on a combination of early 2017 prices and OTC power forwards, as of late March 2017.

Monthly Historical & Futures Pricing at CAISO SP-15 Hub

The reductions CAISO has seen in wholesale power prices are a function of the low price of natural gas and increased renewables build-out. Hydropower is expected to be a readily available, inexpensive resource in California this year, as enough precipitation occurred in winter 2016-2017 to lift most of the state out of a five-year drought and leave the Sierra Nevada mountains with snowpack at 150-175 percent of normal levels. Many of the hydro powerhouses on the system are required to run regardless of CAISO wholesale power prices in order to meet municipal water needs and prevent flooding hazards.

This poses risks for an offsite C&I buyer, primarily in the spring run-off season, as the ramping up of inexpensive solar, still strong available wind, and surging hydro resources are expected to drive an oversupply of power.  This can cause negative pricing and economic or reliability-related curtailment of renewables, at least in the near term.

Over a longer period, California’s state energy policy, which encourages energy efficiency investments, behind-the-meter solar buildouts, and increasing levels of energy storage will put downward pressure on wholesale power prices, while rising gas prices and electrification of the transportation sector will apply upward pressure.

Furthermore, the CAISO’s efforts to expand its footprint across the Western Electricity Coordinating Council (WECC) should stabilize pricing, giving California markets the ability to spill over excess solar and hydro generation and import during times when renewables are not available.

What are the advantages of signing a deal in CAISO?
[Available only in the full report.]

What are the challenges of signing a deal in CAISO?
[Available only in the full report.]

The report is available to Edison Energy clients and to select commercial, industrial and institutional entities, jointly referenced here as C&I buyers. To request a copy of the report, please contact Christen Blum, Edison Energy, at