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Tuesday
Jun202017

Wholesale electricity prices and demand in New England, May 2017

Rising natural gas prices caused wholesale electricity prices to increase during May

Natural gas prices in May were nearly 44% higher than during the previous May in New England, pushing up the average wholesale power price to $29.44 per megawatt-hour (MWh)*, a 38.2% increase compared to the May 2016 average price of $21.29/MWh. For a month-to-month comparison, the May power price was 6.6% lower than the April average price of $31.51.

While the month of May was not particularly unusual, one day—May 18, the day of the May peak—was interesting for significant price variations resulting from a combination of planned power plant and transmission line outages and unusually high temperatures. The range in five-minute prices—from negative prices in northern areas of New England to prices over $800/MWh in other parts of the region—is illustrative of the operational challenges that can arise during the “shoulder seasons” of spring and fall, when consumer demand for power is typically lighter and power plant and transmission lines are taken offline for maintenance and repairs. Read more about the dynamics at work that day. 

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 May was $3.02 per million British thermal units (MMBtu),** up 43.8% from the May 2016 average Massachusetts natural gas index price of $2.10/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 May average natural gas price was down 4.7% from the April 2017 monthly average of $3.17/MMBtu.

Electricity Demand: Demand is driven primarily by weather as well as economic factors. Energy usage during May 2017 dropped 2.8% to 9,171 gigawatt-hours (GWh) from the 9,433 GWh used in May 2016. The average temperature during May was 56˚ Fahrenheit (F) in New England compared to the 58˚F average recorded during the previous May. The average dewpoint, a measure of humidity, came in at 45˚F, compared to 44˚F in May 2016. The number of heating degree days (HDD)*** totaled 306 in May, compared to 246 HDD in May 2016. The normal May level is 239 HDD in New England. The number of cooling degree days (CDD) totaled 8 in May, compared to 10 CDD in May 2016. The normal May level is 6 CDD in New England.

Peak demand for the month was recorded at 20,181 MW on May 18 during the hour from 5 to 6 p.m., when the temperature in New England was 92°F and the dewpoint was 51°. The May 2017 peak was up 6.1% from the May 2016 peak of 19,029 MW, set during the hour from 5 to 6 p.m. on May 31, 2016, when the temperature was 84°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. The all-time high winter peak was 22,818 MW, recording during a cold snap in January 2004 when the temperature was -1°F and the dewpoint was -20°.

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 7,949 gigawatt-hours (GWh) of electric energy generated within New England during May, at about 45% and 31%, respectively. Hydroelectric resources in New England generated 13%. Renewable resources generated about 11% of the energy produced within New England, including 7% from wood, refuse, and landfill gas; 3% from wind; and 1% from solar resources. Coal units generated 0.8%, and oil-fired resources produced under 0.1% of the energy generated within New England. The region also received net imports of about 1,328 GWh of electricity from neighboring regions.


May 2017 and Percent Change from May 2016 and April 2017
May 2017
Change from May 2016
Change from April 2017
Average Real-Time
Electricity Price
($/megawatt-hour*)
$29.44 +38.2% -6.6%
Average Natural Gas Price
($/MMBtu**)
$3.02 +43.8% -4.7%
Peak Demand
20,181 MW +6.1% +28%
Total Electricity Use
9,171 GWh -2.8% +4.1%
Weather-Normalized Use****
9,042 GWh -3.0% +2.1%
*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 1 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 below 65 degrees is counted as one heating degree day. 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.