Monthly wholesale electricity prices and demand in New England, January 2019
Wholesale power and natural gas prices fell in January
With no extended, extreme cold weather in January 2019, natural gas prices fell by more than half compared to the January 2018 price, which was driven up by a week of extreme cold. The drop in natural gas prices during January this year, as well as lower demand for electricity, pulled the average wholesale power price for the month down by 48% in the Day-Ahead Energy Market and 52% in the Real-Time Energy Market when compared to the previous year. The day-ahead energy price was $56.76 per megawatt-hour (MWh)* and the real-time energy price was $51.50/MWh in January.
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 48% of the power produced in 2017 by New England’s power plants, 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 January was $6.94 per million British thermal units (MMBtu)**. The price fell 55% from the January 2018 average Massachusetts natural gas index price of $15.37/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.
Electricity demand: Demand is driven primarily by weather, as well as economic factors. Energy usage during January declined by 4.4% to 11,033 GWh from the 11,536 GWh used in January 2018. The average temperature during January was 27˚ Fahrenheit (F) in New England, while the average during the previous January was 26 ˚. The average dewpoint, a measure of humidity, was 15˚F in January, the same as the dewpoint in January 2018. There were 1,190 heating degree days (HDD)*** during January, while the normal number of HDD in January is 1,192 in New England. In January 2018, there were 1,212 HDD.
Consumer demand for electricity for the month peaked on January 21 during the hour from 5 to 6 p.m., when the temperature in New England was 4°F and the dewpoint was -9°. Demand reached 20,740 MW, with 18 MW met through reductions by active demand resources****. The January 2019 peak was 0.4% higher than the January 2018 peak of 20,662 MW, set during the hour from 5 to 6 p.m. on January 5, when the temperature was 8°F and the dewpoint was -8°.
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°. The all-time high winter peak was 22,818 MW, recorded during a cold snap in January 2004 when the temperature was -1°F and the dewpoint was -20°. 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 resource commitments needed to ensure system stability. Natural gas-fired and nuclear generation produced about 77% of the 8,740 GWh of electric energy generated within New England during January, at about 43% and 34%, respectively. Renewable resources generated about 11% of the energy produced within New England, including 6.5% from wood, refuse, and landfill gas; 3.9% from wind; and 0.8% from solar resources. Coal- and oil-fired units produced 2.5%, combined, of the energy generated within New England. Hydroelectric resources generated 10%. The region also received net imports of about 2,421GWh of electricity from neighboring regions, and active demand response accounted for 2.3 GWh of reduced system demand.
|January 2019 and Percent Change from January 2018 and December 2018
||January 2019||Change from January 2018||Change from December 2018
|Average Natural Gas Price
|Peak Demand||20,740 MW||+0.4%||+12.7%|
|Total Electricity Use||11,033 GWh||-4.4%||+5.1%|
|Weather-Normalized Use*****||10,993 GWh||-3.5%||+4.3%|
*One megawatt (MW) of electricity can serve about 750 to 1,000 average homes in New England. A megawatt-hour (MWh) of electricity can serve about 750 to 1,000 homes for one hour. One gigawatt-hour (GWh) can serve about 750,000 to 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 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. ****Since June 1, 2018, active demand-response resources have been able to participate on an hourly basis in the wholesale electricity markets. These resources reduce demand in real time.*****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.