Low Gas-Fired Generation in CAISO has Mixed Impacts on Natgas Prices

California Independent System Operator (CAISO) just experienced one of the longest low periods for gas-fired generation on record. During the 2026 shoulder season heading into summer (March–May), gas-fired generation averaged 2.2 GW in April, 66% lower than April 2025. Similarly, May averaged 1.9 GW, 74% lower than last May, and on May 16^th, gas-fired generation averaged just 0.5 GW. These declines occurred despite record-high average loads for their respective months across CAISO, with load averaging 23.5 GW in April and 24.7 GW in May. While major renewable and battery buildouts over the last few years have allowed CAISO to meet rising loads with less gas-fired generation, SoCal Citygate, a key regional benchmark price, weakened during the shoulder season before strengthening into summer as other regional fundamentals came into play.

Renewables Push Gas Further Out of the Stack

One of the major projects contributing to the shoulder season decline in gas-fired generation is the SunZia wind project in New Mexico, which began delivering power to CAISO in early May. Under CAISO’s Subscriber Participating Transmission Owner (SPTO) model, SunZia provides CAISO access to approximately 2.1 GW of its 3.6 GW of total wind capacity. However, SunZia is only part of a broader renewable buildout across CAISO. Compared with pre-2025 capacity, solar capacity has increased by 3.7 GW, or 17%.

Looking at this year’s shoulder season, gas-fired generation ramped more materially once total load exceeded approximately 27 GW. In prior years, though, gas generation began increasing at lower levels of load. This suggests that CAISO can now carry higher levels of total load before turning to gas-fired generation, with the significant buildout of battery storage capacity playing a major role in shifting that threshold higher.

Batteries Extend CAISO’s Load Tolerance

The impact of CAISO’s growing battery fleet can be seen in the evening ramp. In June, gas-fired generation during the evening ramp declined by an average of 11.7 GWh, or 48%, as battery discharge increased 2.1 GWh, or 11.5%, during that same period YoY. However, that trend reversed sharply in July, when gas-fired generation averaged 6.9 GWh higher than the prior year despite a much greater YoY increase in battery discharge of 3.8 GWh, or 20%. This reversal highlights that CAISO has also experienced record grid load, even alongside significant renewable and battery buildout, with summer seasonality pushing demand high enough to bring gas-fired generation back into the stack.

In 2025, around 3.4 GW of battery storage came online in CAISO, with an additional 1.1 GW added so far in 2026. These additions increased total CAISO battery capacity by approximately 37% and have helped reduce the grid’s reliance on gas-fired generation to meet higher net load. Net load is total load minus wind and solar generation, representing the portion of system demand left to be served after renewable output is accounted for, with battery discharge treated separately. As renewable generation falls during the evening ramp, batteries can discharge onto the grid before additional gas generation is needed, allowing CAISO to carry higher levels of net load before turning to gas. The graph above compares gas-fired generation at different levels of net load from May through July across 2021–2026. So far this year, gas generation has generally been materially lower than in prior years at similar levels of net load, highlighting how the buildout of battery storage has allowed more of that demand to be served without gas-fired generation. To read more about BESS capacity growth in CAISO, check out our recent Energy Market Insight here.

SoCal Pricing Strengthens as Shoulder Season Ends

As expected, the sharp decline in CAISO gas-fired generation weighed on SoCal Citygate during the shoulder season. SoCal Citygate traded at a discount to Henry Hub, averaging ($0.85)/MMBtu in April and ($0.64)/MMBtu in May. That weakness continued into early June before SoCal Citygate moved to a premium in mid-June, as EPNG Line 1600 maintenance constrained westbound supply into southern California, with segments of El Paso losing up to 0.6 Bcf/d of capacity. When flows returned, SoCal Citygate weakened briefly before rebounding as CAISO exited the shoulder season and gas demand increased across California and neighboring regions. By July, SoCal Citygate basis averaged a $0.26/MMBtu premium.

Conclusion

CAISO’s record-low gas-fired generation this shoulder season highlights how quickly the role of natural gas on the grid is changing. Continued renewable additions have reduced the amount of load left for thermal generators to serve, and the buildout of battery storage has allowed CAISO to carry higher levels of net load before turning to gas. However, July demonstrated that this buffer is not unlimited, as higher summer loads quickly brought gas-fired generation back into the stack. Preliminary data for August appears to show a continuation of this trend, and since August and September have historically been among CAISO’s highest-load months, the remainder of the summer will be telling in terms of how much gas-fired generation ramps as load increases. Meanwhile, the rebound in SoCal Citygate pricing heading deeper into summer reveals that lower average gas-fired generation does not necessarily translate to weaker regional gas markets. Going forward, the more important question may be less about how much gas CAISO burns on average and more about when gas demand materializes and what that means for regional gas pricing as battery capacity and renewable generation continue to grow.

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