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Monday
Sep252017

Monthly wholesale electricity prices and demand in New England, August 2017

August’s average wholesale electricity price plunged 40% year-over-year on very low consumer demand

The average price of natural gas dropped by nearly 25% in August, but  the biggest factor in the 40% drop in wholesale electricity prices was demand for power, which was the lowest seen in any August since 2000. The average wholesale power price, at $23.77 per megawatt-hour (MWh)*, was the seventh-lowest monthly price since March 2003, when markets in their current form were launched. The August price was down 40.9% from the August 2016 average price of $40.19/MWh.

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 August was $2.34 per million British thermal units (MMBtu),** which was the ninth-lowest monthly average since March 2003. The August price was down 23.9% from the August 2016 average Massachusetts natural gas index price of $3.08/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 August average natural gas price was down 5.3% from the previous month’s price of $2.47/MMBtu in July.

Electricity Demand: Demand is driven primarily by weather as well as economic factors. Energy usage during August 2017 fell 12.5% to 11,060 gigawatt-hours (GWh) from the 12,642 GWh used in August 2016. The average temperature during August was 70˚ Fahrenheit (F) in New England compared to the 74˚F average recorded during the previous August. The average dewpoint, a measure of humidity, was 59˚F, compared to 62˚F seen in August 2016. The number of cooling degree days (CDD)*** and heating degree days (HDD) came in at 79 and 12, respectively, in August, compared to 143 CDD and 0 HDD in August 2016. The normal August level is 102 CDD and 6 HDD in New England.

Peak demand for the month was recorded at 22,700 MW on August 22 during the hour from 4 to 5 p.m., when the temperature in New England was 87°F and the dewpoint was 70°. The August 2017 peak was down 11.3% from the August 2016 peak of 25,596 MW, set during the hour from 2 to 3 p.m. on August 12, 2016, when the temperature was 93°F and the dewpoint was 72°.

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 86% of the 9,703 gigawatt-hours (GWh) of electric energy generated within New England during August, at about 56% and 30%, respectively. Hydroelectric resources in New England generated 5%. Renewable resources generated about 9% of the energy produced within New England, including 6% from wood, refuse, and landfill gas; 2% from wind; and 1% from solar resources. Coal units generated 0.01%, and oil-fired resources produced 0.18% of the energy generated within New England. The region also received net imports of about 1,540 GWh of electricity from neighboring regions. 


August 2017 and Percent Change from August 2016 and July 2017
August 2017
Change from August 2016
Change from July 2017
Average Real-Time 
Electricity Price 
($/megawatt-hour*)
$23.77 -40.9% -10.7%
Average Natural Gas Price 
($/MMBtu**)
$2.34 -23.9% -5.3%
Peak Demand
22,700 MW -11.3% -3.4%
Total Electricity Use
11,060 GWh -12.5% -2.7%
Weather-Normalized Use****
11,688 GWh -6.2% -3.3%
*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.