West Coast braces for intense heat wave causing peakload, prices to climb

A heat wave is forecast to hit the US West Coast this week, driving up power demand and wholesale power prices, leading the governor to direct the Office of Emergency Services to activate its State Operations Center and move into Phase II of its Extreme Temperature Response Plan.

The activation is triggered by National Weather Service predictions of excessive heat activity and moves the state into action to coordinate an all-hands response by state government, according to a July 1 statement from the governor's office. Excessive heat warnings and watches are in effect for much of California from July 2 into the weekend. Temperatures are forecast to reach up to 115 degrees Fahrenheit for multiple days and little overnight relief.

"This heat wave is serious," Governor Gavin Newsom said in the statement. "We're used to hot temperatures in California, but this will be several days with little relief overnight."

Utility preparation

Pacific Gas and Electric Company mobilized its Emergency Operations Center and shared two-day advanced notifications with approximately 12,000 customers throughout targeted areas within eight counties where PG&E may need to proactively turn the power off for safety to reduce wildfire risk from energized power lines, spokesperson Suzanne Hosn said, adding the Public Safety Power Shutdown is expected to begin early July 2 and last through July 3.

"PG&E is closely monitoring an anticipated lingering heat wave forecasted over the holiday week, which is expected to peak on July 2 and July 3 and reach 110 degrees Fahrenheit in some areas," Hosn said. "A red flag warning has been issued by the National Weather Service for portions of the Sacramento Valley and foothills starting late July 1, as breezy 20-35 mph northerly winds are expected to develop and combine with high temperatures and low humidity to increase wildfire risk."

Once severe weather has passed and it is safe to do so, PG&E will patrol and inspect lines and restore power for customers as soon as possible.

Utilities across the region are monitoring the weather for potential impacts to electricity generation.

"Our system is performing well, we are seeing the benefits of all the work completed over the past several years on equipment replacement, upgrades and electric grid hardening," SCE spokesperson Reggie Kumar said. "That's why maintenance outages are conducted throughout the year; to ensure that we replace or upgrade the equipment that needs maintenance so that the system is not overwhelmed by repair outages during high heat events."

Air conditioning is one of the largest energy consumers in the home, according to a July 1 Sacramento Municipal Utility District statement .

"Power reliability is a core value and SMUD has enough power resources to meet expected demand, barring a grid or other emergency such as wildfire or unexpected significant power shortfall," SMUD said in the statement.

Market outlook

"Currently, the grid is stable and power supplies are adequate," California Independent System Operator spokesperson Vonette Fontaine said. "We're continuing to monitor the heat and potential for impact on the grid."

CAISO forecast peakload to average about 41 GW over the next week and climb as high as 43.909 GW on July 3, which would be a nearly 11-month high. In comparison, peakload averaged 37.275 GW in July 2023 and reached as high as 43.08 GW late in the month.

The all-time peakload record is 52.061 GW set at 4:57 pm Sept. 6, 2022. The July peakload record is 50.27 GW from 2006, Fontaine said.

As demand is on the rise, so are wholesale power prices in reaction.

SP15 on-peak day-ahead traded around $46/MWh for July 2 delivery on the Intercontinental Exchange. The balance of the week package was bid at $65.50/MWh and offered at $95/MWh, while the next week package was bid at $80/MWh and offered at $115/MWh. In comparison, SP15 on-peak day-ahead locational marginal prices averaged about $18.75/MWh in June and around $76/MWh in July 2023, according to CAISO data.

Likewise, NP15 on-peak day-ahead was bid at $50.50/MWh and offered at $69/MWh for July 2 delivery on ICE, while bal-week was bid at $65/MW. In comparison, NP15 on-peak day-ahead LMP averaged about $23/MWh in June and around $57.25/MWh in July 2023, according to CAISO data.

In the Desert Southwest, Palo Verde on-peak day-ahead traded around $62.50/MWh for July 2 delivery on ICE, while next week was bid at $120/MWh. In comparison, Palo Verde on-peak day-ahead averaged nearly $36.50/MWh in June and nearly $111/MWh in July 2023, according to pricing data from Platts, which is part of S&P Global Commodity Insights.

Weather forecast

"July kicks off with anomalous and potentially dangerous heat impacting the south-central US and portions of the West Coast," the weather service said in its daily outlook. "As of this morning, over 50 million residents are under heat-related watches, warnings and advisories."

High temperatures away from the immediate coastline are forecast to reach into the 100 F to 110 F range, which could break numerous daily records in the San Joaquin and Sacramento valleys on July 2 and 3, according to the weather service. Excessive heat warnings, watches and heat advisories go into effect as early as July 2 and span from southern Oregon to the low desert of southeastern California.

"The duration of this heat wave is concerning as the current forecast keeps scorching conditions in place through at least the end of the week," the weather service said. "This level of heat could pose a danger to the entire population if proper heat safety is not followed."