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The Buyer's Guide to CAISO PPAs

Market Insights
May 15, 2020

Welcome back for our second edition of the LevelTen Market Spotlight series, where we share insight into recent PPA prices, development updates, and competitive supply for a specific renewable energy market. Leveraging the latest data on PPA pricing from our 320+ developer partners, LevelTen equips companies with the information they need in order to procure high-value and low-risk renewable energy. This time, we focus our attention westwards toward the California Independent System Operator (CAISO) market and other projects available in the Western Electricity Coordinating Council (WECC) territory.


The California Independent System Operator (CAISO) was founded in 1997 to serve as California's bulk electricity system operator and planning coordinator, and is one of the largest electricity market operators in the world. The role of the ISO entails managing the sale and delivery of electricity, which then makes its way to homes and businesses. For the community choice aggregators, utilities, and co-ops ("market participants") in CAISO, the centralized management of the grid results in enhanced grid reliability and planning, which should mean lower costs for end consumers.

Western Energy Imbalance Markets (EIMs) - New Opportunities for Offtake?

After the initial establishment of CAISO, entities outside of its original territory of California sought the benefits that a centralized network operator had to offer. So, in 2014, CAISO created the "Western Energy Imbalance Market" or "EIM" as the official avenue to extend its reliability and wholesale market operator services to include these interested parties. As opposed to the entities within the original CAISO territory, the EIM participants may choose to leave CAISO since their participation is completely voluntary.

The most recent additions to the western EIM are Seattle City Light and Salt River Project, who announced their participation on April 1, 2020. The addition of these utilities means that CAISO acts as electricity coordinator to the utility regions representing 61% of the total electricity load of the Western Electric Coordinating Council (basically everything west of Colorado, including the Pacific Northwest).

So what does this mean for the renewable energy buyer? The continued expansion of the EIM will allow for the further integration of renewable generation across the West and may provide new opportunities for companies in the Southwest and Pacific Northwest to source local renewable energy in the future.

CAISO Generation Mix

When it comes to renewable energy, the California ISO is one of the most saturated markets for wind and solar production. On May 26, 2019, renewable energy production hit its annual peak with renewable energy generation meeting 79.9% of the total electricity demand.

Project Availability

Like elsewhere in the country, the availability of wind projects for corporate investment has declined in California over the last year. This trend is primarily a result of the sunsetting of the Production Tax Credit (PTC), increasing competition from solar projects, and a challenging permitting landscape. The image below (left) shows a breakdown of the projects on the LevelTen Marketplace by technology currently seeking PPAs. The image on the right shows the available energy (MWh/year) available from CAISO solar projects. Today, you can source anywhere from 100k MWh/year up to 1.3k GWh/year from individual projects directly from the LevelTen Marketplace.

Source: LevelTen Marketplace

Greenhouse Gas Emissions Avoidance

Due to high renewables penetration, CAISO operates a "clean" grid relative to other wholesale energy markets across the country. That means the incremental reduction in greenhouse gas emissions of adding a new renewable energy project to the CAISO grid is less than if the same renewable energy project were added elsewhere. At LevelTen we calculate the carbon dioxide-equivalent (CO2e) emissions avoidance potential for each project using data from the Environmental Protection Agency's publicly-available Avoided Emissions and Generation Tool (AVERT). According to AVERT, a CAISO project would avoid between 0.4 and 0.5 megatons of CO2e per MWh. Compared to projects located in a coal-heavy market, like MISO, which can have anywhere between a 0.7 to 0.9 megaton CO2e/MWh rate, CAISO projects are not expected to have as great of an impact towards avoiding greenhouse gas emissions.

Solar PPA Prices in CAISO

According to the LevelTen Q1 2020 PPA Price Index, solar PPA offer prices dropped quarter-over-quarter, and the decline was significant, with an 8.3% or $2.0 decrease in the P25 index to $22 per MWh. Year-over-year PPA prices were relatively flat. Significant wholesale market price declines in this market over the last year have put pricing pressure on developers to remain competitive.

Source: LevelTen Q1 2020 PPA Price Index

The Infamous "Duck-Curve"

While there are many benefits of having large amounts of renewable energy on the grid, like low-cost electricity and fewer greenhouse gas emissions, there are also some unique market dynamics that we see in CAISO. When the sun shines in California and all the solar projects are generating power, electricity prices drop to $0 and below. Conversely, when the sun isn't shining and solar projects aren't generating power, electricity prices increase. The result is a daily market price curve that dips during the day and peaks in the early morning and late afternoon, as pictured below. This phenomenon is called the "Duck Curve," because the curves look like a duck.


Buyers interested in procuring renewable energy in CAISO must be aware of the Duck Curve phenomenon and how it could impact the value of their PPA contract. LevelTen has deep experience supporting corporate buyers in CAISO and can help your organization minimize risk and strengthen value.

Settlement Values

As mentioned, the impact of the Duck Curve is most readily recognized when evaluating the settlement value of a virtual PPA for a CAISO project. In general, California solar projects range in value from $-15.00/MWh to $5.00/MWh, as pictured below. That's why it's important to find an advisor who can help you compare PPA opportunities and find one that meets your needs.

Source: LevelTen Marketplace

Want to learn more?

As a buyer, you can access real-time cashflow analyses of nearly every wind and solar project in North America through the LevelTen Marketplace to understand the value and risks associated with each PPA offer. With over 1 billion data points being processed daily on the Marketplace, LevelTen offers buyers a data-driven approach to renewable energy procurement. Reach out to a LevelTen representative today.

Maryssa Barron

Maryssa Barron is a seasoned professional in renewable energy markets and development dedicated to expanding opportunities for corporate investment in clean energy. At LevelTen, she is responsible for identifying projects suitable to meet corporate risk thresholds and manages relationships with 200+ project development firms in the United States, Canada, and Europe.

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