Insights and Updates

Note: This article was originally published here

A diversity of energy sources has been a huge benefit to California’s energy markets. In this chart I have overlapped two highly related topics onto a single slide. The data is from April 21, 2024, and is chosen as a point in time. 

The demand curve shows power consumption in the state of California, while the other curves show the amount of electricity generated by solar and wind. What you can see is that during the roughly 10 hours when the sun was shining, most of the state’s power was provided by solar.

Also plotted on the same timescale is the average marginal price of energy, which is set by the California Independent System Operator (CAISO www.caiso.com), and is based on the bids of sellers (power generators) and buyers in a real-time wholesale electricity market.

For my current purposes, marginal pricing shows the impact that solar has on the cost of energy when managed in a commoditized market. On April 21, 2024, nearly 40% of California’s energy was provided by solar, and during the day, the marginal price of energy dropped substantially, by as much as $80/MWh or about $0.07-$0.08/kWh. Added up over a ten hour period, this is a substantial reduction in the overall cost of wholesale energy. 

Net/net, solar is a major supplier of electricity in the state of California and it has dramatically reduced the energy costs for our state. This reinforces the fact that the most critical element in reducing wholesale energy prices is the operation of broad energy markets with a diversity of energy sources. I am also very optimistic about the development of various energy storage technologies and the impact they can make in pricing, as they can ensure a highly competitive market across 24 hours a day. 

📊 Data sources:

• https://www.caiso.com/todays-outlook/demand 

• https://www.caiso.com/todays-outlook/supply 

• https://www.eia.gov/electricity/wholesale/

‍— Dave Welch