"A big reason for this shift is the large increase in natural gas prices in 2021 compared to 2020," SPP spokeswoman Meghan Sever said. "This resulted in coal being a more economic option, and it replaced some natural gas production. Wind contributed significantly during the fourth quarter of 2021, but it still came in slightly under coal."

Natural gas prices were very high during the winter weather event in February but have stayed at an elevated level due to supply issues, Sever said.

"If natural gas prices stay at these levels in 2022, the natural gas to coal split will likely be similar to 2021, making it more difficult for wind to be the top producer next year," Sever said.

Higher Gas Prices

Spot gas at Panhandle Texas-Oklahoma averaged $3.416/MMBtu in December, 44.2% higher year on year, after reaching an all-time high of $224.56/MMBtu on Feb. 13, according to S&P Global Platts pricing data.

Higher gas prices led gas generation to slip 3.4 percentage points year on year to average 15.8% of the total fuel mix in December, according to SPP data. At the same time, coal generation sank 7.8 points to average 29.4% of the mix.

Filling in the gap, wind generation climbed 11.7 points year on year to lead the fuel mix at 46% for December, the highest monthly average since March and a December monthly record, but it wasn't enough to nab the top fuel spot for 2021.

Power Price Spikes

Power prices climbed even as peakload fell 4.4% year on year to average 31.265 MW in December. Population-weighted average temperatures were 26% higher than normal leading to 35% lower heating-degree days, according to CustomWeather data.

SPP loads trended near the bottom of the five-year range as warmer-than-normal weather limited heating demand in December and drove heating-demand to the lowest level December since at least 2005, according to Platts Analytics.

SPP North Hub on-peak day-ahead locational marginal prices jumped 56.2% year on year to average $33.59/MWh in December, according to SPP data. Prices reached as high as $71.25/MWh Dec. 29 when wind share dropped to 23.9%, a 52-day low, while gas share climbed to 29.2%, a 56-day high.

Wind Drives Price Volatility

North Hub on-peak real-time LMP reached as high as $119.20/MWh Dec. 6, the highest level since record highs during the February winter storm, while South Hub on-peak real-time LMP fell to a record low of minus $21.64/MWh on Dec. 24.

"Any day-to-day volatility in wind is magnified when it comes to prices by the relatively slow ramp-up or ramp-down of coal plants, inherent to the technology," Giuliano Bordignon, power analyst with S&P Global Platts Analytics, said about strong wind generation combined with a limited dispatch of gas across SPP in December. "This means that price swings can be larger than in other months."

Similar to previous months, wind output hardly exceeded 20 aGW on an hourly basis in December, the likely result of grid bottlenecks, allowing zonal prices to avoid the full impact of high wind speeds, Bordignon added.

Forwards

Power forwards continue to trend well above year-ago packages following higher gas forwards, although both dipped month on month. With the lower gas forwards month on month, Platts Analytics expects SPP daily gas generation to average more than 111 GWh/d in February, which would result in a daily power burn of about 0.92 Bcf/d, assuming heat rates similar to February 2021.

South Hub on-peak January rolled off the curve at $60.50/MWh, 147.4% above it's 2021 counterpart a year ago, according to Platts data.

The on-peak February package is currently in the upper $50s/MWh, 138% above the year-ago package, while on-peak March is in the mid-$40s/MWh, 92% higher.

Panhandle Texas-Oklahoma January rolled off at $5.359/MMBtu, 131.3% higher than its 2021 counterpart last year, according to Platts data. The February contract is currently around $5.638/MMBtu, 139% higher than the 2021 contract last year, while March is around $3.836/MMBtu, 68% higher.

The three-month outlook shows greater chances for above-normal temperatures for the SPP's southern portion and equal changes for above- and below-normal temperatures for the rest of the footprint, according to the US National Weather Service.