CAISO price spreads are expected to rise to $240-270/MWh by 2030, up from $160/MWh in 2025. Spreads will then decline, settling at $90-100/MWh approaching 2050.

In the short-term, load growth across the Western Interconnection is poised to raise peak prices.

In the 2030s, batteries replace retiring natural gas generators as dispatchable generation. Wind and solar capacity grows to meet the state’s carbon targets, causing wholesale prices to decline. But peak prices could fall faster than midday-prices, compressing spreads over the long-term.

With CAISO’s Extended Day-Ahead Market (EDAM) scheduled to go live in May 2026, neighboring Balancing Authorities (BAs) will begin to have a greater impact on California’s wholesale power prices.

Our latest CAISO market outlook uses the February 2026 version of the Modo Energy WECC Power Price Forecast - now live in the Terminal.

Key takeaways

• Load growth from data centers (3.5 GW in California) and manufacturing across the WECC will raise peak prices and push TB4 spreads to $240-270/MWh by 2030.
• TB4 spreads decline through the 2030s as batteries replace retiring natural gas units and offshore wind lowers overnight prices, settling at $90-100/MWh by 2050.
• Solar generators bid at their Renewable Energy Credit (REC) driven marginal cost, depressing midday prices across CAISO. This floor persists through 2050.
• Diablo Canyon, California's last nuclear facility, likely receives its third extension, continuing to operate beyond 2050.

Price spreads rise in the short-term, then fall in the 2030s

Top-bottom four-hour (TB4) power price spreads in Southern California Edison’s (SCE) jurisdiction averaged $160/MWh in 2025. This benchmarks the arbitrage opportunity available to 70% of California’s grid-scale batteries.

Price volatility in CAISO has returned to the averages seen before global natural gas prices spiked in 2022 in the wake of the Ukraine-Russian conflict. This same decline in gas prices has meant around-the-clock (ATC) averages have followed a similar path, falling to $35-40/MWh last year.

But looking ahead, TB4 spreads are expected to rise back to $240-270/MWh for the rest of this decade, before they begin their gradual decline in the mid-2030s, settling at $90-$100/MWh approaching 2050.

Load growth raises spreads in the short-term, then batteries and renewables squeeze the spread

Trends in California’s price curve over the next 25 years will move through three stages: between today and 2030, to 2040, and then to 2050.

2026-2030: Large load growth across the West raises peak prices

Over the next five years, load growth will increase run-hours for aging natural gas fleets across the Western Interconnection. As a result, overnight and evening peak prices rise, boosting the top-end of the TB4 spread.

In California, new data centers could add 3.5 GW of peak demand, ten times what exists today. 90% of this capacity would be in Pacific Gas and Electric’s (PG&E’s) jurisdiction covering Northern California.

But new growth in neighboring BAs across the Western Interconnection will also drive power prices in CAISO. Their effects will be even more prominent after CAISO’s Extended Day Ahead Market (EDAM) goes live in May 2026.

Demand growth in the wider WECC is expected to increase twice as fast as in California.

New data centers, emerging semiconductor and battery manufacturing, and hydrogen electrolysis are the largest sources of load growth. This shift in the demand curve helps explain the increase in peak prices between 2026 and 2030.

2030-2040: Peak prices fall as natural gas plants retire

In the 2030s, peak prices fall quickly as natural gas generators retire, and power prices decouple from gas markets. Batteries then replace these units as dispatchable generation to meet CAISO’s net load ramping need at sunrise and sunset.

Solar continues to dominate the daily generation stack, lowering midday prices.

These generators receive revenues from utilities as part of their Power Purchase Agreements (PPAs) for providing Renewable Energy Credits (RECs). These credits are claimed by utilities to achieve 60% clean energy by 2030 as set by California's Renewable Portfolio Standards (RPS).

As competition between solar generators continues, units bid closer to their marginal cost of production to abide by the terms of their PPAs and ensure they receive credits, driving midday system prices closer the price of these RECs.

Wind capacity in Northern California continues to grow in the early 2030s, notably with the introduction of floating offshore wind. The two major offshore wind developments scheduled in the WECC ADS include Humboldt (900 MW) and Morro Bay (2,900 MW) with phase-in dates between 2032 and 2034.

The key uncertainty is federal policy risk. The current administration's stop-work orders for East Coast offshore wind projects may signal broader opposition. Morro Bay and Humboldt are still in early development, having received leases in 2022 and no construction underway.

If these projects do complete successfully, they will not receive federal Production Tax Credits (PTCs) from the Inflation Reduction Act. The accelerated sunsetting of PTCs introduced in the One Big Beautiful Bill Act (OBBBA) mean wind generators coming online after 2027 would not be eligible. They will still, however, put a downward pressure on prices in-line REC-driven PPAs.

2040-2050: Batteries flatten the duck curve

As the Western Interconnection continues to electrify, Balancing Authorities across the WECC forecast load to grow 1.2% annually over the next 25 years - over twice that of California's 0.5% CAGR.

But the accompanied growth in renewables and batteries means effective load will be both lower and flatter compared to today.

By the 2040s, solar and wind will create Net Load averages as low as -10 GW at midday. But as the duck curve deepens, batteries built in tandem to reduce this effect, flattening the load curve that must be met by other dispatchable generation.

The Bottom Line

For battery investors in CAISO, the next five years offer the strongest arbitrage environment if load growth raises peak prices in line with expectations. TB4 spreads of $240-270/MWh through 2030 reward developers who can bring capacity online before the spread compression begins.

But beyond 2035, the revenue case shifts. Resource Adequacy contracts will provide the majority of revenue for batteries - as they have done for the last two years.

Two uncertainties remain: demand growth, and the development of current offshore and onshore wind generators.

If data center and manufacturing load growth underperforms expectations, spreads will continue to decline from where they are today.

And if emerging federal policy risks the development of major wind projects, average prices during out-of-solar hours will not fall as fast as expected.