Coal beats wind in SPP 2021 fuel mix; power prices expected to follow gas, coal lower

Coal is expected to beat out wind for the top spot in the Southwest Power Pool’s generation fuel mix for 2021, but wind could regain the lead in 2022 due to ongoing shifts in natural gas and coal supplies.

SPP in 2020 became the first grid operator in the US to have wind at the top of its generation stack. While wind was expected to come out on top in 2021, high natural gas prices ended up giving coal-fired generation a leg up in the generation mix.

“This resulted in coal being a more economic option, and it replaced some natural gas production,” SPP spokesperson Meghan Sever said in an email. “Wind has been contributing significantly during the fourth quarter of 2021, but as of now, it appears it will still come in slightly under coal.”

Coal accounted for 35.5% of the total fuel mix through Dec. 15, while wind made up 35.2% of the mix, according to SPP data. Wind has increased from less than 14% of the total fuel mix in 2015, when coal made up 55.2% of the mix, to lead the mix at nearly 32% in 2020, when coal made up 30.6%.

But wind could come out on top again in 2022 due to steady capacity additions and headwinds around coal burn, said Giuliano Bordignon, a power analyst with S&P Global Platts Analytics.

Capacity changes
Nearly 525 MW of capacity in SPP retired in 2022 — 456 MW in natural gas-fired generation and 66 MW in fuel oil — according to the latest Platts Analytics North American Electricity Short-Term Forecast.

At the same time, SPP is expected to add more than 8.2 GW of new generation capacity in 2022, according to the operator. The majority — 4.377 GW — would be wind, followed by 3.094 GW of solar and 740 MW of battery storage.

Half of the states in SPP’s footprint rank in the top 10 for US wind capacity, according to the American Clean Power Association’s quarterly report for Q3 2021.

Forward curve
Read full article at Platts
Power forwards had a sharp reaction to the February storm and resulting rotating outages, jumping and continuing to trend upward throughout the year to more than double where 2021 packages were a year ago. SPP set a new winter peakload record of 43.661 GW Feb. 15, surpassing a three-year record. Spot prices reached record highs that same day as South Hub on-peak day-ahead locational marginal prices reached $3,360.72/MWh and North Hub on-peak day-ahead LMP reached $3,202.59/MWh.