U.S. Renewable Power Price Analysis

We split the US into two cohorts

U.S. Renewable Power Price Analysis
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Enersection has done previous analysis on the impact of rising natural gas prices on industrial power prices across all 50-states, in particular drilling-down into the states with the lowest and highest amount of natural gas generation

Not surprisingly in a rising price environment, the data suggests states with the highest exposure to natural gas generation are seeing higher power price changes compared to states with lower natural gas generation exposure

For another riff on this theme, we broke the U.S. into two cohorts - the 25 states with the highest trailing 12-month percentage of wind & solar generation and the 25 states with the lowest mix of wind & solar generation, then created historical indices with simple averages of the cohort monthly industrial power prices

We prefer to utilize industrial power prices over residential and commercial to best isolate generation and fuel costs. Industrial customers take power at higher voltage, requiring less infrastructure, transmission and distribution resulting in costs closest to wholesale power.

High wind & solar cohort power prices were 11.4% higher in August 2022, but that is changing fast as you'll see visually

The Times They Are A Changin'

It should be noted the index we created used August 2022 state generation mix across the entire time series.  Said differently, we didn't change the grouping of the top and bottom 25 states monthly, but rather the highest and lowest cohorts as of August 2022 were assumed to be constant over time.

High wind & solar state industrial power prices are currently 11.4% higher than low wind & solar states.

High wind & solar state power prices have compressed versus lower wind & solar power prices since the premium peaked in February 2021

Looking at the year-over-year change in industrial power prices visually highlights low wind & solar states have seen larger power price increases during 2022. Indeed, the last three months of data show low wind & solar cohort power prices increasing 8.7% faster on a year-over-year basis.  

If price changes continue at the recent relative rates, nominal low wind & solar power prices should exceed high wind & solar power prices in 3 months.  Given the EIA data is delayed by 2-3 months, that change is likely happening in the market today.    

Talk about future marketing material for the U.S. renewable energy movement.  For context, the low wind & solar cohort averaged 4% wind & solar generation on a trailing 12-month basis versus 29% for the 25 state high wind & solar cohort.

In U.S. power markets, states with low wind & solar generation typically exhibit a high percentage of natural gas generation exposure.  

The relative changes in low and high cohort correlate well with natural gas price changes - much of what we are witnessing is simply fuel prices inflation being felt much more quickly than capital cost inflation.

Enersection will continue to track and report on this data