October’s average price of electricity fell on continuing low natural gas prices and low demand
Lower demand, driven by milder weather, and lower natural gas prices pulled October’s average monthly power price down 30%, to $22.72 per megawatt-hour (MWh)*, compared to the October 2015 average price of $32.62/MWh. The wholesale power price during October was the sixth-lowest since the wholesale electricity markets in their current form were launched in 2003 in New England, and the natural gas price was the eighth-lowest during that time period. Total energy consumption in New England in October was the lowest of any October since 2000, and the fourth-lowest monthly consumption.
October 2016 highlights:
Sixth-lowest LMP, per megawatt-hour:
- March 2016: $17.20
- June 2015: $19.61
- June 2016: $21.24
- May 2016: $21.29
- December 2015: $21.35
- October 2016: $22.72
Lowest October energy consumption since 2000, in gigawatt-hours (GWh):
- October 2016: 9,319
- October 2015: 9,495
- October 2014: 9,710
- October 2012: 9,751
- October 2011: 9,861
Fourth-lowest monthly energy consumption since 2000 (GWh):
- April 2016: 9,020
- April 2015: 9,239
- April 2012: 9,297
- October 2016: 9,319
Eighth-lowest natural gas price, per million British thermal units (MMBtu)**:
- June 2015: $1.68
- May 2015: $1.85
- July 2015: $1.96
- March 2016: $2.03
- May 2016: $2.11
- June 2016: $2.14
- December 2015: $2.19
- October 2016: $2.26
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% 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 October was $2.26/million British thermal units (MMBtu)** at the Algonquin pipeline delivery point in Massachusetts. The October average natural gas price represents a 39.1% decline from the October 2015 monthly natural gas price of $3.72/MMBtu. The October 2016 natural gas price fell 10.3% from the September 2016 average price of $2.52/MMBtu.
Electricity Demand: Demand is driven primarily by weather as well as economic factors. Energy usage during October 2016 fell 1.9% to 9,319 GWh from the 9,495 GWh used in October 2015. The average temperature during October was 53˚ Fahrenheit in New England compared to the 52˚ Fahrenheit average recorded during the previous October. The average dewpoint, a measure of humidity, came in at 44˚F, compared to 40˚F in October 2015. The number of cooling degree days (CDD) and heating degree days (HDD) totaled 0 and 366, respectively, in October, compared to 0 CDD and 418 HDD in October 2015. The normal October level is 2 CDD and 412 HDD in New England.***.
Peak demand for the month was recorded at 16,274 MW on October 27 during the hour from 6 to 7 p.m., when the temperature in New England was 38°F and the dewpoint was 36°. The October 2016 peak was up just 0.2% from the October 2015 peak of 16,247 MW, set during the hour from 6 to 7 p.m. on October 28, 2015, when the temperature was 53°F and the dewpoint was 50°.
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°F and the dewpoint was 74°. 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.
Fuel Mix: The mix of resources used in any given time period depends on price and availability, as well as supplemental unit commitments made to ensure system stability. Natural gas-fired and nuclear power plants produced most of the 7,781 gigawatt-hours (GWh) of electric energy generated within New England during October, at about 45% and 38%, respectively. Hydroelectric resources in New England generated 4%. Renewable resources generated about 11% of the energy produced within New England, including 7.1% from wood, refuse, and landfill gas; 2.8% from wind, and 0.7% from solar resources. Coal units generated 0.8%, and oil-fired resources produced 0.8% of the energy generated within New England. The region also received net imports of about 1,689 GWh of electricity from neighboring regions.
|October 2016 and Percent Change from October 2015 and September 2016 ||October 2016 ||Change from October 2015 ||Change from September 2016
|Average Natural Gas Price
|Total Electricity Use
* One megawatt (MW) of electricity can serve about 1,000 average homes in New England. A megawatt-hour (MWh) of electricity can serve about 1,000 homes for one hour. One gigawatt-hour (GWh) can serve about one million homes for one hour.
** A British thermal unit (Btu) is used to describe the heat value of fuels, providing a uniform standard for comparing different fuels. One million British thermal units are shown as MMBtu.
*** A degree day is a measure of heating or cooling. A zero degree day occurs when no heating or cooling is required; as temperatures drop, more heating days are recorded; when temperatures rise, more cooling days are recorded. The base point for measuring degree days is 65 degrees. Each degree of a day’s mean temperature that is above 65 degrees is counted as one cooling degree day, while each degree of a day's mean temperature that is below 65 degrees is counted as one heating degree day. A day’s mean temperature of 90 degrees equals 25 cooling degree days, while a day's mean temperature of 45 degrees equals 20 heating degree days.
**** Weather-normalized demand indicates how much electricity would have been consumed if the weather had been the same as the average weather over the last 20 years