Low natural gas prices is the main reason why wholesale power prices are much lower today than in 2008. But still another reason is substantial increased wind and solar generation. More supply equals lower prices. But how much lower?
A new study modeled what would happen to wholesale power prices in 6 locations in Pennsylvania and New Jersey if new solar capacity were installed equal to 15% of peak demand. No surprise, the power prices go down for the whole market.
http://mseia.net/site/wp-content/uploads/2012/05/MSEIA-Final-Benefits-of-Solar-Report-2012-11-01.pdf.
The study finds solar at 15% of peak demand would lower power prices by $55/Mwh or 5.5 cents per kilowatt-hour. The price suppression effect of solar or wind is substantial, because they are both complete price takers and not price setters. Their zero fuel costs and exceptionally low operating costs mean that they can and do bid zero into wholesale markets and take the market clearing price.
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