Monthly wholesale electricity prices and demand in New England, September 2019
Real-time prices lowest for September since at least 2003, third-lowest month overall
Average wholesale power prices in September 2019 were down 50.3% in the Real-Time Energy Market when compared to the previous year, falling to $20.45 per megawatt-hour (MWh)*. These prices mark the third-lowest average for any month since March 2003, when the region’s current markets launched, and the lowest of any September in that time. Prices were also down by 37.6% in the Day-Ahead Energy Market when compared to September 2018, averaging $21.14/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 September was $1.95 per million British thermal units (MMBtu)**, the fifth-lowest natural gas price since March 2003. The price fell 33.2% from the September 2018 average Massachusetts natural gas index price of $2.92/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 September declined by 9.7% to 9,082 GWh from the 10,059 GWh used in September 2018. The average temperature during September was 64˚ Fahrenheit (F) in New England, down two degrees from the previous September. The average dewpoint, a measure of humidity, was 53˚F in September, down six degrees from September 2018. There were 19 cooling degree days (CDD)*** during September, while the normal number of CDD in September is 34 in New England. In September 2018, there were 79 CDD. There were 70 heating degree days (HDD)*** during September, while the normal number of HDD in September is 88 in New England. In September 2018, there were 76 CDD.
Consumer demand for electricity for the month peaked on September 23 during the hour from 4 to 5 p.m., when the temperature in New England was 86°F and the dewpoint was 65°F. Demand reached 19,105 MW, with 12 MW met through reductions by active demand resources****. The September 2019 peak was 21.9% lower than the September 2018 peak of 24,475 MW, set during the hour from 3 to 4 p.m. on September 6, when the temperature was 90°F and the dewpoint was 71°F.
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°F. 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°F. 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 83% of the 7,297 GWh of electric energy generated within New England during September, at about 50% and 33%, respectively. Renewable resources generated about 12% of the energy produced within New England, including 6.6% from wood, refuse, and landfill gas; 3.3% from wind; and 2.4% from solar resources. Coal- and oil-fired units combined produced less than 1% of the energy generated within New England. Hydroelectric resources generated 5%. The region also received net imports of about 1,915 GWh of electricity from neighboring regions, and active demand response accounted for 2 GWh of reduced system demand.
|September 2019 and Percent Change from September 2018 and August 2019
||September 2019||Change from September 2018||Change from August 2019
|Average Natural Gas Price
|Peak Demand||19,105 MW||-21.9%||-18%|
|Total Electricity Use||9,082 GWh||-9.7%||-18.8%|
|Weather-Normalized Use*****||9,270 GWh||-2%||-17.8%|
*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.