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Monthly Wholesale Electricity Prices and Demand in New England, June 2017

Source: 
Targeted News Service (Press Releases)

ISO New England issued the following news release:

Compared to the near record-low prices of June 2016, natural gas and wholesale electricity prices rose slightly in June--but were still among the lowest monthly prices seen since 2003. The average wholesale power price during June was $23.93 per megawatt-hour (MWh)*, the 7th lowest since the region's current energy markets were launched in 2003. Still, the June price was about 13 percent higher than the June 2016 price--which was the 3rd lowest since 2003, at $21.24/MWh. The average monthly price of natural gas was the 11th lowest since 2003, compared to the June 2016 average natural gas price, which was the 8th lowest.

Drivers of Wholesale Electricity Prices

In general, the two main drivers of wholesale electricity prices in New England are the cost of fuel used to produce electricity and consumer demand.

Power Plant Fuel: Fuel is typically one of the major input costs in producing electricity. Natural gas is the predominant fuel in New England, used to generate 49 percent of the power produced in the region last year, and natural gas-fired power plants usually set the price of wholesale electricity in the region. As a result, average wholesale electricity prices are closely linked to natural gas prices.

The average natural gas price during June was $2.46 per million British thermal units (MMBtu),** up 6.8 percent from the June 2016 average Massachusetts natural gas index price of $2.30/MMBtu. The Mass. index price is a volume-weighted average of trades at four natural gas delivery points in Massachusetts, including two Algonquin points, the Tennessee Gas Pipeline, and the Dracut Interconnect. The June average natural gas price was down 18.5 percent from the May 2017 monthly average of $3.02/MMBtu.

Electricity Demand: Demand is driven primarily by weather as well as economic factors. Energy usage during June 2017 held steady at 10,244 gigawatt-hours (GWh), up only 0.7 percent from the 10,176 GWh used in June 2016. The average temperature during June was 68 degree Fahrenheit (F) in New England compared to the 67 degreeF average recorded during the previous June. The average dewpoint, a measure of humidity, came in at 55 degreeF, compared to 52 degreeF in June 2016. The number of heating degree days (HDD)*** and cooling degree days (CDD) both came in at 57 in June, compared to 29 HDD and 17 CDD in June 2016. The normal June level is 55 HDD and 50 CDD in New England.

Peak demand for the month was recorded at 23,889 MW on June 13 during the hour from 4 to 5 p.m., when the temperature in New England was 91 degree F and the dewpoint was 65 degree. The June 2017 peak was up 19.6 percent from the June 2016 peak of 19,966 MW, set during the hour from 4 to 5 p.m. on June 29, 2016, when the temperature was 81degreeF and the dewpoint was 60 degree.

Peak demand is driven by weather, which drives the use of heating and air conditioning equipment. The all-time peak demand in New England was 28,130 MW, recorded during an August 2006 heat wave, when the temperature was 94 degree F and the dewpoint was 74 degree. Air conditioning use is far more widespread than electric heating in New England, so weather tends to have a relatively greater impact on the summer peak than the winter peak. The all-time high winter peak was 22,818 MW, recording during a cold snap in January 2004 when the temperature was -1 degree F and the dewpoint was -20 degree.

Fuel Mix: The mix of resources used in any given time period depends on price and availability, as well as supplemental resource commitments needed to ensure system stability. Natural gas-fired and nuclear generation produced most of the 8,860 gigawatt-hours (GWh) of electric energy generated within New England during June, at about 45 percent and 33 percent, respectively. Hydroelectric resources in New England generated 9 percent. Renewable resources generated about 10 percent of the energy produced within New England, including 6 percent from wood, refuse, and landfill gas; 3 percent from wind; and 1 percent from solar resources. Coal units generated 0.5 percent, and oil-fired resources produced 0.2 percent of the energy generated within New England. The region also received net imports of about 1,515 GWh of electricity from neighboring regions.

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