Monthly wholesale electricity prices and demand in New England, August 2019
Real-time prices lowest for August since at least 2003, ninth-lowest month overall
Average wholesale power prices in August 2019 were down 39.8% in the Real-Time Energy Market when compared to the previous year, falling to $23.58 per megawatt-hour (MWh)*. These prices mark the ninth-lowest average for any month since March 2003, when the region’s current markets launched, and the lowest of any August in that time. Prices were also down by 34.4% in the Day-Ahead Energy Market when compared to August 2019, averaging $25.69/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 2018 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 August was $2.02 per million British thermal units (MMBtu)**, the sixth-lowest natural gas price since March 2003. The price fell 35.7% from the August 2018 average Massachusetts natural gas index price of $3.14/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.
Demand is driven primarily by weather, as well as economic factors. Energy usage during August declined by 11.3 % to 11,186 GWh from the 12,605 GWh used in August 2018. The average temperature during August was 71˚ Fahrenheit (F) in New England, down four degrees from the previous August. The average dewpoint, a measure of humidity, was 60˚F in August, down six degrees from August 2018. There were 95 cooling degree days (CDD)*** during August, while the normal number of CDD in August is 102 in New England. In August 2018, there were 194 CDD.
Consumer demand for electricity for the month peaked on August 19 during the hour from 3 to 4 p.m., when the temperature in New England was 88°F and the dewpoint was 70°. Demand reached 23,305 MW, with 35 MW met through reductions by active demand resources****. The August 2019 peak was 10.4% lower than the August 2018 peak of 26,024 MW, set during the hour from 4 to 5 p.m. on August 29, when the temperature was 93°F and the dewpoint was 70°.
Peak demand is driven by weather, which drives the use of heating and air conditioning equipment. 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°. 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 resource commitments needed to ensure system stability. Natural gas-fired and nuclear generation produced about 86% of the 9,161 GWh of electric energy generated within New England during August, at about 59% and 27%, respectively. Renewable resources generated about 10% of the energy produced within New England, including 5.9% from wood, refuse, and landfill gas; 1.9% from wind; and 2.1% from solar resources. Coal- and oil-fired units produced less than 1% combined, of the energy generated within New England. Hydroelectric resources generated 4%. The region also received net imports of about 2,207 GWh of electricity from neighboring regions, and active demand response accounted for 3 GWh of reduced system demand.
|August 2019 and Percent Change from August 2018 and July 2019
||August 2019||Change from August 2018||Change from July 2019
|Average Natural Gas Price
|Peak Demand||23,308 MW||-10.4%||-4.1%|
|Total Electricity Use||11,186 GWh||-11.3%||-9.4%|
|Weather-Normalized Use*****||11,280 GWh||-0.6%||-2.1%|
*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.